Purity Macro Podcast

For all the discussion these past few months around the inflationary impact of global protectionism I would like to offer a slightly different perspective on a Saturday morning as I sip my coffee and muse on the world.Let’s begin with the release of Core PCE data this past week out of the US. I’m looking at the table break down of that data point and I see multiple line items showing month over month declines when comparing February vs March. The overall print itself indicated zero inflation in the most important inflationary gauge watched by the Fed.Think about that for a moment. Most prices for both durable and non durable goods were actually down on the month as were overall transportation costs and food service accommodation.Yes, it’s probable that as imported prices of goods begin to show up in key inflation metrics we see some upward bias and then think upon the disinflationary offsets as well that may counter balance those forces.Take the Crude Oil curve for instance. The price of spot crude Oil now trades below $60.00/ a barrel, a level not seen since before the time of Covid. Curve dynamics in the Crude Oil market themselves don’t indicate a resumption of an upward trend and technically bearish sentiment prevails. This downward pressure in energy markets is occurring at the exact same time as a complete collapse in global trade volumes has led to greater then 50% declines in major world container freight indexes that measure the cost of shipping goods from Asia to the US.The cost of shipping a regular 40ft container from Shanghai to NewYork at the start of this year was north $6,800 and this is now around $3,500 - almost a 50% drop. Similiar % drops are being reported at trade routes into the US from across the world.Things don’t look promising on the demand front either. Both Manufacturing and Services PMI’s out of the US remain in contractionary territory and 1st quarter GDP growth this week came in -0.3% for the quarter, driven lower by a sharp decline in exports. Labor market health, on the surface looks ok with a healthy creation of 177,000 non farm jobs posted yesterday, but leading indicators for employment in both the ADP releases and Jolts releases indicated underlying weakness to come.The combination of a supply driven shock pushing up on prices and a potential demand driven recession weighing down on the economy will make the Fed’s task extremely difficult in the coming weeks and months as it tries to ascertain the correct response to this most unique of situations.Let’s see how they respond. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit puritymacro.substack.com

This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit puritymacro.substack.com

DisclaimerThe information provided in this post is for general use only and does not constitute a solicitation for investment. It should not be construed as professional financial advice. Seek independent professional consultation before making an investment decision.   This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit puritymacro.substack.com

DisclaimerThe information provided in this post is for general use only and does not constitute a solicitation for investment. It should not be construed as professional financial advice. Seek independent professional consultation before making an investment decision.   This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit puritymacro.substack.com

DisclaimerThe information provided in this post is for general use only and does not constitute a solicitation for investment. It should not be construed as professional financial advice. Seek independent professional consultation before making an investment decision.   This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit puritymacro.substack.com

DisclaimerThe information provided in this post is for general use only and does not constitute a solicitation for investment. It should not be construed as professional financial advice. Seek independent professional consultation before making an investment decision.   This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit puritymacro.substack.com

        DisclaimerThe information provided in this post is for general use only and does not constitute a solicitation for investment. It should not be construed as professional financial advice. Seek independent professional consultation before making an investment decision.   This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit puritymacro.substack.com

DisclaimerThe information provided in this post is for general use only and does not constitute a solicitation for investment. It should not be construed as professional financial advice. Seek independent professional consultation before making an investment decision.   This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit puritymacro.substack.com

DisclaimerThe information provided in this post is for general use only and does not constitute a solicitation for investment. It should not be construed as professional financial advice. Seek independent professional consultation before making an investment decision. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit puritymacro.substack.com

DisclaimerThe information provided in this post is for general use only and does not constitute a solicitation for investment. It should not be construed as professional financial advice. Seek independent professional consultation before making an investment decision. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit puritymacro.substack.com

DisclaimerThe information provided in this post is for general use only and does not constitute a solicitation for investment. It should not be construed as professional financial advice. Seek independent professional consultation before making an investment decision.` This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit puritymacro.substack.com

DisclaimerThe information provided in this post is for general use only and does not constitute a solicitation for investment. It should not be construed as professional financial advice. Seek independent professional consultation before making an investment decision.   This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit puritymacro.substack.com

            DisclaimerThe information provided in this post is for general use only and does not constitute a solicitation for investment. It should not be construed as professional financial advice. Seek independent professional consultation before making an investment decision.   This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit puritymacro.substack.com

DisclaimerThe information provided in this post is for general use only and does not constitute a solicitation for investment. It should not be construed as professional financial advice. Seek independent professional consultation before making an investment decision.   This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit puritymacro.substack.com

If you enjoyed this post, please be sure to like, comment or share the link with a friend.You can also now follow me on X : @macroali1    Enjoy the rest of your day. Ciao           DisclaimerThe information provided in this post is for general use only and does not constitute a solicitation for investment. It should not be construed as professional financial advice. Seek independent professional consultation before making an investment decision.   This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit puritymacro.substack.com

Today’s Chart packFollow me on X : @moali18               DisclaimerThe information provided in this post is for general use only and does not constitute a solicitation for investment. It should not be construed as professional financial advice. Seek independent professional consultation before making an investment decision.   This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit puritymacro.substack.com

DisclaimerThe information provided in this post is for general use only and does not constitute a solicitation for investment. It should not be construed as professional financial advice. Seek independent professional consultation before making an investment decision This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit puritymacro.substack.com

