There is a lot of central bank speak today. European Central Bank President Lagarde will of course be offering comments. However ECB officials have given the impression that the ECB will follow the lead of the Federal Reserve. That, and a rather dangerous focus on data dependency, reduces the impact of ECB officials’ public pronouncements.

Federal Reserve governor Waller suggested there was “no rush” to cut rates. There is no absolute urgency, but there are three counter arguments. Real rates for businesses and consumers have risen significantly since last July. Any lingering US inflation is mainly confined to Texas and Florida, not the whole country. And saying there is “no rush” is unlikely to be appreciated by struggling lower income households.

We examine a potential timeline for the Fed to commence Quantitative Tightening, including the criteria which needs to be met, and how fixed income markets might respond to such a policy shift. We also review allocation preferences within the asset class, and highlight recent performance drivers. Featured are Leslie Falconio, Head of Taxable Fixed Income Strategy Americas, and John Murtah, Fixed Income Analyst Americas, UBS Chief Investment Office. Host: Daniel Cassidy

The Federal Reserve minutes offered some clarity on future Fed policy. The tone is consistent with rate cuts and a soft economic landing. The Fed does not want rising real interest rates with a slowing economy. Disinflation trends were discussed (economists selectively adjust data to better identify these trends).

The minutes of the last Federal Reserve meeting are due, and markets will care. The US is approaching changes in both monetary and quantitative policies. Fed Chair Powell seemingly lacks the communication skills of his predecessors, so markets are easily pushed about by shifting policy expectations. The minutes offer a more considered view of where policy should be heading.

The ECB releases a negotiated wage settlement index. ECB President Lagarde has repeatedly highlighted wages as a factor determining policy moves. Real wages should be rising—after so long a period of weak wage growth, rebalancing is needed. Rising real wages should not be seen as an automatic cost pressure for inflation—changing working habits and automation have increased productivity, allowing companies to pay workers more in exchange for more output.

The ending of the lunar new year holiday has people focusing on China’s domestic demand. The number of trips rose above pre-pandemic levels, but early indications are that the amount of money spent per trip was subdued. As with developed economies, China’s consumers want to see friends and family, and have fun. Unlike developed economies, there seems a bias to having fun cheaply.

Japan’s population fell 0.44% last year. Fewer people make and consumer fewer things. Japan’s economy had a second quarter of economic contraction at the end of 2023, but in the context of a declining population this is less surprising.

Yesterday’s US consumer price inflation rate slowed slightly less than expected—in the world of hashtag economics that was “hot” and a cue for hysteria. In reality, the fictitious owners’ equivalent rent drove most of the inflation. Moreover, inflation is geographically concentrated. For homeowners in most of the US, inflation in reality (excluding OER) is around 2%—bad luck if you live in Texas or Florida, where it is approaching 5%.

Following this morning's release of the January CPI print, Senior Economist Americas with the UBS Chief Investment Office, Brian Rose, drops by to share his thoughts on the data release and the broader US economy.

With the S&P 500 having topped the 5,000 level late last week, investors are curious as to how markets might evolve from here. Jason provides his take on the road ahead, along with updates on the Q4 reporting season and previews this week’s inflation data. Featured is Jason Draho, Head of Asset Allocation Americas, UBS Chief Investment Office. Host: Shiavon Chatman

The Truth About Inflation is a complex subject, worthy of a book. The challenge for economists with today’s US consumer price data is stripping away the fiction to get at the reality. The largest part of the consumer price index is owners’ equivalent rent, which rose 6.3% in December. It is a price no one pays, and it means middle-income homeowners have a lower cost of living increase and thus more spending power.

Former US President Trump was making some strongly pro-Russia comments over the weekend, in the wake of increasingly hostile rhetoric toward China. Markets to date are largely unmoved. Investors are not yet prepared to price scenarios for the November elections. While defence and trade policy fall under presidential commander in chief powers, fiscal policy will depend on Congress as well as the White House.

The calendar is quiet. The recent pattern of data deluge then data desert is unhelpful. In an increasingly complex world, overworked economists need time to examine the details of numbers to judge if they are reliable. Gaps in the calendar allow markets to speculate on irrelevant topics.

China’s consumer prices have been in deflation since last July (producer prices for far longer). January consumer price deflation was the worst in over 14 years, but this is distorted. The lunar new year is (literally) a moveable feast—occurring in January 2023, and in February 2024. That distorts food price patterns, exaggerating deflation. Nonetheless, deflation trend is indicative of weak domestic demand.

US December trade figures are due. Trade will be an increasing focus in 2024 as elections encourage economic nationalism. Structural changes are also adjusting trade patterns as the lengthy supply chains of the third industrial revolution appear unnecessarily complex given the technologies of the fourth industrial revolution. Geographic details of trade patterns are of interest, therefore. While the focus will be on imports (the US role as consumer of last resort is why it is the world’s most important economy), the US does still export and shifts there should not be overlooked.

