US macro

Interesting to note that the US University of Michigan expected inflation survey showed a substantially revised downward print (see the prints, below, amongst the other various inflation measures).

In other words, the historical data changed, and the new estimates are much less scary than the old ones. Longer run inflation expectations are not showing a potential de-anchoring, in our view, and the medium run (3 year) estimates are likewise looking reasonably stable.

Recall that this print was explicitly used by the Fed (specifically chairman Powell) to permit the hawkish shift to a 75bps hike.

So, a moderation, also one fuelled by the knowledge that commodity prices have rolled over, is quite a helpful dovish underprinning.

Note also that US retail sales was out Friday, and showed ongoing resilience. There is no sign of fatigue, yet, for the US consumer.

Had the inflation prints been higher, this retail sales data would have added fuel to the hawkish fire. But, the outcome of strong underlying macro and moderating inflation would be an excellent outcome.

Policy engineering the “soft landing” (i.e. restraining inflation without crushing the economy).

And, for the various reasons outlined above, we are sticking broadly close to our SAA weights. What we’ve outlined above makes it extremely difficult to be highly convicted in any particular direction, at the moment, with the modest exception of the occasional higher conviction style call (e.g. value over growth) or the modest asset class call (UW commodities) or modest sectoral call (e.g. OW insurance companies).

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