Macroeconomic and Investing, The Macro Compass

Alfonso Peccatiello (Alf)

Macroeconomic and Investing

The Macro Compass

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<ul><li>This week, the Fed announced various nominees for the task forces Warsh has set up. Former BoE chief Mervyn King was chosen to lead the new ‘’communications task force’’.</li><li>Back when he was at the helm of the BoE, King proposed the Maradona approach to Central Bank communication: pretend to go right (be hawkish), pretend to go left (be dovish), and in the end get to your final objective without really moving much.</li><li>And given the output of the macro models I use to look at US growth, labor market and inflation the Maradona approach to interest rates could be the best fit.</li></ul>

This week, the Fed announced various nominees for the task forces Warsh has set up. Former BoE chief Mervyn King was chosen to lead the new ‘’communications task force’’.Back when he was at the helm of the BoE, King proposed the Maradona approach to Central Bank communication: pretend to go right (be hawkish), pretend to go left (be dovish), and in the end get to your final objective without really moving much.And given the output of the macro models I use to look at US growth, labor market and inflation the Maradona approach to interest rates could be the best fit.

<ul><li>Sorry I disappeared from Substack for a good while but markets are crazy, the fund is growing nicely and it’s a huge amount of work.</li><li>But no worries - I am back with a healthy dose of macro analysis for you.</li><li>As an exception to the norm and to gain back brownie points with you guys, I am sharing the latest research piece reserved to the investors and The Macro Compass subscribers.</li></ul>

Sorry I disappeared from Substack for a good while but markets are crazy, the fund is growing nicely and it’s a huge amount of work.But no worries - I am back with a healthy dose of macro analysis for you.As an exception to the norm and to gain back brownie points with you guys, I am sharing the latest research piece reserved to the investors and The Macro Compass subscribers.

<ul><li>I find it hilarious that people are calling him a hawk based on what he did 10-15 years ago.</li><li>This is like looking at old pics of me with a head full of hair (still have one of these on LinkedIn!). These times are long gone.</li><li>Jokes aside, I spent hours listening to the most recent interviews Warsh did (here and here, for example).</li></ul>

I find it hilarious that people are calling him a hawk based on what he did 10-15 years ago.This is like looking at old pics of me with a head full of hair (still have one of these on LinkedIn!). These times are long gone.Jokes aside, I spent hours listening to the most recent interviews Warsh did (here and here, for example).

<ul><li>The first 5 weeks of the year have seen international equities outperforming the S&amp;P 500: European and Chinese stocks have rallied harder than US stock indexes, and certain emerging markets like Chile or Poland are doing even better.</li><li>My main thesis for the first half of the year remains to be positioned with an ‘’International Risk Parity’’ portfolio: long US bonds, and long stocks around the world.</li><li>The chart above shows that the US growth exceptionalism might be over. The Aggregate Income Growth series is a great proxy for nominal growth in real time: it includes private sector job creation, workweek hours, and wage growth – effectively reflecting the growth rate of nominal income US workers are bringing home.</li></ul>

The first 5 weeks of the year have seen international equities outperforming the S&amp;P 500: European and Chinese stocks have rallied harder than US stock indexes, and certain emerging markets like Chile or Poland are doing even better.My main thesis for the first half of the year remains to be positioned with an ‘’International Risk Parity’’ portfolio: long US bonds, and long stocks around the world.The chart above shows that the US growth exceptionalism might be over. The Aggregate Income Growth series is a great proxy for nominal growth in real time: it includes private sector job creation, workweek hours, and wage growth – effectively reflecting the growth rate of nominal income US workers are bringing home.

<ul><li>''Beginning in June, the Committee will slow the pace of decline of its securities holdings by reducing the monthly redemption cap on Treasury securities from $60 billion to $25 billion.''</li><li>With this sentence, the Fed announced the tapering of their QT program last week.</li><li>The Federal Reserve has been running QT (Quantitative Tightening) since mid-2022: this process is aimed at unwinding the multi-trillion Fed bond holdings accumulated during previous QE episodes</li></ul>

''Beginning in June, the Committee will slow the pace of decline of its securities holdings by reducing the monthly redemption cap on Treasury securities from $60 billion to $25 billion.''With this sentence, the Fed announced the tapering of their QT program last week.The Federal Reserve has been running QT (Quantitative Tightening) since mid-2022: this process is aimed at unwinding the multi-trillion Fed bond holdings accumulated during previous QE episodes