Marc Chandler, Managing Partner at Bannockburn Global ForEx and editor of the Marc to Market website, joins us for a special weekend Editorial. First off, we dive into his take on the trends and forward expectations for the bonds and interest rates markets, and how that may play into the future contraction of economic conditions.
Next we dove into the data of the last 2 years GDP trends, and if we are going to see as robust of a 3rd Quarter as the Fedwatch GDP Now site is projecting. It brings up the whole debate of are we going to see a recession later this year or earlier next year; or has there been the proverbial “soft landing” where we’ve avoided any more market and economic dislocations? This wide-ranging conversation get’s at the question of if and when we are reaching the end of business cycle? Marc points out that much of thinking about a recession and even it’s precise definition is more nebulous, and stems from a post Great Depression and WWII mindset. Moving forward he believes the metrics around GDP may be less about nominal overall growth or shrinkage, and more about GDP per capita and the impact and quality of life of each individual citizen in a given country.
The conversation then shifts over to the inflation data, and the base-effects we’ve seen affecting the trends, in tandem with the Fed’s tightening cycle and rate hikes. It’s a nuanced topic that delves into when we may see rate cuts next year, if the Fed’s 2% target be achieved, and what cost-push affect on pricing we may see as a result of higher commodities prices. Marc points out that the way CPI is calculated now is really less about goods and more focused on services, which are not as hamstrung to commodity prices, but that rising energy prices will affect both businesses and consumers. One of the key metrics on tap that he’ll be watching is the retail sales report, and other metrics around the strength of the consumer.
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