In this week’s episode, Jason explains why the US economy’s ‘vibecession’ appears to be over and a ‘vibespansion’ has begun. We also discuss the road ahead for monetary policy and portfolio positioning. Featured is Jason Draho, Head of Asset Allocation Americas, UBS Chief Investment Office. Host: Shiavon Chatman

There is a narrative that rising equity markets are good, and falling equity markets are bad. This is not true. Fairly valued equities are good, and bubbles or disorderly markets are bad. If the latest barrage of equity market measures by China’s government are aimed at correcting irrational pessimism and disorderly markets, they are economically beneficial. If they are driven by a desire to see equities higher just because they want equities higher, they are economically negative.

A pre-recorded television interview with Federal Reserve Chair Powell was broadcast over the weekend. Powell’s public remarks have a scarcity value that certain other central bank leaders might learn from. The value of the content of Powell’s remarks is, perhaps, more questionable. Powell focused on what his colleagues were thinking—no March rate cut, three cuts this year. Powell added that a weaker economy might mean more rate cuts, a stronger economy fewer rate cuts.

As another eventful week comes to a close, Brian Rose shares his take on the latest employment data, along with Wednesday’s Fed statement. We also discuss the overall state of the US economy and what to expect in the month’s ahead. Plus, preview what you can expect next week. Featured is Brian Rose, Senior Economist Americas, UBS Chief Investment Office. Host: Shiavon Chatman

With a new year underway, we discuss what investors will be focused on and how factors spanning global elections to potential shifts in monetary policy might impact the sustainable investing landscape. Featured are Amantia Muhedini, Sustainable & Impact Investing Strategist Americas, UBS Chief Investment Office, and Lucy Thomas, Head of Sustainable Investing at UBS Asset Management. Host: Daniel Cassidy

Hear the latest thinking and investment recommendations from the UBS Chief Investment Office with Jason Draho, Head of Asset Allocation Americas, and Nadia Lovell, Senior Equity Strategist Americas.

The US reminds us that average earnings are not wages, and also publishes some other employment data. Today’s employment report will be a bit messy—US workers do not like cold weather, and the weather was cold. There is also the big set of benchmark revisions to past data, which are likely to reduce estimated payrolls.

Following this past weekend’s attacks in Jordan against US servicemembers, Shane discusses how and when the US will respond to Iran and what it all means for brewing tensions in the region. We also update on House GOP impeachment proceedings against Homeland Security Secretary Mayorkas, and bi-partisan Congressional legislative efforts aimed at tax breaks for businesses and children. Featured is Shane Lieberman, Senior Governmental Affairs Advisor, Government Affairs US. Host: Daniel Cassidy

Hear from members of the UBS Chief Investment Office, including Mark Haefele, Paul Donovan, Mark Andersen, and Nadia Lovell, as they share an economic and market outlook.

The violent swings in US equity pricing yesterday tell investors all they need to know about Federal Reserve Chair Powell’s communication skills. In the battle between extremists predicting a hard landing and the realists who see a soft economic landing, the Fed seems to tilt towards a soft landing. Rates have peaked, a March cut is (probably) not happening, but cuts are coming.

Fresh off of the latest FOMC policy meeting and press conference, the UBS Chief Investment Office shares reflections on the outcome, and how markets have been responding. Plus, an outlook for monetary policy is shared, along with considerations when it comes to portfolio positioning. Featured are Brian Rose, Senior Economist Americas, Barry McAlinden, Senior Fixed Income Strategist Americas, and David Lefkowitz, Head of Equities Americas. Host: Daniel Cassidy

The Federal Reserve is not expected to change policy. Fed Chair Powell (not an economist) is unlikely to apologize for past policy errors. The Fed chair might try to take undeserved credit for the rapid US inflation slowdown.

The Eurozone and assorted components release preliminary fourth quarter GDP guesses. A small drop in growth is expected, led by Germany. The German economy was poorly positioned for global consumers’ spending focus shifting from goods to having fun. Any drop will provoke media hysteria about the nonsensical term “technical recession”. Falling GDP is more probable when countries have falling populations, and in the real world no one differentiates –0.1% from 0.0% growth.

Investors can expect a lot to digest in the week ahead, spanning a Fed policy meeting, to numerous corporate earnings, all leading to the January Jobs report to cap off the week. Jason Draho outlines his expectations and what certain outcomes may mean for the markets and your portfolio. Featured is Jason Draho, Head of Asset Allocation Americas, UBS Chief Investment Office. Host: Daniel Cassidy

Today’s calendar is so quiet even ECB President Lagarde is not speaking (former US Treasury Secretary Summers might be speaking, but that is just background noise at this stage).

With the 2024 campaign trail in full swing, Shane reflects on the results of the New Hampshire primary and previews what the next few weeks have in store. We also update on border negotiations within Congress and ongoing tensions in the Red Sea. Featured is Shane Lieberman, Senior Governmental Affairs Advisor, Governmental Affairs US. Host: Daniel Cassidy

Yesterday’s US GDP data showed stronger growth, although inventory numbers hint at some slowing ahead. Inflation continues to moderate. Can the Federal Reserve claim credit for this? It cannot. Central banks slow inflation by weakening credit and demand. This is not what has happened in the US. Inflation was always going to slow, and US economic performance seems to have happened in spite of the Fed, not because of it.

