North America


July 12, 2024

EZ and UK Government Bonds: Decoupling From the U.S.?
Paying Article

July 12, 2024 9:37 AM UTC

Different economic and inflation dynamics, plus no constraint from trade weighted exchange rates, means that the ECB and BOE can cut irrespective of the Fed in the coming quarters.  This can see 2yr yields decline, though less so in Germany where a 2.5% ECB depo rate is already discounted.  10yr y

June 25, 2024

Equities Outlook: Choppy U.S. and Outperformance Elsewhere
Paying Article

June 25, 2024 7:05 AM UTC

 •    U.S. equities are overvalued and waiting for earnings growth to catch-up, which leaves the market choppy, directionless and vulnerable to intermittent 5% corrections. Our forecast slowing of the U.S. economy before Fed rate cuts or nervousness about the post-election prospects are potenti

June 24, 2024

DM Rates Outlook: Rate Cuts Arrive Except Japan
Paying Article

June 24, 2024 8:45 AM UTC

•    For U.S. Treasuries we see a steady easing process from the Fed from September, which can allow 2yr yields to fall consistently.  However, the decline in H2 2024 will be slower at the long-end from traditional yield curve steepening pressures and then we see fiscal stress in H1 2025 unde

June 20, 2024

U.S. Outlook: Economy Starting to Lose Momentum
Paying Article

June 20, 2024 6:17 PM UTC

•    The U.S. economy is starting to lose momentum after a surprisingly strong second half of 2023, and we expect the loss of momentum to become more apparent in the second half of 2024, causing a slowing in employment growth from its current strong pace. We expect inflation to resume a gradua

May 10, 2024

Asset Allocation 2024: Tricky Seven Months Remaining
Paying Article

May 10, 2024 1:06 PM UTC

Fed easing expectations for 2025 and 2026 can shift from a terminal 4% Fed Funds rate towards 3%, as the U.S. economy slows due to lagged tightening effects.  Combined with Fed easing starting in September this should mean a consistent decline in 2yr yields.  However, 10yr U.S. Treasury yields wil

March 25, 2024

Equities Outlook: Cyclical Recovery Versus Structural Headwinds
Paying Article

March 25, 2024 9:00 AM UTC

 ·        In the U.S., a tug of war between momentum and U.S. exceptionalism on the one side versus valuations and any deviations from the U.S. goldilocks scenario now means volatility and a risk of a correction.  We feel that the U.S. equity market recovery can push onto 5250 for the S&P5

March 22, 2024

DM Rates Outlook: Rate Cuts Arriving and Positive Yield Curves
Paying Article

March 22, 2024 2:00 PM UTC

U.S. Outlook: Fed to Ease as Economy Gradually Slows
Paying Article

March 22, 2024 10:00 AM UTC

•    The U.S. economy has continued to see growth surprising to the upside supported in particular by consumer spending. While the momentum of the second half of 2023 will be difficult to sustain the economy now looks poised for a soft landing, with risk that continued resilience in the econom

January 10, 2024

Preview: Due January 11 - U.S. December CPI - Marginally above 0.2% before rounding
Paying Article

January 10, 2024 2:00 PM UTC

Our forecast for the core rate would be a slowing from 0.3% (0.285% before rounding) in November, though similar to October’s outcome of 0.227%.
We expect some slowing from November accelerations in owners’ equivalent rent and medical care though these components should remain stronger than most

January 09, 2024

Shipping Freight Cost Jump and Inflation – Some Perspectives
Paying Article

January 9, 2024 2:24 PM UTC

Figure 1: Freight Cost Surge in Perspective
Source: DataStream 
How Long?
Houthi rebels have been attacking some ships in the Red Sea in recent weeks.  The key question is how long this will last?  One line of thinking is that the Houthi attacks are part of Iran axis of resistance alongside attacks

