Markets Weekly July 15

Hello my friends today is July 15th. My name is Joseph and this is markets weekly This week was an exciting week in markets. So we have a lot to talk about First last week I was thinking the top was in in the risk asset markets And I was 1000% wrong and the market still looks like it wants to go higher now, this is a Point of concern that I've been talking about for some time and we'll talk about it throughout this session But first as usual we're going to talk about three things First we're going to talk about the big news of the week the CPI data is inflation dead are we going back to pre 2020 levels does that mean that the Fed is going to cut rates very soon? Secondly we got to talk about what's happening in Japan because if you look at the yen and the Japanese bond market It looks like more and more people are anticipating a change in yield curve control And lastly we have to talk about a debate that's happening within the Fed right now And that is whether or not monetary policy really acts with long and variable lags because if it Doesn't well, then we got to keep hiking rates Okay, starting with inflation.

大家好，今天是7月15日。我叫约瑟夫，欢迎来到本周市场动态。这一周市场非常精彩，我们有很多值得讨论的事情。首先，上周我曾认为风险资产市场已经达到了顶峰，但结果我错了1000%，市场看起来还想再上涨。这是我一直在谈论的一个令人担忧的问题，在本节目中我们将讨论这个问题。但首先，像往常一样，我们将先讨论三个话题。首先，我们将谈论本周的重大新闻——CPI数据，通胀是否已经消失，我们是否会回到2020年前的水平，这是否意味着美联储将很快降息？其次，我们需要讨论日本目前发生的情况，因为如果你看日元和日本债券市场，越来越多的人预计会发生利率曲线调控的变化。最后，我们必须讨论美联储目前正在进行的一场辩论，即货币政策是否真的存在长期和变动的时滞，因为如果不存在，我们就需要继续加息。接下来谈谈通胀问题。

So at the beginning of this week the 10 year was above 4% risk assets were no digesting a bit and then boom We had a CPI report that was softer than expected both in headline and in core And it was notably softer such that many people were looking at this and Saying that you know inflation is over if you were looking at social media You would have noticed that many people who initially said that inflation was transitory Basically jumped out and began doing their victory dance And of course as we all remember back then they were saying that inflation was transitory so the Fed doesn't need the hike rates In fact inflation was not transitory and the Fed Hiked rates by 500 basis points and inflation is still here. So those guys are still totally completely wrong That being said Is inflation actually over did the Fed Perform a quote-unquote soft landing where you know inflation was really high now. It's calmed down back to 2% Are we going to say smoothly sell at this 2% rate for the foreseeable future? The world goes back to how it was before 2020 and then everything is okay, you know the economy continues to grow and of course Soon the Fed will have to cut rates because with inflation of 2% we don't need the Fed funds rate of 5% right? And so the markets saw that and began to rally remember one of the biggest biggest determinants of risk assets is the stance of policy back for for the past few months Everyone was thinking recession Fed cuts rates. So, you know, you got to buy risk assets now It's inflation is over if it's going to cut rates. So you got to buy risk assets And you know what it's possible that inflation really really could be tamed. That's a possibility So if you follow me for any length of time, you know, that's not really how I think about it So I would actually Before we go further, I would actually point to a few other things that that we have to keep in mind.

