Chief Economist, Heteronomics

Phil Rush

Chief Economist

Heteronomics

Heteronomics represents a different kind of economics. We believe analysis should delve into the details of what is really going on, rather than using overly simplistic assumptions to quick-sell stories. Independence from myopic institutional pressures allows us to focus on the realities underlying your asset allocation decisions, without the conflicts of the old market structures. Heteronomics targets the themes driving UK asset prices, offering the benefits of depth, independence and ultimately price.

UK-centric macro research

Macroeconomics

<ul><li>The worst services PMIs thawed in November, broadening growth even as averages held steady. Activity in the US services ISM has trended up to exceed the PMI data now.</li><li>A slight fading of stagflationary pressures in the latest US surveys probably balances out in the Fed’s policy trade-off. We still fear that it is easing excessively.</li><li>Rising unemployment rates in the US and UK are concerns not experienced in most of the world. This theme feeds their recent divergence from the global surprise tendency.</li></ul>

The worst services PMIs thawed in November, broadening growth even as averages held steady. Activity in the US services ISM has trended up to exceed the PMI data now.A slight fading of stagflationary pressures in the latest US surveys probably balances out in the Fed’s policy trade-off. We still fear that it is easing excessively.Rising unemployment rates in the US and UK are concerns not experienced in most of the world. This theme feeds their recent divergence from the global surprise tendency.

External broker reports, Nordea

Nordea

External broker reports

External broker reports(aggregated public sources)

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<ul><li>Callable bonds have reached levels where I now recommend selling.</li><li>While further tightening remains possible, current OAS levels fail to adequately compensate for the fundamental risks inherent in these complex instruments.</li><li>In the latest Bonds &amp; Bold: Callable Bonds a Lottery Ticket? I moved from buy to neutral and I wrote that if callables performed another 7-10bp then one should sell them. </li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Callable bonds have reached levels where I now recommend selling.While further tightening remains possible, current OAS levels fail to adequately compensate for the fundamental risks inherent in these complex instruments.In the latest Bonds &amp; Bold: Callable Bonds a Lottery Ticket? I moved from buy to neutral and I wrote that if callables performed another 7-10bp then one should sell them. Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

<ul><li>The Euro-area flash inflation estimate for November remained close to the ECB’s target at 2% y/y, supporting an ECB that is on hold unless new shocks appear.</li><li>The first quarter of 2026 is likely to see too low inflation followed by gradually increasing inflation over the course of 2026 and 2027 as fiscal easing picks up, leading to ECB rate hikes in 2027 in our forecast.Table 1.</li><li>November flash inflationServices price inflation increased to 3.5% y/y and remains high and sticky, though the monthly rate of change eased slightly.</li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

The Euro-area flash inflation estimate for November remained close to the ECB’s target at 2% y/y, supporting an ECB that is on hold unless new shocks appear.The first quarter of 2026 is likely to see too low inflation followed by gradually increasing inflation over the course of 2026 and 2027 as fiscal easing picks up, leading to ECB rate hikes in 2027 in our forecast.Table 1.November flash inflationServices price inflation increased to 3.5% y/y and remains high and sticky, though the monthly rate of change eased slightly.Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Euro-area flash inflation:  In support of unchanged ECB rates

<ul><li>A surprise rise in EA inflation to 2.2% in November meant October’s long-awaited dip was a false dawn for a disinflationary consensus exceeded by 0.4pp since June.</li><li>The accumulated extent and the increase in service inflation to 3.5% are concerning, but the latest news was narrowly concentrated in Greece, with other errors being minor.</li><li>Stronger underlying momentum into year-end is preventing the January base effects from driving it significantly below target. The ECB’s good place isn’t breaking dovishly.</li></ul>

A surprise rise in EA inflation to 2.2% in November meant October’s long-awaited dip was a false dawn for a disinflationary consensus exceeded by 0.4pp since June.The accumulated extent and the increase in service inflation to 3.5% are concerning, but the latest news was narrowly concentrated in Greece, with other errors being minor.Stronger underlying momentum into year-end is preventing the January base effects from driving it significantly below target. The ECB’s good place isn’t breaking dovishly.

<ul><li>Volatile markets and policy guidance washed out, with pricing and forecasts little changed on the month.</li><li>Bailey is biased to ease, but the BoE is awakening to its inflation problem. It should cut less than dovishly priced.</li><li>Higher unemployment could move beyond a structural shift from policy to signal a less elevated neutral rate.</li></ul>

Volatile markets and policy guidance washed out, with pricing and forecasts little changed on the month.Bailey is biased to ease, but the BoE is awakening to its inflation problem. It should cut less than dovishly priced.Higher unemployment could move beyond a structural shift from policy to signal a less elevated neutral rate.