We continue with our series of muni market conversations by reviewing YTD asset class performance, as well as some portfolio themes. We also spend time on outlining the investment case for high quality water and sewer bonds. Featured is Kathleen McNamara, Senior Municipal Strategist Americas, UBS Chief Investment Office. Host: Daniel Cassidy

Hear the latest thinking and investment recommendations from the UBS Chief Investment Office with Jason Draho, Head of Asset Allocation Americas, and David Lefkowitz, Head of Equities Americas.

ECB President Lagarde speaks. This is not an especially rare occurrence. In one of last week’s multitude of speeches, Lagarde took time to brand economists a “tribal clique”. Today’s remarks come after the ECB decides on policy, so could generate a flicker of interest. ECB colleagues have periodically had to “clarify” some of the president’s remarks, but assuming that is not necessary this time vague signals of a summer easing seem likely.

Today’s calendar is plagued with business sentiment survey opinion, and little else. Surveys attract media attention because if you assume the survey does what it says it does, it can produce a more dramatic story. However, survey evidence has been a progressively less reliable description of reality across various measures. The UK government’s ONS says its labor force survey is unreliable—why would sentiment surveys of employment be more credible?

Our series of thematic investing conversations continues as we explore the top sustainability-linked investment ideas for 2024, outlined within the latest edition of Sustainable Investing Perspectives from the UBS Chief Investment Office. Featured is Michelle Laliberte, Thematic Investing Strategist Americas, UBS Chief Investment Office. Host: Daniel Cassidy

The Bank of Japan continued its policy of masterful inactivity—leaving everything but its inflation forecasts unchanged (headline inflation forecasts were revised lower). Investors are focusing on policy meetings after the spring pay round as being the earliest chance of a policy change. The ECB bank lending survey is due, and relevant to future policy discussions there.

Initial trade data for January from South Korea suggests that there was a slowdown in export growth. The data should not be affected by rerouting ships away from the Red Sea (it is counting when goods leave Korea, not when they arrive at their destination). Global trade has to contend with consumers shifting demand from goods to services, the hype about artificial intelligence (and its associated technology), and simplifying supply chains.

Our conversation covers a range of timely topics, including takeaways from President Biden’s White House meeting with Congressional leadership, a status as to where government shutdown negotiations stand, and an update on Decision 2024 ahead of next week’s New Hampshire primary. Featured is Shane Lieberman, Senior Governmental Affairs Advisors, Governmental Affairs US. Host: Daniel Cassidy

A timely conversation with insights into the current environment for fixed income investing, the road ahead for monetary policy, and considerations when it comes to allocation within the asset class. Featured are Gene Tannuzzo, Global Head of Fixed Income, Columbia Threadneedle Investments and Leslie Falconio, Head of Taxable Fixed Income Strategy Americas, UBS Chief Investment Office. Host: Daniel Cassidy

UK retail sales volumes were weak in December. Consumer rebellion over profit-led inflation pushed consumers into buying earlier when discounts were on offer, and simply refusing to consume when prices were higher. Online retail also slowed, but fared a lot better than in person retail. Elsewhere German producer prices continued in deflation in December.

With 2024 underway, Richard Bernstein rejoins the podcast to share RBA’s economic and market outlook, as well as discusses investment views, monetary policy, and market risk factors with Jason Draho. Featured are Jason Draho, Head of Asset Allocation Americas with the UBS Chief Investment Office, and Richard Bernstein, Founder, Chief Executive Officer and Chief Investment Officer of Richard Bernstein Advisors. Host: Daniel Cassidy

Markets seemed surprised that US December retail sales were stronger than expected. This is weird—some part of US retail sales data surprised positively every single month during 2023. Never go short the hedonism of the US consumer. The Federal Reserve’s Beige Book suggested leisure travel also benefitted. However, unlike 2021/22 this spending is unlikely to be indifferent to prices— but instead to be a response to price discounting.

In this week’s Snapshot, Jason Draho answers five ‘bigger picture’ questions that may help to determine ‘what’s next’ for both the markets and the economy. Featured is Jason Draho, Head of Asset Allocation Americas, UBS Chief Investment Office. Host: Daniel Cassidy

Retail sales dominate, and there seems no reason abandon the hedonism of the US consumer. Lower income US households are more constrained, but middle income homeowners are living in a world of around 2% inflation (except in Florida) and have more spending firepower. The narrative has shifted. In 2022, consumers were spending the President Trump’s profligate unemployment payments and were relatively price insensitive. Today consumers are responding to evidence of price discounting.

As we look ahead over the first half of 2024, Leslie Falconio outlines expectations for rates and fixed income returns. We also spend time reviewing the latest fixed income allocation recommendations from the UBS Chief Investment Office. Featured is Leslie Falconio, Head of Taxable Fixed Income Strategy Americas, UBS Chief Investment Office. Host: Daniel Cassidy