In today’s briefing:
- Yen Weakness Not Solely Due to Bank of Japan as Corporates Play a Critical Role
- Looking For Inflation In All The Wrong Places
- How Serious Is The Market’s Trend Break?
- US Employment Report Superficially Strong Again
Yen Weakness Not Solely Due to Bank of Japan as Corporates Play a Critical Role
- The weak yen could be a legacy of aggressive quantitative easing (QE), whereby the BoJ became the largest holder of government bonds, forcing traditional buyers overseas.
- Overseas cash hoarding by Japanese affiliates is being cited as another reason for yen weakness. Superior growth opportunities outside of Japan are a reason for the lack of cash repatriation.
- Japan’s exporters currently face formidable competition with China, making a strong yen an unattractive option during a period of higher cost pressures, notably for labour.
Looking For Inflation In All The Wrong Places
- Conventional inflation hedge vehicles have exhibited subpar performance despite rising concerns over persistent inflation that will delay the Fed’s rate cuts.
- That’s because 1970s-style “bad inflation” is not present and “good inflation”, which is a by-product of an economic recovery and stronger growth expectations, is becoming dominant narrative.
- Market expectations are shifting from a soft-landing to a no-landing outcome, which should be bullish for cyclical stocks and neutral to bearish for bonds.
How Serious Is The Market’s Trend Break?
- Multiple breaks in rising trend lines are signs that a risk-off episode is under way.
- We are long-term bullish and investment-oriented accounts should regard weakness as a buying opportunity.
- We have outlined a number of bullish tripwires based on sentiment and technical indicators for investors to follow.
US Employment Report Superficially Strong Again
- Stocks and Gold rally as US economy shows continued strength in employment
- Under the hood, it is not looking quite so rosy
- Meanwhile the Bank of Japan faces its own credibility issue
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