Friday, October 22, 2021

Morning Note: The 'S' Word

The opening sentence from this week's release of the Fed's Beige Book* echoes the story we've been telling of late. That is, recession risk remains low, but growth is slowing:

"Economic activity grew at a modest to moderate rate, according to the majority of Federal Reserve Districts. Several Districts noted, however, that the pace of growth slowed this period, constrained by supply chain disruptions, labor shortages, and uncertainty around the Delta variant of COVID-19."

That's a setup that has the term "stagflation" (rising inflation amid a stagnating economy) finding its way into a few narratives. We won't go there just yet, but, sure, it's a risk...

These two graphs, for the moment, argue that risk:

The Atlanta Fed GDP Nowcast ("GDPNow forecasting model provides a "nowcast" of the official estimate prior to its release by estimating GDP growth using a methodology similar to the one used by the U.S. Bureau of Economic Analysis):

Consumer Price Index:

More to come in our weekly macro update (next up):

Asian equities were mixed overnight, with 8 of the 16 markets we track closing lower.

Europe's catching a nice bid his morning, with 18 of the 19 bourses we follow trading up, as I type.

US major averages are mixed to start the day: Dow up 123 (0.35%), SP500 up 0.06%, SP500 Equal Weight up 0.46%, Nasdaq 100 down 0.36%, Nasdaq Comp down 0.40%, Russell 2000 down 0.10%.

The VIX sits at 14.98, down 0.20%.

Oil futures are up 0.63%, gold's up 1.46%, silver's up 2.55%, copper futures are down 0.84% and the ag complex is up 0.42%.

The 10-year treasury is up (yield down) and the dollar is down 0.21%.

Led by silver, MP (rare earth miner), metals miners, KRBN (carbon credits) and gold -- but dragged by uranium miners, Viacom, Latin American equities, Indian equities and solar stocks -- our core portfolio is up 0.60% to start the session.

"It is only when we begin to interpret, to translate according to our conditioning, according to our prejudice, that we miss the truth. After all, it is like research. To know what something is, what it is exactly, requires research—you cannot translate it according to your moods."

--Jiddu Krishnamurti 

Have a great day!

*Commonly known as the Beige Book, this report is published eight times per year. Each Federal Reserve Bank gathers anecdotal information on current economic conditions in its District through reports from Bank and Branch directors and interviews with key business contacts, economists, market experts, and other sources. The Beige Book summarizes this information by District and sector. An overall summary of the twelve district reports is prepared by a designated Federal Reserve Bank on a rotating basis.

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