Editor's Note: Below is a brief excerpt transcribed from today's edition of The Macro Show hosted by Macro analyst Ben Ryan. Click here to learn more about The Macro Show.
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Ben Ryan: We have these three Macro themes that we put out every quarter. Part of our #StrongDollar call going into this year was that our predictive tracking algorithms suggested growth would slow globally. That’s our Global #Divergences call. Global growth had been accelerating and the data looked really positive. Our point was that Wall Street called this the ‘globally synchronized recovery’ and there was risk to that. Our call was that a lot of these countries would not be in #GrowthAccelerating positions anymore as we progressed throughout 2018. Growth would rollover and you’ve seen a lot of that. This has proved positive for the U.S. Dollar because when there’s turmoil in market abroad investors generally bring their money back to the U.S. If global #GrowthSlowing was the first part of our #StrongDollar call, hawkish economic data was the second part of the puzzle. We think U.S. growth slows into the back half of 2018. Most investors would say that the Fed would go dovish on that. But again, our point was that what if the data that’s coming in is really hawkish and important inflation readings continue higher? Just look at the NFIB Small Business Confidence reading and there are a lot of important read throughs. That coupled with some of the other data points that have come out recently, on CapEx and Real PCE, it’s hard to look at that data and, based on the Fed’s framework, come to the conclusion that they’ll be dovish. The Fed really isn’t in a place to loosen policy or be dovish on the margin. That coupled with our Global #Divergences call would argue for more dollar strength. |
