Juliette Declercq: A Red String of Fate Ties U.S. to China

Posted by Patrick Ceresna on Apr 7, 2017 12:37:34 PM

Juliette Declercq.jpg

Juliette Declercq founder of JDI Research a boutique institutional advisory service that advises some of today's most successful portfolio managers. During the interview on MacroVoices, Erik and Juliette discuss the outlook for the US Dollar, the 10-year US Treasury Yields and the FOMC policy moving forward.  

They reflect on Juliette’s perspectives on the red string of fate ties U.S. to China and the current business cycle.  They further discuss where is the ISM heading next, the impact on Trump’s tax and infrastructure spending and the potential surprises for the upcoming French election.

Here are some notable excerpts from the interview discussing the idea that the current business cycle is long in the tooth and Trump is running out of time.  They further discuss the strong ISM numbers and her views as to if this has now turned.   

Erik:              Now in the next section you move on to the business cycle and you pose the critical question of how long does Donald Trump have before it's too late. Please elaborate because a lot of our guests have suggested that this business cycle is very long in the tooth. So, how much longer can the euphoria last and what are the charts on page six telling us?

Juliette:         In the section, you describe, I’ve modeled aggregate demand which is all monetary by adding the two sorts of money, basically incomes and the change in debt level. You can see on page six that this perfectly defines the business cycle and also the intermediate cycles.  What should normally happen on the strong ISM boost is that income growth picks up on higher employment or wage gains and credit demand should also pick up. This time the opposite is happening and this is telling me that the Trump trade is fantasy rather than the reality.  The reality is that there is no such thing as a Trump trade in 2016, there was no magic. The global economy reacted to the sharp easing in financial conditions stemming from the Fed's relent and China's vigorous stimulus like it has always done. Because of very strong price base it takes we had a bounce in activity for example energy sector cap ex collapsed 70% from 2014 to early 2016 and this subtracted0.7% from real GDP.  It's only natural that the bounce in prices necessarily causes the bounce in activity in 2016 from extremely low levels. The same goes for the distressed level of inventory. The issue is that none of those effects can be extrapolated into 2017 and the effect of the global stimulus has largely run its cause. In fact, base effects now work in reverse. In short there is no such thing as a Trump trade although it is somewhat discounted by both markets and the Fed and I see this as a trading opportunity.

 Erik:              Juliette the bulls would tell us that the ISM is the near all-time highs and that signals nothing but rock solid growth and economic strength on the horizon, meanwhile another popular narrative is the president’s Trumps tax and infrastructure spending initiatives will soon become reality and these factors can only be bullish for asset markets at least according to the bulls. You see it differently, so please explain why, why don't we start with the graph from pages nine and ten and what they're telling us and explain also where China fits into this story.

 Juliette:         So, on pages nine and ten you can see that investment does not in any way corroborate the bounce in ISM and we started to see signs of a peak in ISM this week with both a weaker manufacturing ISM and a much softer non-manufacturing report. The leading indicators defined by new orders versus inventory sentiment also look to have already turned the corner. Basically, my fear is that the China driven early 2016 stimulus caused the debt cap bounce in global activity. Trump’s campaign promises greatly and artificially amplified the position of survey effect as hard instincts took over and created the illusion of a more sustainable cycle. I think we have already reached the top in terms of how far hope can support markets and I had recommended from the Trump’s night to pay rates anticipating hope to run wild but reality is now about to hit. The longer China growth can hold steady and the longer it will take for financial conditions to tighten more meaningfully but my best guess is that China growth can only be supported into the congress.

Conclusion:

Juliette shared some very important insights, particularly the sensitivity the U.S. economy has to China.  The entire interview transcript and chart book are available for download on the MacroVoices.com website.   

 

 

 

 

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Topics: bonds, macroeconomics, China

Economic Data Has Peaked And Going To Start To Disappoint

Posted by Patrick Ceresna on Apr 1, 2017 12:54:09 PM

julian_brigden_headshot.jpeg Julian Brigden is the co-founder and President of Macro Intelligence 2 Partners and is one of the most streets most respected macro strategists. In the interview on MacroVoices, Erik and Julian discuss the U.S. Dollars impact on the US shale bubble, the peak acceleration in ISM manufacturing and the risk that headline inflation is peaking.  They further discuss if the Fed tightening is going to start to impact data. 

Julian also points out that the bond shorting opportunity is over and the subsequent risks to the reflationary trades.  Also discussed are the wage trends in the U.S., perspectives on European growth and inflation and the relative pricing between U.S. and European bunds.

