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>Inadequate energy supply for the winter has squeezed wholesale prices up, taking yields with it owing to the BoE’s fear of high spot inflation fuelling second-round effects.</li>
<li>The UK government’s new energy price cap removes this as a direct source of inflation and a reason to hike rates near market pricing. It is tactically bullish.</li>
<li>Price caps do not fix supply, so rationing remains likely. Along with the painful fiscal costs, this unimaginative scheme means bearish pressures may reassert in the winter.</li>
</ul>


Inadequate energy supply for the winter has squeezed wholesale prices up, taking yields with it owing to the BoE’s fear of high spot inflation fuelling second-round effects.
The UK government’s new energy price cap removes this as a direct source of inflation and a reason to hike rates near market pricing. It is tactically bullish.
Price caps do not fix supply, so rationing remains likely. Along with the painful fiscal costs, this unimaginative scheme means bearish pressures may reassert in the winter.


<ul>
<li>The UK unemployment rate held at 3.8%, while the underlying data showed more slight rises. Retirement is subduing labour supply while demand (vacancies) is falling.</li>
<li>Changes in wage settlements and unemployment suggest further progression towards the cycle burning out, especially leading into preliminary August data.</li>
<li>Inflation has crushed real wages to record falls, reversing 2020’s rise and growth since 2007. While helpful for the BoE, that record probably prevents a Tory re-election.</li>
</ul>


The UK unemployment rate held at 3.8%, while the underlying data showed more slight rises. Retirement is subduing labour supply while demand (vacancies) is falling.
Changes in wage settlements and unemployment suggest further progression towards the cycle burning out, especially leading into preliminary August data.
Inflation has crushed real wages to record falls, reversing 2020’s rise and growth since 2007. While helpful for the BoE, that record probably prevents a Tory re-election.


<ul>
<li>The BoE hiked by 50bps to 1.75%, in line with market and consensus expectations, but contrary to our view that a lack of increased second round effects would mean 25bps.</li>
<li>A reassessment of existing pressures proved more important than the downside news and state-dependent guidance that was needlessly issued and broken.</li>
<li>We now ignore retained guidance about the reaction function and focus on the BoE’s 2yr inflation forecast. GBP pressure will probably underly another 50bp if it occurs.</li>
</ul>


The BoE hiked by 50bps to 1.75%, in line with market and consensus expectations, but contrary to our view that a lack of increased second round effects would mean 25bps.
A reassessment of existing pressures proved more important than the downside news and state-dependent guidance that was needlessly issued and broken.
We now ignore retained guidance about the reaction function and focus on the BoE’s 2yr inflation forecast. GBP pressure will probably underly another 50bp if it occurs.


Founder & Chief Market Strategist - SAV Markets, SAV Markets

Shyam Devani

Founder & Chief Market Strategist - SAV Markets

Provide Comprehensive Analysis & Commentary

SAV Markets

SAV Markets aims to provide comprehensive analysis & commentary on foreign exchange and asset markets. The approach is multi asset as markets are typically interlinked. Cause and effect are always at work, even if those effects take time to manifest. As nothing is permanent we strive to get ahead of the curve in an ever changing world.

Cross Asset Strategy

<ul>
<li>As we prepare for the FOMC there are patterns to watch beyond the short term</li>
<li>The risk of lower yields still persists, especially given the curve inversion</li>
<li>As a consequence we are likely to see further gains in US equities</li>
</ul>


As we prepare for the FOMC there are patterns to watch beyond the short term
The risk of lower yields still persists, especially given the curve inversion
As a consequence we are likely to see further gains in US equities


<ul>
<li>The British consumer continued suffering from painfully high inflation in June, with no significant real growth since Oct-21 creating an annual decline near 6%.</li>
<li>Food sales were relatively high in June but should probably be read relative to the deep drop in May amid bank holiday changes. April’s similar rise was revised away.</li>
<li>Non-Retail consumption is also being squeezed. New car sales are trending down at near a 20% annual pace. Consumers are being forced to drop discretionary purchases.</li>
</ul>


The British consumer continued suffering from painfully high inflation in June, with no significant real growth since Oct-21 creating an annual decline near 6%.
Food sales were relatively high in June but should probably be read relative to the deep drop in May amid bank holiday changes. April’s similar rise was revised away.
Non-Retail consumption is also being squeezed. New car sales are trending down at near a 20% annual pace. Consumers are being forced to drop discretionary purchases.


United Kingdom

The British Pound Sterling is the official currency of The United Kingdom. 

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UK: Bullishly Capping Yields with Energy

The UK government’s new energy price cap is tactically bullish for the UK. However, price caps do not fix supply, so rationing remains likely....

Phil Rush

UK: Labour Market Pains Propagating

Changes in wage settlements and unemployment suggest further progression toward the cycle burning out. Inflation has crushed real wages to record...

Phil Rush

BoE: Market Tail Wags Policy Dog

The BoE hiked by 50bps to 1.75%. We now ignore retained reaction function guidance and focus on the BoE’s 2yr inflation forecast. GBP pressure will...

Phil Rush

"V" For ? Thoughts on Central Banks

Market reactions to the ECB are clear, they are going the opposite way of what policy makers intended. As we prepare for the Fed, some medium term...

Shyam Devani

UK: Sales Down, Down, Deeper and Down

The British consumer continued suffering from painfully high inflation in June, with no significant real growth since Oct-21 creating an annual...

Phil Rush

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