The consistent decline in Economic Policy Uncertainty*, as measured by the indexes presented here, would seem to serve as evidence supporting a continuation of the positive trend in European equities.
We won’t know how the first quarter officially ended for another nine days but the Chicago Fed just gave us a hint that it will be below trend growth. According to the Chicago Fed National Activity Index, the three-month period ending in March just posted the slowest growth since October 2012.
For about six weeks, between the middle of January and the first week of March, inflation expectations embedded in the US Treasury market bounced after declining for the second half of 2014.
Three weeks ago we mentioned how Fed assets were finally declining on a quarterly basis. Since then we have had a few more data points released and the trend is still downward.
There is a geographic disparity amongst the Citi Economic Surprise Index. Economies, both developed and emerging, are surprising to the upside in Asia and Europe while economies in the western hemisphere are not doing as well (at least in terms of meeting and exceeding expectations). Below we show some of the more interesting charts.
Not even a month ago, we wrote about how it looked like the market was pricing in two rate hikes in 2015 and four in 2016. Well, apparently a lot has changed (at least regarding expectations) since then.
The spread between junk bonds and 10-year treasury on 6/23/14 hit a very narrow 222 basis points. At that time, the S&P 500 was trading at 1962. Since then the junk bond spread widened to over 5% in December and currently stands at 415 basis points.
NYSE margin debt increased by $20 billion in February. The one-month change is the largest change in 8 months. Margin debt is at the second highest level of all time and it currently stands just $787 million below the all-time high set in February 2014.
Throughout QE3, one of our favorite charts to look at was the three-month change in total fed assets. You could overlay this series with bonds or stocks or other economic indicators and find some interesting relationship.
Inflation is falling and so are inflation expectations. We and the majority of the rest of the financial community have been highlighting this for most of 2015.