Markets Weekly March 23, 2024

Hello, my friends. Today is March 23rd, and this is Markets Weekly. So this week was a great week in markets. We had all the major US stock market indexes making you all-time highs. The catalyst seems to have been the dovish Fed meeting, which we've already discussed. So today I want to talk about three things. First, let's talk about how the bias towards easing that the Fed has showed is something that's pretty common among many other major central banks. Secondly, let's talk a little bit more about financial conditions. Now, Chair Powell told us that he thought financial conditions were restricting economic growth, but let's look at a number of other indicators that just suggest that he's probably looking at the wrong things. And lastly, let's talk a little bit about home prices and why I think they're poised to surge this year in line with everything else in the Great Crash up. Okay, starting with global central banks. So this past week, we had to Swiss National Bank kick off the rate cutting cycle among developed market central banks by surprising the market with a cut. Now, every central bank behaves a little bit differently. The Fed, as we all know, likes to telegraph things far and advanced and often basically tries to hold the market's hand. The SMB is completely different. The SMB has a history of surprising the market. Notably, a few years ago, the Swiss National Bank had an exchange rate floor between the Swiss Franc and the Euro. The aim of the floor was to prevent the Swiss Franc from appreciating too much. One day, the SMB woke up and decided that it didn't want the floor anymore. And so in the blink of an eye, we had the Swiss Franc appreciate as much as 30% against the Euro. I'm sure it was a painful day for some people.

大家好，我的朋友们。今天是3月23日，这是市场周报。这周市场表现非常出色。美国所有主要股市指数都创下历史新高。催化剂似乎是温和的联储会议，这我们之前已经讨论过了。所以今天我想谈谈三件事。首先，让我们谈谈联储显示出的偏向宽松，这在许多其他主要央行中是相当普遍的。其次，让我们详细探讨一下金融状况。现在，鲍威尔主席告诉我们他认为金融状况制约了经济增长，但让我们看看一些其他指标，这些指标可能表明他可能仔细观察了错误的事物。最后，让我们谈谈一下房价，我认为它们有可能在今年迅速上涨，与大崩盘中的其他一切一样。 好的，先从全球央行开始。这周，瑞士国家银行在其中一个发达市场央行中率先启动降息周期，出乎市场的意料宣布了降息。每个央行的行为都有些许不同。正如我们都知道的，美联储喜欢提前透露事情，并经常试图把握市场的手。而瑞士国家银行完全不同。瑞士国家银行以出其不意而著称。特别是几年前，瑞士国家银行设立了瑞士法郎与欧元之间的汇率地板。地板的目的是防止瑞士法郎过度升值。有一天，瑞士国家银行醒悟过来，决定不再需要地板。所以眨眼之间，瑞士法郎对欧元升值了高达30%。我敢肯定这对一些人来说是一个痛苦的一天。

But true to its nature, this past week, the SMB surprised the market with a cut. And of course, the Swiss Franc depreciated immediately in response. The rationale for the SMB's cut was that it felt that inflation is basically under control. Indeed, if you look at a history of its inflation projections, you'll see that they've progressively come down lower. Such that at the moment, the SMB felt that inflation would be comfortably below its 2% ceiling for the foreseeable future. And if they think that, then obviously it makes sense to cut a bit. Now, what we see with SMB is also what we see in many other central banks as well. Last week, we also had a monetary policy meeting by the Bank of England. Now, in the prior meetings, the Bank of England always had, let's say, one or two people on their monetary policy committee voting for more hikes. This time, though, there were no more monetary policy committee members voting for hikes. And they had one person voting for a cut. Now, the market saw that and began to think that the Bank of England, the next move would be biased towards easing. After all, no one is voting for a cut. No one is voting for hikes anymore. And of course, in response to that, we saw the pound depreciate notably against the dollar. Looking at the ECB, recently, the ECB had progressively lowered their inflation projections. And if the ECB is thinking that inflation is going to be lower than expected, then that also makes sense for them to begin thinking about cutting rates. And the market, indeed, has been pricing in a rate cut by the ECB in June. Now, many central banks are cutting rates, but not all this past week, we also had the Bank of Japan finally, finally, after telegraphing this for quite some time, I get off negative interest rates. And now they are comfortably at 0% interest rates, even as inflation is at 2%. Now, I look at this more as the Bank of Japan going from extremely easy monetary policy to slightly less easy. But in any case, looking at the big picture, the large central banks in the world are slowly moving towards cutting. And I'm going to write about this this week in my blog about how I think that maybe the whole is greater than the sum and how there continues to be notable upside risk in equity markets due to the synchronized easing.