所以在本周初，十年期国债收益率超过了4%，风险资产开始有些不太消化，然后突然之间，我们发布了CPI报告，该报告的总体和核心数据都比预期要软一些。这一点特别明显，以至于很多人都在说，你知道吗，通胀已经结束了。如果你浏览社交媒体，你会注意到许多最初表示通胀是短期现象的人基本上跳出来开始庆祝。当然，大家还记得他们当时还在说通胀是短期的，所以联储不需要加息。事实上，通胀并非短期现象，而联储加息了500个基点，通胀仍然存在。所以那些人仍然完全错误。话虽如此，通胀真的结束了吗？联储实现了所谓的软着陆吗？也就是说，通胀曾经很高，现在已经平稳下降到2%了。我们会持续以这个2%的速度平稳发展吗？世界会恢复到2020年之前的状态，然后一切都好了，经济继续增长，当然，很快联储将不得不降息，因为在2%的通胀率下，我们不需要5%的联邦基金利率，对吧？于是市场看到了这一点，并开始上涨。要记住，风险资产的最大决定因素之一是政策立场。在过去几个月里，每个人都认为经济衰退，联储削减利率。所以，你现在必须购买风险资产。通胀已经结束了，如果要降息的话。所以你必须购买风险资产。不过你知道的，通胀确实可能被控制住，这是可能的。如果你跟随我已经有一段时间了，你会知道这不是我对此问题的看法。所以在我们进一步讨论之前，我实际上会指出还有一些其他要注意的事情。

Well first Recall just a few episodes ago. We talked about what happened in Canada and in Australia In those two countries, they got some good inflation prints the central banks stood up patted themselves on the back and announced a pause and then within a Couple months they began to see that actually inflation seemed to be re-accelerating what they were looking at was really a false dawn and so they began to start hiking again and indeed the Bank of Canada who declared victory in January only to hike again last month hiked again this past week Even looking at the US itself you can remember a couple summers ago that the US had inflation that that seemed to be going Way only to see it surge higher. So We could be seeing a false dawn It's it's not really clear yet. We need to have more data

首先，回想一下前几集的内容。我们讨论了加拿大和澳大利亚发生的情况。在这两个国家，他们发布了一些良好的通胀数据，央行对此感到满意，并宣布暂停加息，然而在几个月后，他们开始发现通胀实际上正在重新加速。他们所看到的只是一个虚假的黎明，于是他们开始再次加息。事实上，加拿大央行在1月宣布取得胜利后，上个月再次加息，这个星期又再次加息。即使看看美国自身，你也可能记得几个夏天前美国出现了一波通胀，但结果却看到它持续攀升。所以我们可能正在见证一个虚假的黎明，现在还不确定。我们需要更多的数据来确认。

now Here's an interesting fact from the 1970s and 80s Here this is a chart of inflation back then and you'll notice that inflation rocketed up strongly like a rocket ship then After climbing Mount Everest, it seemed to tumble down precipitously And at that point you could imagine when inflation was tumbly down like that that maybe they were maybe that it was over Maybe that the Fed could have at that time high cut rates and then we would have backed to normal But instead as you can see from the chart inflation did not stay low but began to turn around and rocket hire again Such that looked like two mountains next to each other rather than a mountain and a flat line Now the question on everyone's mind after the CPI print is Is inflation dead or is this a false dawn as it was for the Bank of Canada Bank of Australia and For the US in recent history and in history long ago It's not easy to know at this moment again if you follow me You know that I believe that there are structural reasons where inflation will continue to rise First off of course we have significant deficit spending that continues to create demand and of course from the supply side We have an aging workforce. So every day boomers are retiring and we're going to need more people to do all that work And that's going to keep wages high which means that people can continue to buy stuff and You know afford higher prices So even if inflation were to come down a bit if you have wage growth continuing Because of a shortage in labor then that just means that growth will accelerate which of course is supportive of inflation So so far it's not super clear which of these scenarios would play out the market though It seems very very much willing to believe that inflation is over. So you can see that the tenure yield Went down a lot after the CPI print and of course stock market went up higher again There are many people thinking that you know, this is a new bull market. We did the soft landing Everything is going to be okay got to buy risk assets because if that is going to cut soon I personally am very cautious on that now

