Recap 2014-10-28


FOMC is the headline event tomorrow. Obviously we’ve seen a lot of market movement since the last one, so one question is whether expectations have shifted as much as the market. And the answer there clearly seems to be no. Despite the move in treasury yields, and despite the drop in oil prices and inflation expectations, the consensus for the path of Fed hikes remains little changed. Below is the historical consensus forecast for the Fed Funds Target rate for Q3 2015, for example:

This suggests the possibility of a dovish surprise. Rule of thumb: when there is a divergence in views between the market and pundits… go with the market.

Separately, per paststat, there is a strong seasonal bias for the S&P over the next 2 weeks.

Finally, interesting observations from the Fed’s 2013 Survey of Consumer Finances:

The top 3 percent has been getting most of the gains:

Median and Average Household net worth has not grown from 2010 to 2013:

GS: In light of our commodities team’s recently reduced oil price forecasts, we explore one frequently discussed offset to the otherwise positive growth effects of cheaper oil, namely the effect of a potential reduction in oil and gas-related fixed investment. Our conclusion is that the decline in oil and gas-related investment should reduce real GDP growth by no more than -0.1pp, because spending growth in this segment has already slowed considerably since it peaked in 2010 and the decline in oil-related capital spending is expected to be fairly shallow. This suggests that while the benefits of cheaper oil to US growth will be smaller than they have been previously, the positive effect on consumer income will still outweigh the negative effect of lower production activity.


  • US Durable Goods Orders were weak, falling -1.3% vs +0.5% exp. The Core capital good orders measure was also weak, falling -1.7% vs +0.7% exp.
  • Consumer Confidence jumped to 94.5 vs 87 exp and 86 prev.
  • Sweden’s Riksbank unexpectedly cut rates from 0.25% to zero. They said they would not raise rates until mid-2016 delayed from the September forecast for the end of 2015.
  • France bows to the EU pressure. They will cut its budget deficit next year by an additional €3.6bn, a move that it hopes will be enough to avert a bruising fight with Brussels over its public finances. In a letter sent to the European Commission on Monday, the eurozone’s second-largest economy said that the additional cuts would boost the country’s structural adjustment efforts next year to above 0.5 per cent.
  • The BoJ’s Kuroda was speaking in Parliament saying that the 2-year time frame the bank has for meeting the 2% inflation target is not rigid and will act further if needed, also adding that the JPY weakness is positive for the economy.


  • Tue: New Zealand Business Confidence
  • Wed: Oil Inventories, FOMC, RBNZ, AU New Home Sales
  • Thu: UK House Prices, German Unemployment, CPI, US Jobless Claims, 3Q GDP, NZ Building Permits, Japan Employment, CPI, UK Cons Confidence
  • Fri: Month End, Japan Housing Starts, EU Unemployment, CPI, Canada GDP, US Personal income, PCE Deflator, Chicago PMI, China PMI
  • Weekend: AustraliaMfg PMI, Australia Building Approvals, China Non-Mfg PMI,
  • Mon: EU PMI, CanadaPMI, US ISM, Australia Trade Balance, Retails Sales, RBA, Japan PMI