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Topics: bonds, macroeconomics, inflation, reflation

Is the 35 Year Bond Bull Market Over?

Posted by Patrick Ceresna on Jan 29, 2017 12:47:33 PM

 

David Rosenberg_headshot_HR - small.jpg
In an exclusive interview on MacroVoices.com, David Rosenberg, Chief Economist & Strategist at Gluskin Sheff, discusses his views on Trump, inflation expectations, the Fed, the U.S. Dollar, Bonds and Stocks.  Some of his most interesting observations are his views on bonds and the 35-year secular bond bull market. Bond gurus like Bill Gross and Jeffrey Gundlach have suggested that the bond bull market may be over, but David has a much different view.  Here are some highlights:  

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Topics: bonds, Federal Reserve, economy, fed

Second Quarter Forecast: Bonds, Interest Rates and the Federal Reserve

Posted by Patrick Ceresna on Mar 21, 2014 5:42:00 PM

This is the "Part 3" of a "4 Part" blog series - The Second Quarter Forecast.
The Federal Reserve and Central Banks around the world have implemented the greatest monetary experiment in history. There is zero precedence for such a global expansion of money supply, but more importantly, there is zero precedence as to what happens to an economy when the money faucet is shut off. While the media and many analysts are eager to applaud Ben Bernanke and Janet Yellen for a job well done, there is ample evidence that the praise is premature. 

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Topics: bonds, Interest Rates, Federal Reserve

Financial Stocks Failing and Bonds Rallying

Posted by Patrick Ceresna on Sep 25, 2013 9:08:00 AM

On Monday we specified the key criteria for us to go back on “Crash Alert”. We wanted to focus on the first two criteria (Bonds and Financials) in today’s blog. 

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Topics: Market Forecast, bonds, financial stocks

The Fed, Market Forecast S&P500, Bonds and Gold

Posted by Patrick Ceresna on Sep 19, 2013 9:02:00 AM

WOW.  It wasn’t that the Fed didn’t taper.  The message was that economy is in no state to begin tapering any time soon.  The bottom line is that the media pundits and analysts were dead wrong. In our past blogs and presentations we have maintained that the Fed will never be able to exit.  We will have further follow up presentations to explain.

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Topics: Market Forecast, s&p500, bonds, Gold, Fed Tapering

Summers Over, Market Yellen Higher - Market Forecast

Posted by Patrick Ceresna on Sep 16, 2013 8:45:00 AM

We were looking for the rally to run out of momentum as we approached overhead resistance, but we find ourselves in a very different situation. Larry Summers pulled his name from consideration for being the next Federal Reserve chairman. This has caused a material rally higher in the market as Summers was viewed as hawkish, which implied higher interest rates and more aggressive Fed action.  With the dovish Janet Yellen being the front runner we see an immediate price adjustment to bonds and stocks. 

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Topics: Market Forecast, s&p500, bonds, Larry Summers, Yellen

Market Forecast on S&P500 and 30 Year Treasury Bonds

Posted by Patrick Ceresna on Sep 4, 2013 9:06:00 AM

The market remains in a muddle. The market is starting to see mild signs of being oversold, but is not at any extremes. The headline news of Syria and the pending Friday Jobs report will keep traders on the edge this week.  Yesterday was an important clue as the market popped higher over the long weekend and proceeded to be fully distributed only hours into the trading day. The path of least resistance remains lower.

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Topics: Market Forecast, s&p500, bonds

Market Forecast S&P500, Gold and 30 year Treasury Bonds

Posted by Patrick Ceresna on Aug 26, 2013 9:34:00 AM

CRASH ALERT: Crash alerts do not guarantee a crash but simply observe that we are in a market state where all the criteria for a crash are there.

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Topics: Market Forecast, s&p500, bonds, Gold

Market Forecast S&P500, Gold and 10 Year Treasury Bonds

Posted by Patrick Ceresna on Aug 12, 2013 9:34:00 AM

The S&P500 has now turned lower from last week’s consolidation highs. While there is further risk of weakness this morning, we believe that there is room for a rally this week to squeeze out overzealous traders that are being too aggressive getting short. Like we emphasized last week, we are in a bull market and the market has yet to do anything bearish.  At the same time markets very rarely advertise a turning of the tides. Those of our readers that have taken our Technical Masters Program understand the rules of symmetry, and it is interesting that the rallies in the Nasdaq100 and the S&P500 have both stalled out at the completion of measured moves. For a market correction to start off these levels would be very natural for the markets.

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Topics: Market Forecast, s&p500, bonds, Gold

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