现在我来给大家讲一个有趣的事实，来自于1970年代和80年代。这是那个时期通胀的图表，你会注意到通胀像火箭一样急速上升。在攀登完珠穆朗玛峰后，它似乎迅速下跌。在那个时候，你可以想象，当通胀如此下跌时，也许通胀已经结束了。也许美联储当时可以降低利率，然后我们就能回到正常水平了。但是，正如你在图表中看到的那样，通胀并没有保持低位，而是开始反弹并再次飙升。这使得看起来像是两座山并列在一起，而不是一座山和一条平直的线。现在，每个人心中都有一个问题，CPI数据公布后，通胀是否消失了，还是这只是一个假黎明，就像加拿大银行、澳大利亚银行以及美国最近和很久以前的历史一样。此刻很难知道究竟会发生哪种情况，但如果你听过我之前的讲解，你就会知道我相信存在结构上的原因，通胀将继续上升。首先，当然，我们有大量的赤字支出，这继续创造需求；此外，从供给端来看，我们有一个老龄化的劳动力。每天都有婴儿潮一代退休，我们将需要更多的人来完成这些工作。这将保持工资的高水准，这意味着人们可以继续购买物品，并承担更高的价格。因此，即使通胀有所回落，如果工资增长因为劳动力短缺而持续增长，那只会加速经济增长，当然也能支持通胀。到目前为止，尚不清楚哪种情况会发生，但市场似乎非常愿意相信通胀已经结束。所以你可以看到通胀预期会滑落，而股市则会再次上涨。很多人认为这是一个新的牛市，我们完成了软着陆，一切都会好起来。因此要买入风险资产，因为如果很快会有减息。对于这一点，我个人表示非常谨慎。

Secondly, let's talk about what's happening in Japan. So if you look closely at what's happening in the big Japanese asset markets So you want you see the Nikkei basically, you know kind of At least not rocketing hires seemingly just meandering about you see the yen strengthening significantly again So dollar now below USD GPI below 140 and you also see the you the 10 year JGB move higher towards towards the upper bound of yield curve control, which is a 0.5% Now all of this taking into account Suggests that there is probably some change in monetary policy now There are reports suggesting that the Bank of Japan might finally finally been toggling their yield control framework

其次，让我们谈谈日本正在发生的情况。所以，如果你仔细看日本大型资产市场上正在发生的事情，你会发现日经指数基本上没有出现大幅上涨的迹象，似乎只是在漫无目的地徘徊。你还会看到日元再次显著升值，现在兑美元的汇率已经低于140，此外你还会看到10年期日本政府债券收益率逐渐升高，接近利率曲线控制的上限0.5%。综合考虑所有这些情况，可以推断出日本的货币政策可能发生了一些变化。有报道称日本银行可能最终调整了他们的收益率控制框架。

So as you recall, we've talked about this before Japan has an inflation target of about 2% which they've been missing terribly for for a for a very very very long time but recently Inflation in Japan seems to be making a comeback in fact. It's higher than their target now We've heard clips from a new Governor of the Bank of Japan wait on suggesting that you know or Or forecasts are that even though inflation is above target now. It's going to come down soon And if it doesn't come down, then maybe we'll just start stance of monetary policy So in the whole world as even as the Western countries Okay, so even as Europe and North America

尽早降低通货膨胀带来的风险，而欧洲和北美等西方国家正在采取措施来平抑通胀。这也说明，尽管日本通胀率目标超过了2%，但他们仍然希望尽快使通胀率回落。此外，日本新任央行行长也表示，如果通胀率不下降，可能会调整货币政策的立场。这也反映了整个世界对通货膨胀的关注和应对。

Continue to high grades and have this big inflation problem Bank of Japan Actually hasn't changed your monetary policy stance at all. So there's been a lot of speculation as to whether or not they'll finally do it That speculation is playing out in the markets right now Now, I don't know if this is going to happen or not But if it does I think it's going to be a shock to the financial system. So if the Bank of Japan were to Become more I guess restrictive adjust their yield curve from trophy and more maybe away from From 5% being a ceiling for the 10 year JGB yields to be 1% being a ceiling You can expect that to reverberate throughout the global bond markets now global bond markets are if you look at any graph You'll see that they're they're tightly connected This is because investors are global if you are an investor in Japan and you don't like seeing let's say 0.4% yield on the tenure There maybe you move your money to somewhere else and so because investors are mobile You know, they they're comparing returns across different jurisdictions and because of that a global bond market is sent to move together