January 03, 2024

AI and Technology Impact on Growth and Inflation
Paying Article

January 3, 2024 10:30 AM UTC

Bottom Line: The full benefits of the latest AI wave will likely not kick in until the late 2020/early 2030’s.However, 5G over the last couple of years has been enabling more connectivity via the Internet of Things and allowing more big data analysis, including AI tools and algorithms. In the 2hal

January 02, 2024

Preview: Due January 11 - U.S. December CPI - Marginally above 0.2% before rounding
Paying Article

January 2, 2024 5:03 PM UTC

Our forecast for the core rate would be a slowing from 0.3% (0.285% before rounding) in November, though similar to October’s outcome of 0.227%.
We expect some slowing from November accelerations in owners’ equivalent rent and medical care though these components should remain stronger than most

December 15, 2023

Equities Outlook: Rate Cuts To Help in 2024
Paying Article

December 15, 2023 11:00 AM UTC

Equities Outlook: Rate Cuts To Help in 2024
·        For other DM equity markets, EZ and UK are undervalued in contrast to the U.S., but are in or close to recessions and economic recovery will likely be weak and disappointing.  Though the ECB and BOE will likely ease in Q2 with the Fed, we

U.S. Outlook: Slower Growth to Sustain Improved Inflation Picture
Paying Article

December 15, 2023 10:01 AM UTC

·         Given the strength of recent GDP growth the Fed is rightly cautious about declaring victory on inflation despite recent encouraging progress. Should data surprise to the upside, the Fed could still tighten again, even if it now looks unlikely. However, we believe that data will sh

December 11, 2023

Preview: Due December 12 - U.S. November CPI - Flat again overall but not quite as soft in the core
Paying Article

December 11, 2023 1:25 PM UTC

Gasoline prices saw accelerated declines in November and this could feed through to other components such as air fares. In the core rate, October’s downside surprise was mostly due to shelter, which came in below trend after an above trend September, and we expect shelter in November to look simi

December 10, 2023

December Government Bond Volatility
Paying Article

December 10, 2023 2:32 PM UTC

Figure 1: 10yr-Fed Funds (%)
Source: Continuum Economics/Datastream
Government bond yields so far in December have continued the November trend to lower yields, as speculation grows about the scale of easing from DM central banks in 2024/25.  While numerous central banks meet this week, the bond mark

December 07, 2023

Preview: Due December 8 - U.S. November Employment (Non-farm Payrolls) - Slightly firmer due to returning strikers
Paying Article

December 7, 2023 12:46 PM UTC

October's payroll saw a decline of 35k in manufacturing with 33k of that due to autos, where the monthly strike report reported that 25k were on strike. We expect a 25k increase in manufacturing in November, more than fully due to autos. October's strike report also showed 16k on strike in the motio

October 25, 2023

Bank of Canada Forecast Fine Tuned, Easing Later but Faster in 2024
Paying Article

October 25, 2023 5:06 PM UTC

The BoC’s updated view
The BoC stated that there is growing evidence that past interest rate increases are dampening economic activity and relieving price pressures. There can be little doubt over the first conclusion given recent GDP data, but that the BoC felt able to make the second conclusion i

October 17, 2023

Bank of Canada to Hold Rates on October 25, Won’t Signal Rates Have Peaked
Paying Article

October 17, 2023 4:34 PM UTC

A quarterly Monetary Policy Report is due at the meeting. This will confirm that Q3 GDP at -0.2% annualized significantly underperformed a 1.5% forecast made with July’s MPR, and that Q3 CPI, averaging 3.7% yr/yr, significantly exceeded July’s 3.3% projection. Q3 GDP appears to be tracking below

September 20, 2023

FOMC Forecasts Justify More Hawkish Dots, but May Be Too Optimistic
Paying Article

September 20, 2023 8:41 PM UTC

Fed’s updated economic view justified more hawkish dots
Since the FOMC dots were last updated in June, GDP has exceeded expectations, with Q1 revised up, Q2 exceeding expectations and early signals for Q3, particularly from consumers, as stressed by Chairman Jerome Powell in the press conference, l