但根据其性质，上周央行出人意料地进行了降息。当然，瑞士法郎也立即贬值作出了回应。央行降息的理由是他们认为通胀基本上是受控制的。如果你查看央行通胀预测的历史，你会发现它们逐渐降低。因此，目前央行认为未来通胀将稳定在其2%的上限以下。如果他们认为如此，显然降息是有道理的。现在，我们在央行看到的也是许多其他央行所看到的。上周，英国央行也召开了货币政策会议。在先前的会议中，英国央行货币政策委员会总是有一两个人投票支持加息。然而，这一次却没有成员投票支持加息，反而有一人投票支持降息。市场看到这一点开始认为英国央行下一步的行动将有倾向于宽松政策。毕竟，没有人投票支持加息，也没有人再投票支持降息。当然，作为回应，英镑兑美元明显贬值。最近，欧洲央行也逐渐降低了其通胀预期。如果欧洲央行认为通胀将低于预期，那么为他们开始考虑降息也是有道理的。事实上，市场已经在预测欧洲央行将在六月降息。现在很多央行在降息，但并非全部，上周日本央行终于做出了一个信号已久的行动，结束了负利率政策。现在他们的利率舒适地维持在0%，即使通胀率为2%。我更多地看待这是日本央行由极为宽松的货币政策转向稍微宽松。但无论如何，从宏观角度来看，世界各大中央银行正慢慢倾向于降息。本周我将在博客中写下我的看法，认为整体而言，合力超过了独立作用，由于全球货币宽松政策，股市仍存在明显的上行风险。

Now, the second thing I want to talk about is financial conditions. Now, the way the central bank works is that it does something, you know, toggles with interest rates, so it's balance sheet, and it aims to impact financial conditions, which in turn, feed through to the real economy. Now, financial conditions is a pretty nebulous concept. When people are thinking about them, they usually think about a few things. Now, notably, let's say in the US, you can think about the 10-year yield. Now, if the 10-year yield is going up, well, a lot of people borrow the capital markets at a spread to the 10-year yield. So, as the 10-year yield is going up or down, that affects borrowing costs, and that in turn can affect economic activity.

现在，我想谈谈的第二件事是金融条件。现在，中央银行的工作方式是通过调整利率等手段来影响金融条件，进而影响实体经济。金融条件是一个相当模糊的概念。当人们在思考金融条件时，他们通常会考虑到一些因素。特别是在美国，你可以考虑到10年期收益率。如果10年期收益率上升，很多人会以10年期收益率的利差来从资本市场借款。因此，随着10年期收益率的变化，借款成本也会受到影响，从而进一步影响经济活动。

Looking over the past few months, the 10-year yield peaked at about 5%, in that sense, then, basically, trended lower and is, say, 4.2, 4.3, this past week. So, obviously, the 10-year yield has come down, and that would be a sign of easing financial conditions. But as we discussed earlier, people don't borrow at the 10-year yield unless you're the US government usually borrow at a spread to the 10-year yield. And so, we can also look at credit spreads. Usually, when financial conditions are tied, credit spreads are quite wide. That's because when financial conditions are restrictive, well, there's a higher probability that a company might not be able to repay its loans, so the lender will want more of a premium.

回顾过去几个月，十年期收益率曾经达到约5％的峰值，然后基本上走低，目前大约在4.2％，4.3％左右。显而易见，十年期收益率已经下降，这可以视为金融状况放缓的迹象。但正如我们之前讨论过的，除非你是美国政府，否则人们通常不会按照十年期收益率借款，而是按照十年期收益率的利差借款。因此，我们也可以看看信贷利差。通常，当金融状况收紧时，信贷利差会很大。这是因为当金融状况限制时，公司未能偿还贷款的可能性更高，因此贷款人希望获得更多的风险溢价。

Now, a graph of investment-grade credit spreads shows that credit spreads have been steadily narrowing the past few months and are historically low. So, you definitely don't see tied financial conditions over there. Again, you can also look at other corners of the market, equity markets going at all-time highs. We had Reddit do its IPO this past week, and it surged 40%. Not necessarily, I wouldn't say that, suggests tied financial conditions. And of course, you can look at more speculative corners of the market like crypto. Now, Bitcoin didn't have a great week, but Zuma out a little bit, and they just recently made all-time highs. Many other meme coins have been surging as well. So, again, there are many things to look at when it comes to financial conditions.