日本银行继续坚持高利率，同时面临巨大的通胀问题。事实上，日本银行的货币政策立场一直没有改变。目前市场上存在很多关于他们是否会最终采取行动的猜测。这种猜测正在市场上发酵。我不知道这是否会发生，但如果发生，我认为这将对金融系统造成震动。所以，如果日本银行采取更加严厉的措施，调整收益曲线，将10年期JGB收益率的上限从5%调整为1%，你可以预计这将在全球债券市场产生连锁反应。全球债券市场是紧密相连的，你如果查看任何一张图表，都会发现它们之间存在着紧密关联。这是因为投资者具有全球视野，如果你是一位在日本的投资者，不喜欢看到10年期公债只有0.4%的收益率，你可能会将资金转移到其他地方。由于投资者是移动的，他们会在不同的管辖区域比较回报率，所以全球债券市场趋于同步运动。

So if the Bank of Japan would be would were to be more hawkish that would impact global bond yields and possibly spill over to global risk assets As well, you're seeing the Nikkei kind of chomp around a little bit. You could easily see See that being a headwind for other risk assets as well now We'll have to wait and see so It's going to be definitely something we want to watch for this month and if not this month there are other meetings The belief is that eventually it'll have to happen. It's just not really sure when it will happen

如果日本银行变得更加强硬，这将对全球债券收益率产生影响，可能会波及全球风险资产。此外，日经指数也会有一些波动。其他风险资产也可能受到阻力。现在我们必须等待和观察。这绝对是我们本月要关注的事情，如果不是本月，还有其他会议。人们相信，这种变化最终会发生，只是不确定什么时候会发生。

Now the last thing we'll talk about today is Whether or not monetary policy acts with long and variable lags and let me tell you why this is important So there's a big debate in the Fed today As to whether or not they should continue to hike now if you are in dove at the Fed So you don't want to fit the hike and what you'll say as your reason is that monetary policy acts with long and variable lags So a lot of the tightening that we've done over the past year Actually hasn't been felt in the economy yet Now if you are a hawk you want to hike rates and you'll just say that actually, you know We did a whole bunch of tightening and it's mostly been felt so or monetary policy tightening It's not going to be slowing the economy down anymore and the economy is still going strong So if we want to have additional constraints on economic activity, we need to continue to hike Now Additionally, the dogma is the received wisdom from the central banking community is that there are quote-unquote long and variable lags to policy Let's say your hike rates today and maybe you know that effect might be not be felt Maybe not till 12 months maybe 16 months maybe Two years since since since since the initial decision Now I find that to be really suspect because the more The more time that elapses between when you do something and when and when something actually happens The less you can attribute a cause between the two So if I bang on a table and the table immediately cracks Well, I can say very clearly that you know cause and effect I banged on the table and it cracked If I bang on the table and maybe five hours later it cracked Well, I think it's a lot less clear if what I had caused the crack a lot of time in between Means that a lot of other factors were playing in as well. So it's more difficult to lash into that cause But but so that that's one part now the other part is that so If you are a dove you're going to point towards this literature of received wisdom and says, you know Longer variable lags stuff Now the Hawks are having our have a much more interesting argument And I think it's worth thinking about because governor Waller just talked about it in a speech this Friday And his argument for shorter lags to monetary policy are twofold First is that markets today anticipate the Fed a lot more than markets in the past Now in the past we had a Fed chairman's like Alan Greenspan who would actually high-grates and not tell you about it So and there were no, you know, there were no con press conferences. There weren't very many speeches So you don't really know what the Fed was thinking so What would happen is that you know the Fed would do something and then you would have all these people kind of look at interest rates It's kind of guess to see whether or not the Fed did something and people many people would find out after the fact That's very different from how central banks operate today today, you know, the Fed gives a whole bunch of speeches press conferences writings and so forth, so they're very transparent so When the Fed although the Fed first hiked rates early last year the market was anticipating that the Fed would do so months in advance So before the Fed actually does its first rate hike a lot of that is already priced into the markets. So so in a sense Monetary policy is having an impact on the economy even before the Fed actually does anything And you can see that in the two-year yield which began to rise months ahead of the actual rate hike last year So because of this likes are logically shorter right the way that monetary policy is Conducted is very different from the past and this makes complete sense to me the second argument that Governor Waller gives is that you know when you're hiking big there's going to be less of a lag than when you're hiking small So for example if you're hiking Let's say 25 basis points and that makes your mortgage rate go up a little bit That's not really going to affect behavior that much.

