Good afternoon,
US Markets edged up this week, while the TSX was slightly in the red. And while markets are broadly green around the world year-to-date, the bargain bond market still has bated breath. The Bloomberg Barclay’s Global Aggregate Bond index is only up around 2 ½% this year so far – coming of a brutal year last year. The broken record skips on -- we continue to monitor inflation stats, wondering when financial covid will finally and truly fade away.
Out with a whimper? If this week’s Federal Reserve rate hike proves to be the last, then this historic rate hike cycle ended as innocuously as it began. We look at why we believe this is the case and what it means for fixed income portfolios. (I hope RBC is right here, but this is far from certain).
Regional developments: U.S. stocks shrug off recession concerns, but for how long? Canadian recession risk receding; All options are on the table for the European Central Bank; China pledges more support for the economy
Full Story here: Global Insight Weekly
Friday Chart:
U.S. household less exposed to higher rates than in the past: These two charts (below from the Wall Street Journal) may offer the best explanation of the weird inflationary cycle we’re in, and the consumer’s resilience to higher interest rates. “Americans locked in ultralow rates on debt such as mortgages and auto loans in the decade-plus that followed the 2008 financial crisis… As of the first quarter, (of 2023) only 11% of outstanding household debt carried rates that fluctuated with benchmark interest rates… likely blunting the impact of the Federal Reserve’s rate hikes."
Video (11-minutes) on De-dollarization: (This is excellent) Watch: here
Quick Video Summary: A smart RBC lady from France talks with smart RBC lady from the UK about what’s actually happening (or isn’t very quickly happening) with de-dollarization.
- As trade and geopolitical tensions get more fragmented, will the U.S. dollar will continue to be the global reserve currency of choice? (There’s lots of hoopla about this out there. It’s somewhat exaggerated, but it is a long-term issue to watch).
They also touch on:
- The increasing relevance of the Chinese renminbi;
- Whether the greenback’s days in the top spot are numbered;
- The complex factors that support the dollar’s reserve currency status;
- Which currencies could benefit from de-dollarization.
For previous parts from the series, please see the executive summary of the “Worlds apart” broad overview and the role of critical minerals in the deglobalization theme.
Just for fun: When literary critic Dorothy Parker reviewed “Winnie the Pooh” she found it overly childish and whimsical. Among other cheap shots, she said she almost “fwowed up” reading it. Hmm… A childish children’s book, imagine that! Dear Dorothy. We quite enjoy witty cynicism, even when it comes from long-forgotten, unopened bathroom reader royalty.
Enjoy your weekend!
Mark