September 06, 2023

Bank of Canada Pauses as GDP Slips but Remains Worried About Inflation
Paying Article

September 6, 2023 2:47 PM UTC

The BoC stated that given signs of easing excess demand and given policy lags they decided to hold the rate at 5.0% but they go on to say that they are concerned about persistent underling inflationary pressures and are prepared to tighten further if needed. While we expect the BoC to keep rates at

August 07, 2023

Navigating the Path to Peace: Saudi Talks on Ukraine-Russia Conflict
Paying Article

August 7, 2023 10:59 AM UTC

Saudi plays peacemaker
The goal of the meeting in Jeddah this weekend was to discuss and potentially agree upon essential principles that could pave the way for a peaceful end to the conflict in Europe. Saudi brought together several stakeholders with diverse interests and perspectives on the conflic

July 31, 2023

Fed Q3 Senior Loan Officer Survey - Similar Picture to Q2 Keeps Business Investment Risks Moderate
Paying Article

July 31, 2023 6:34 PM UTC

For C+I loans, a net 50.8% tightened standards for large and medium firms and 49.2% did for small firms, up from 46.0% and 46.7% respectively in Q2, and the highest since Q3 2020. However this was a second straight modest deterioration, suggesting the banking turmoil earlier this year has not had a

June 21, 2023

U.S. Outlook: No Recession, but Subdued Growth Will Help to Reduce Inflation
Paying Article

June 21, 2023 9:33 AM UTC

GDP outlook subdued but not recessionary
U.S. economic data has tended to surprise on the upside in recent months, most notably employment growth and most significantly core PCE prices, where the underlying trend appears stuck at a pace a little above 4.0% on an annualized basis. This is off the high

March 27, 2023

U.S. Outlook: Two Subdued Years for the Economy as Inflation Falls Only Gradually
Paying Article

March 27, 2023 12:43 PM UTC

Source: Federal Reserve, Bureau of Economic Analysis, Bureau of Labor Statistics, Continuum Economics
Source: Continuum Economics
Two Straight Subdued Years for the U.S Economy
The U.S. economy ended 2022 with renewed momentum. Consumers look healthy with the second half of 2022 seeing renewed growth i

August 24, 2022

U.S. Equities: Valuation or Earnings?
Paying Article

August 24, 2022 3:18 PM UTC

Figure 1: 10yr U.S. Real Treasury Yield Inverted and Forward S&P500 P/E Ratio (% rhs)
Source: Datastream, Continuum Economics using breakeven inflation from index-linked bonds
Valuations or Earnings Outlook
The bounce in U.S. equities since the start of July has been driven by short covering, specul

August 11, 2022

Oil Prices: Recession Headwinds
Paying Article

August 11, 2022 12:39 PM UTC

Figure 1: WTI Net Non-commercial Future Positions
Source: CFTC
Various Factors Take the Steam Out of Oil
A number of factors are leading to our downward revision of the WTI oil price outlook.
Figure 2: OECD Oil Inventories in Number of Days
Source: U.S. EIA
Nevertheless, we do see oil prices rising in

August 10, 2022

4th Taiwan Straits Crisis
Paying Article

August 10, 2022 11:12 AM UTC

Figure 1: Taiwan Straits Exercises nearer than 1995-96
Source: CSIS
Temporary Military Flexing or Prelude to Invasion, Blockade or Tensions?
China's military exercises in the Taiwan straits are not at the same intensity but are being extended, as China shifts to a new normal on Taiwan. China wants to

August 08, 2022

U.S. Inflation Reduction Bill: Little Macro but Helping Climate Change Fight
Paying Article

August 8, 2022 3:54 PM UTC

Figure 1: Historical and Modeled Net U.S. Greenhouse Gas Emissions (billions metric tonnes CO2 equivalent)
Source: Rapid Energy Policy Evaluation Tool Kit (REPEAT here)
Little Inflation or Macro, More Reducing Climate Emissions
The Inflation Reduction Act of 2022 will likely have little impact on ne