现在我们要讨论的最后一个话题是货币政策是否具有长期和不确定的滞后性，让我告诉你为什么这很重要。今天美联储存在一个很大的争议，即是否应继续加息。如果你在美联储是持鸽派观点的，你不想加息，你会说货币政策具有长期和不确定的滞后性。所以我们过去一年所进行的大部分紧缩实际上还没有在经济中产生影响。但如果你是鹰派，你希望加息，你会说实际上我们进行了大量的紧缩，而且大部分已经产生了影响，所以货币政策并不会再拖累经济，而且经济仍然保持强劲增长。所以如果我们希望对经济活动有进一步的限制，就需要继续加息。此外，中央银行界的教条是政策具有所谓的长期和不确定的滞后性。比如，你今天加息，可能要过12个月、16个月甚至两年，才会产生实际影响。我发现这个观点非常有问题，因为时间越长，你越难将两者之间的因果关系联系起来。比如，如果我敲击桌子，桌子立刻裂开，那么我可以明显地说，因果关系很明确，我敲击桌子导致了裂开。但如果我敲击桌子，五个小时后桌子才裂开，那么我觉得我们很难确定是我的敲击导致了裂开，因为时间间隔很长，其他因素也可能起了作用。所以这就更难找到因果关系。鸽派会指向接受的智慧文献，并称之为滞后性，而鹰派则持有更有趣的观点，并且值得思考。鲍威尔州长在上周五的演讲中提到了这个观点。他认为货币政策滞后性较短的论点有两个。首先，现在的市场比过去更能预测美联储。过去我们有像阿兰·格林斯潘这样不会提前告诉你他们会加息的美联储主席。没有新闻发布会，也没有很多演讲，所以你真的不知道美联储在想什么。所以以前的情况是美联储采取行动后，很多人才会观察利率变化，并在后来发现美联储的行动。这与现在中央银行运作的方式完全不同，如今美联储会发表大量演讲、新闻发布会等，非常透明。所以即使在美联储去年首次加息之前，市场已经预期到美联储会这样做。这意味着在美联储实际采取行动之前，货币政策已经对经济产生了影响。去年实际加息之前，两年期美债收益率已经开始上升，这一点可以看得很清楚。因此，从逻辑上来说，滞后性会更短，货币政策的实施方式与过去非常不同，这对我来说是合理的。鲍威尔州长给出的第二个论点是，在加息较大幅度时，滞后期会比加息较小幅度时短。举个例子，如果加息25个基点，这可能会导致抵押贷款利率略微上升，这并不会对行为产生太大影响。

So someone looks at their mortgage and says, you know, that's okay Fed hiked rates So instead of let's say 4.2 percent my mortgage is 4.3 percent whatever But because I've had hiked rates so aggressively from like zero to 500 basis points You know that same person is is looking at this and saying oh my gosh. I have a 7% mortgage rate That that's definitely going to get my attention and change my behavior so From that perspective, you know bigger rates hikes catch the intention of the public more easily and this more directly impact their behavior And that makes sense to me as well

