Friday, Dec 5Hamish Risk | December 4, 2020
The Covid-19 pandemic has sped up transformation across society and the economy that many had seen as inevitable. In today’s Macro Briefing, Ollari Consulting explains why that may well be the case for economic policy, and why investors should pay attention to the velocity of money as policymakers try to level the playing field and use fiscal policy to target stimulus towards those that will play a part in reflating the real economy. As Cowen’s Washington Research Group sets out, the importance of the Senate run-offs in Georgia cannot be underestimated in that regard. Meanwhile 4X Global Research rails against painting every EM currency with the same brush, TMI Data Science explains why gold is facing something of an identity crisis and RenMac outlines why retail bank collaboration with big tech has a hint of turkeys voting for Christmas.
fiscal policy velocity of circulation Ollari Consulting
1. V will show us the wayMonetary policy has reached its limits, with the V in the MV=PQ equation the reason why massive monetary stimulus has not translated into economic reflation says Christophe Ollari at Ollari Consulting. Instead, it has resulted in wealth concentration, he says, with the velocity of money declining because the dollars the Fed created went into asset purchases instead of hourly wages which would have been recycled back into the economy. Of course, that was not the Fed’s intention, but the post-Covid world is likely to be about MMT and printing money to fund an expansive fiscal policy which will funnel money into the hands of people who will spend it, according to Ollari. That is why investors should watch V, he says – because that will show them the way.
US economic policy US Senate runoffs Cowen Washington Research Group
2. Highway 20 ride – Georgia senate runoffsIt’s impossible to overstate the importance of the two Georgia Senate run-offs on January 5 says Chris Kreuger at Cowen & Co’s Washington Research Group. They will, after all, decide the fate of 2021 US federal policy, he says. From Trump’s fraud allegations, a GOP split and worries over black turnout, Kreuger sets out the nuances behind the vote. How anyone can have any conviction over the result is somewhat mystifying, he says, but one thing is for certain: the Democrats have a real chance of winning both seats and putting a $3 trillion fiscal stimulus and tax increases back on the table.
EMFX 4X Global Research
3. Emerging market currencies – hopes and realitiesAs we highlighted earlier this week there is increasing optimism from the likes of ECR Research around the prospects for EM currencies as risk appetite rises. Olivier Desbarres at 4X Global Research, however, has issued a note decrying the lazy tendency to lump in so many diverse, high and low-yielding currencies together as “EM”. He says EM currency bullishness glosses over recent performance and regional divergences, arguing regional factors over and above global risk appetite have been just as important in determining relative performance. As Desbarres puts it, the list of reasons put forward by pundits for further blanket EM gains against developed currencies over the next year are long and varied, but so are the caveats. He prefers a more nuanced approach, breaking down his forecasts for the coming year into three distinct phases.
gold Sentiment TMI Data Science
4. Text-mining the themes behind gold’s disappointing fallTMI Data Science is an alternative data provider utilizing Natural Language Processing to build leading indicators, forecasts and trading strategies via unstructured data sourced from the global financial, trade and traditional media across a wide array of asset classes. The latest report from TMI’s Elan Gore examines a range of gold-related custom indicators to chart the catalysts for gold’s persistent weakness since August. A revealing read explains how media discussion of cryptocurrencies, correlations and the dollar have all combined to call gold’s traditional portfolio function into question.
Financials open banking Renaissance Macro Research
5. Software is eating the banksGoogle Plex is to retail banks what Apple iPhone was to telecom carriers, and that is not a good thing for the banks according to Howard Mason at Renaissance Macro Research. He explains how in the world of open banking, big tech is taking an expanded role in customer origination, user experience and product sales, leaving the banks, like the telecom network providers before them, fighting for the scraps by providing the commoditised plumbing that supports the industry. The big question for the banks joining Google Plex is whether they are sacrificing industry structure for short-term comparative advantage, or whether they just need to bite the bullet and accept they cannot hope to match the user experience on offer from big tech.