Welcome to the Post-New Normal Era in Markets

Welcome to the Post-New Normal Era in Markets

Originally published at Bloomberg.com | February 15, 2018

Get ready for the post-new normal. 

Recent market volatility reflects more than just an unwinding of positions or the failure of a few esoteric volatility products. The catalyst for the selloff arrived on Feb. 2 in the form of higher-than-expected U.S. wage inflation. Although a few data points aren’t conclusive evidence, it won’t be long before market participants begin to doubt the Fed can remain committed to “gradual normalization.” The implications of such a shift in sentiment cannot be overstated. 

Yes, positioning and market structures have exacerbated market moves. The unwinding of consensus positions in global equities and in trades that would benefit from subdued volatility meant that losses in those markets were more pronounced than elsewhere. Oil prices were another positioning casualty.

But this was not a mere “risk-off” episode. Had it been, bond yields would have fallen, not risen. Continue Reading.

Trump’s First Year Echoes Obama’s Record on the Economy

Trump’s First Year Echoes Obama’s Record on the Economy

Originally published at Bloomberg.com | January 22, 2018 The first year of Donald Trump’s presidency was marked by some of the worst political turbulence in modern U.S. history. But when it comes to the economy and markets, the surprise is how little change, good or bad, has occurred. Let’s start with economics. The prevailing view… Continue Reading

Can The Remnimbi Take On The World?

Can The Remnimbi Take On The World?

The Chinese have a saying: “Take a second look; it costs you nothing.” This advice is apt in the context of China’s current stock-market volatility, the implications of which extend to the country’s core strategic goal of establishing the renminbi as a global reserve currency. Continue Reading

The US economy’s strange decade

The US economy’s strange decade

Weak productivity growth helps to explain the continued robust rates of job creation in the United States, as well as workers’ sluggish wage gains. If left unresolved, the productivity malaise will ensure that the current expansion remains uniquely unbalanced and unhealthy. Continue Reading