Vai al contenuto

The market is now in tune with the Fed

François Christen

François Christen

Chief Economist

La vigueur du marché du travail américain apporte de la crédibilité à la posture austère de Jerome Powell.

Original article published on agefi.com

Recent macroeconomic news has dashed the hopes of a Federal Reserve “pivot” that fueled financial market exuberance in January 2023. The gap between the central bank’s projections and the expectations reflected in the term structure of interest rates in dollars has completely vanished in response to the publication of several indicators highlighting the firmness of the economy and the problematic persistence of inflation in the USA.

Admittedly, year-on-year inflation continued to decline to 6.4% in January after 6.5% in December, but the monthly increases in the overall index (0.5%) and the index excluding energy and food (0.4%) is still not in line with the Fed’s targets. However, it is worth noting the predominant influence of shelter prices, which tend to “lag” the evolution of prices in general. Upstream, producer prices are showing a monthly increase of 0.7% (0.5% excluding energy and food), which is incompatible with the central bankers’ objective.

The activity indicators are pointing upwards and far from validating the fears of recession. Retail sales jumped by 3% in January. The rebound in manufacturing output (up 1% in January) and the NAHB index (42 in February after 35 in January) reflect a continued firmness in the economy. In short, the recent news lends further credibility to the scenario outlined by Jerome Powell and his FOMC colleagues when they talk of monetary interest rates being raised durably above 5% to restore price stability.

The past fortnight has seen a significant increase in dollar yields at all maturities. Nearly 4% in mid-January, the yield on the 2-year T-Note peaked at 4.7% last Friday. The yield on the 10-year T-Note reached 3.9%, a considerable jump from the 3.35% level seen at the end of January. This correction erases a large part of the inflated gains made in January and could be an attractive “entry point” for investors who want to increase their bond exposure and hedge against recession risks that may materialize later.

The euro capital market was not spared the shockwave from the US. The yield on the German 10-year Bund rose above 2.5% before falling back to around 2.4%. Tensions are even more acute on short maturities, which include the prospect of monetary interest rates peaking at around 3.75% next September. The meagre economic news is not likely to call into question the 0.5% interest rate hike expected on 16 March. In the UK, the rebound in retail sales in January and the acceleration in wage inflation could lead the Bank of England to maintain a restrictive stance for longer than expected, which has generated strong upward pressure on the sterling yield curve. The damage to the Swiss market has been mitigated by the fact that inflation in Switzerland has behaved well (3.3% annual, 2.2% excluding energy and food in January).

On the credit market, risk premiums have risen slightly, but this does not call into question the spectacular
decline observed since the end of September. This serenity, which can also be seen in the equity market,
reflects the persistent but fragile hope of a soft landing for the western economies despite the challenges
facing the central banks in their maneuver.

Macro

Silicon Valley Bank (SVB), a micro chaos resolved while forgetting the macro risk

The implosion of small banks in the US generates immense confusion and a flight to safety.

Per saperne di più →
Corporate

2022 ANNUAL REPORT & INVITATION TO 2023 AGM

ONE swiss bank SA publishes its 2022 Annual Report, announces a dividend payment and notifies of the agenda for the 2023 Annual General Meeting.

Per saperne di più →
Macro

Between realism and complacency

The disconnect between equities and bonds, which have been falling for a month, is widening further.

Per saperne di più →
Macro

Le retour à la lucidité crée des opportunités

La violente correction obligataire survenue en février relance un thème d’investissement majeur pour 2023.

Per saperne di più →
Macro

The market is now in tune with the Fed

Bond investors have finally bought into the roadmap outlined by the US central bank.

Per saperne di più →
Corporate

10th Annual WealthBriefing Swiss Awards 2023

We are thrilled to have won on 9 February 2023 the award for “Best Corporate Strategy Implementation” at the 10th Annual WealthBriefing Swiss Awards 2023.

Per saperne di più →
Macro

Une bonne nouvelle plombe l’ambiance

La vigueur du marché du travail américain apporte de la crédibilité à la posture austère de Jerome Powell.

Per saperne di più →
Corporate

H2 and full-year 2022 financial results

After a challenging year in which global financial markets experienced unprecedented turmoil, we are pleased to report that ONE swiss bank’s financial turnaround is now complete.

Per saperne di più →
Macro

The menu promises to be copious and digestible

Central banks have signalled their immediate plans, but the dessert is still a surprise.

Per saperne di più →
Macro

La Fed est en phase d’approche

Le succès de la manœuvre d’atterrissage reste incertain, les risques de récession sont élevés.

Per saperne di più →