所以有人看了他们的抵押贷款，说，你知道，没关系，美联储加息了。所以，取而代之的是，比如我的房贷利率从4.2%变成了4.3%，无论如何，但是由于我加息的幅度非常大，从零加到了500个基点。同样的人看到这个情况时会说，天哪，我有一个7%的房贷利率。这绝对会引起我的注意并改变我的行为。从这个角度来看，更大幅度的加息更容易引起公众的注意，从而更直接地影响他们的行为。这对我来说也是有道理的。

So according to him and from my read Chairman Powell is also in agreement with this view of the world. They think that a lot of the rate hikes have already filtered through to the economy. So if you want to continue to slow the economy down, you'll need more hikes, and governor Waller continues to pencil in two hikes for the rest of the year. Although he notes that if we continue to get soft CPI prints, maybe we only need one. Oh, by the way, it's totally 100% sure that the federal hike in in July, that that's pretty much baked into the cake.

所以根据他和我自己的阅读，鲍威尔主席也同意这种世界观。他们认为很多加息已经通过经济体系过滤出来。因此，如果你想继续放缓经济增长，就需要进一步加息，而沃勒州长继续预计今年剩下的时间还会进行两次加息。不过他指出，如果我们继续出现软通胀数据，或许只需要一次加息。哦，顺便说一句，7月联邦加息是完全确定的，几乎已经成为定局。

Right now we're heading into what's called the blackout period. So no more fed speakers and they left it at the assumption that the fed would be hiking rates in July. So that should be done. Now going forward what we're have to see is CPI data and how this debate about Long and variable legs continues to evolve in the Apple MC. So far, of course, the default is we get more hikes. And if it does turn out that CPI continues to be weak, I think we'll probably be the end of the hiking cycle in July. Again, we're gonna have to see the data and the Fed will hold here for the next several months, but again, that's something we'll have to see.

现在我们进入所谓的黑暗期。所以不再有联邦储备系统的发言人，并且他们假设联邦储备系统将在7月份加息。所以这项工作应该完成了。接下来，我们需要看的是消费者物价指数数据以及“长期和可变杠杆”辩论如何在苹果MC（市场条件）中继续演变。到目前为止，当然，首选是我们会有更多加息。如果CPI继续保持疲软，我认为7月份可能是加息周期的终点。再次强调，我们需要看数据，联邦储备系统将在接下来的几个月保持利率不变，但这也是我们需要观察的事情。

Although of course the market is already very Ebulante and assuming that inflation is over. Okay, if it is over, you know, the market is totally right. If it's not, I think you have a real chance of what appears to be a mania unraveling rather quickly. Okay, so that's all I've prepared for today. Thanks so much for tuning in. If you like what I'm producing, remember to like and subscribe. And if you're interested in hearing more about my more in-depth thoughts about the markets and the financial system, check out my blog FedGuy.com. And if you're interested in learning more about how I how to understand the markets, I recommend my course central banking 101. Excuse me, markets 101 at central banking 101.com. which is a series of courses on how to understand markets and the same course that I would teach our new traders at the Fed's trading desk. All right. Thanks so much. Talk to you guys next week.

当然市场已经非常繁荣，假设通胀已经结束。好吧，如果通胀已经结束，市场就是完全正确的。如果没有，我认为可能会迅速出现一种被视为狂热的局面。好吧，这就是我今天准备的全部。非常感谢您的收听。如果您喜欢我的作品，请记得点赞和订阅。如果您对市场和金融体系的更加深入的思考感兴趣，可以查看我的博客FedGuy.com。如果您想了解更多关于如何理解市场的内容，我推荐我的课程“中央银行学101”。对不起，是市场学101，在centralbanking101.com网站上。这是一系列关于如何理解市场的课程，也是我在美联储交易台教授给新交易员的课程。好了，非常感谢。下周与大家交流。