DisclaimerThe information provided in this post is for general use only and does not constitute a solicitation for investment. It should not be construed as professional financial advice. Seek independent professional consultation before making an investment decision.   This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit puritymacro.substack.com

DisclaimerThe information provided in this post is for general use only and does not constitute a solicitation for investment. It should not be construed as professional financial advice. Seek independent professional consultation before making an investment decision.   This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit puritymacro.substack.com

In today’s macro podcast we take a deeper look into the actual impact of the jump in shipping costs globally and the effect it might have on central bank policy in both the US and Europe. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit puritymacro.substack.com

This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit puritymacro.substack.com

The week that wasThe week was characterized by conflicting data and mixed messages from the Federal Reserve.  Dissonance is defined as a “lack of harmony among musical notes” and I find it a particularly apt term to describe markets as we begin the new year.  We had a strong US payrolls report to end the week only to be followed subsequently by a large decline in the employment component of the ISM services report.  December’s Fed meeting and projections were received as unequivocally dovish where as the release of that meeting’s minutes this past week contained a higher degree of uncertainty than was previously communicated. The “dissonance” or lack of harmony was even seen in energy markets where we saw a 5.5m barrel draw in crude inventories but a 10.9m barrel build in Gasoline stockpiles.  Trouble in the Red sea and unrest in Iran further clouds the picture as it remains unclear whether the impact of these events will ultimately affect global trade and crude oil supply.  The growing uncertainty around Trump’s eligibility to run for office and the potential for domestic political volatility ahead of elections this year has also perhaps unnerved equities which have started the year on a weak footing.Central BanksWhile some of the Federal Reserve’s members air out caution to the market, I think fundamentally the upcoming easing cycle has been somewhat misunderstood. We are now 4 years on from the advent of the pandemic and 2024 should be viewed as a return to normalcy of sorts as far as markets are concerned.   In that context, having a real rate of close to 3% is just not necessary anymore.  Irrespective of whether the economy slows down meaningfully or not, as long as inflation continues to be on a downward path, it will be incumbent on the Fed to begin easing policy. The length and breadth of that cycle will ultimately be determined by the evolution of the data, the timing however SHOULD NOT be data dependent. In the coming days and weeks, the more clarity the market can receive from Chairman Powell with regards to the timing of the easing cycle the better it will be for markets. To that end, upcoming data on inflation and the Fed meeting itself towards the end of the month will be crucial in reducing the uncertainty that currently pervades global macro markets. The week aheadIn the US, we have a 10y note auction along with oil inventories on Wednesday, followed by the inflation report due to be released on Thursday.  Over in Japan, we have the release of cash earnings on Tuesday, a number which is closely watched by the BOJ.  China also releases key inflation and trade data on Thursday which will be of particular interest to markets.As always, we’ll keep you posted.Have a great weekendDisclaimerThe information provided in this post is for general use only and does not constitute a solicitation for investment. It should not be construed as professional financial advice. Seek independent professional consultation before making an investment decision.  This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit puritymacro.substack.com

US 10y : 3.91% (-2 bps)Gold : 2041 (-1%)DXY : 102.47 (+0.35%)Oil : 72.80 (+3.35%)S&P Futures : 4,755 (-0.7%)Good Afternoon all,It’s been a jittery start to the new year for risk assets with all major Equity Indexes in the US down between 2 and 4%. Weakness in tech stocks have been notable but we also take particular note of the declines in small caps and Consumer Discretionary stocks within the main S&P 500 cash index. US Ism Manufacturing data came in as expected, still in contraction mode at 47.4. The prices subcomponent of the survey came in weaker than expected however at 45.2. We also were awarded a speech from the Fed’s Tom Barkin and got details of the FOMC meeting that was held back in December. Both the speech and the FOMC minutes highlight some uncertainty around the potential rate path for 2024 while the market awaits confirmation that inflation has indeed safely returned to target. In our minds, this uncertainty has been all but alleviated when one takes a deeper look at the rate of goods deflation within PCE measures but markets perhaps over positioned for an easier Fed have pared back risk to start the new year.There has been some energy market volatility as well with front crude futures contracts trading down to $70.00 a barrel before stabilizing today at $73.00. Chinese import quota announcements for 2024 along with continued unrest in the red sea should keep prices overall supported. We do note however that a close below $65.00 a barrel would be bearish from a technical perspective.Our focus shifts now to Oil Inventories due out tomorrow and ADP jobs data ahead of Non Farm Payrolls on Friday.As always, we shall keep you posted.DisclaimerThe information provided in this post is for general use only and does not constitute a solicitation for investment. It should not be construed as professional financial advice. Seek independent professional consultation before making an investment decision.   This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit puritymacro.substack.com

Levels changes from Friday CloseEur/usd : 1.1110 (+110 pips)Oil : $75.00 (+1.50)Gold : $2,080 (+40.00)US10y : 3.82% (-5 bps)FROM FRIDAY’S PCE RELEASE:FURNISHINGS : -1.2% momRECREATIONAL: -1.2 momCLOTHING: -1.4%Purity Macro Disclaimer:The information provided in this post is for general use only and does not constitute a solicitation for investment. It should not be construed as professional financial advice. Seek independent professional consultation before making an investment decision.   This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit puritymacro.substack.com