The US is digesting 450 basis points of interest rate hikes, and another 50 basis points may be on the way. The ECB hiked by 300 basis points and signaled that another 100 basis points would follow. Japan increased the cap on its 10-year bond yield, and it may exit YCC this year. Central bank balance sheets are contracting.
What happened to the assured recession which most models, surveys, and leading indicators have been pointing to?
Risk assets are off to a great start. The market, as it usually does, has fooled everybody. We are reminded of Humphrey Neill’s potent advice: “When everybody thinks alike, everyone is likely to be wrong.” Trends change before the masses take notice.
Because of the inherent future uncertainty, the inefficiencies at the heart of macro investing are permanent. Most of the data required is publicly available. The differentiating factor is the ability to analyze and thematically organize the information into coherent theories.
In this conversation with Nilay Patel (Deputy CIO of Dymon Asia), we ruminate contrarily on the state of the global economy and markets, directing our thoughts in ways that are counterintuitive yet promise to make us wiser.