Recap 1-07-14


The themes from late last year look fairly consensus now. It seems too early to expect an equity correction (i.e. a drop of more than 3%) at this juncture, but we could well get one in 1Q. A possible catalyst comes from Yellen’s ascendance to Fed chair. All new FOMC chairmen have faced a market ‘test’ of some sort early in their tenure, and given the usage of ‘forward guidance’ now, this looks likely to repeat.

On a big picture basis, such a correction probably won’t be a big deal. 6-8% drawdowns are the norm in bull markets, and would be pretty reasonable if returns are in the double digits, which is the norm in bull markets.


  • China’s banks will need to raise up to two trillion yuan ($330 billion) from share and bond sales in the next five years, according to McKinsey & Co. WSJ
  • EU CPI declined to 0.8% in Dec as exp vs 0.9% prev. The Core measure declined to 0.7% vs 0.8% exp and 0.9% prev

Upcoming Data:

  • Wed: US ADP Employment, FOMC Minutes, Australia Retail Sales, Building Approvals, China CPI
  • Thu: BoE, ECB, Canada Housing Starts, US Jobless Claims,
  • Fri: US Employment, Canada Employment, USDA Ag report
  • Mon: AU Home Loans, BoC Business Outlook Survey, Japan Eco Watchers Survey
  • Tue: France, CPI, UKPPI, US Retail Sales