现在，一张投资级信用利差图表显示，过去几个月信用利差一直在稳步收窄，处于历史低位。因此，可以明显看出金融环境不受限制。此外，你也可以看看市场的其它方面，比如股市在创历史新高。上周Reddit进行了IPO，股价上涨了40%。我不会说这显示出金融环境受限。当然，你也可以看看市场上更具投机性的方面，比如加密货币。虽然比特币上周表现不佳，但最近已经略有回升，并创下历史新高。许多其他的模因币也在大幅上涨。因此，在考虑金融环境时有很多方面需要考虑。

And so, people create indexes that try to take all this together and come up with a number to indicate whether or not financial conditions are tight. One of these indexes is produced by the Chicago Fed. It's called the Chicago Fed National Financial Conditions Index. And if you look at it, it'll tell you that financial conditions have been steadily easing over the past few months. There are many other indexes, and they all tell the same story. So, it's very clear to anyone in the markets that financial conditions have been easing. And yet, when Chair Powell was asked about this, this is his reply. Ultimately, we do think that financial conditions are weighing on economic activity. And we think you see that in a great place to see it as in the labor market, where you've seen demand cooling off a little bit from the extremely high levels. And there, I would point to job openings, quits, surveys, the hiring rate.

因此，人们制定指数，试图综合考虑所有这些因素，并得出一个数字，以指示金融条件是否紧张。芝加哥联储制定了一个这样的指数，名为芝加哥联邦储备银行全国金融状况指数。如果您查看这一指数，它会告诉您，过去几个月金融状况一直在稳步放松。还有许多其他指数，它们都讲述同样的故事。因此，任何市场上的人都很清楚，金融状况一直在放松。然而，当鲍威尔主席被问及此事时，他的回答是：我们最终认为金融状况正在拖累经济活动。我们认为您可以在劳动力市场这样一个地方看到这一点，您可以从极高水平稍微降低的需求中看到。在那里，我将指出工作机会、辞职、调查、就业率。

So, he tells you that he looks at financial conditions, anything, so that they're constraining economic activity, any points to the labor market as proof, which is kind of strange. Because if you look at the non-affirm payroll report, it's pretty obvious that jobs continue to be created in a robust manner. If you look at wages, they have been moderating. But a big part of that has been the surge in migration. The Congressional Budget Office is estimating that we hit about 3.3 million migrants the last year. Many of them illegal, so we don't know the exact number. But it's a sizable number. And that seems to be putting downward pressure on wages. None of that seems to be impacted by whatever the Fed is doing with this monetary policy.

因此，他告诉你，他会关注金融状况，任何制约经济活动的因素，还提到劳动力市场作为证据，这有点奇怪。因为如果你看非农就业报告，很明显就可以看出就业机会继续以强劲的方式增加。如果你看工资，可以看到它们一直在适度增长。但其中很大一部分是由迁徙潮引起的。国会预算办公室估计去年我们迎来了约330万移民。其中许多是非法移民，所以我们不知道准确数字。但这是一个相当可观的数量。这似乎给工资带来了下行压力。但这似乎并不受联邦储备委员会通过货币政策所做的任何影响。

So, I think that to me is the tell that when the Fed basically says something that's obviously wrong, that kind of tells me that they want to cut rates no matter what. And I think that's, you know, as we discussed earlier, very bullish.

所以，我认为对我来说这就是表明联邦储备系统基本上说了一些明显错误的迹象，这告诉我他们不管怎样都想要降低利率。而且我认为，正如我们早些讨论过的那样，这是非常看好的。

The last thing that I want to talk about is how I think the housing market is going to surge this year. Now, let's zoom out a bit. So, over the past year, we saw mortgage rates go as high as 8% and many were expecting the housing market to absolutely tumble because of it. But that just didn't happen. A very common index for home prices is the case-jiller home price index. And you can see that it's surge during the pandemic era. And then when mortgage rates got really high, it basically just kind of paused a little bit. But what you don't see at all is a meaningful decline.

我想谈谈的最后一件事是我认为今年房地产市场将会大幅增长。现在，让我们放大一点。过去一年，我们看到抵押贷款利率曾高达8%，许多人预计房地产市场会因此而大幅下跌。但事实并非如此。一个非常常见的房价指数是凯斯-杰勒（Case-Shiller）房价指数。你可以看到它在疫情时期激增。然后当抵押贷款利率非常高时，它基本上只是稍作停顿。但你根本看不到任何实质性的下降。

Now, house prices like anything else is supply and demand. And as we all know, the supply has been constrained because many, many people are sitting on mortgage rates that are 4%, 3%, or something even with a 2% handle. And those people don't want to sell their homes because they think the mortgage is very valuable, which indeed it is. Now, if you have constrained supply, that's going to be supportive of prices. Going forward though, that supply situation is probably not going to improve a whole lot simply because that 2% or 3% mortgage just really is valuable. But demand is probably going to pick up.

现在，房价就像任何其他东西一样是供需关系。众所周知，由于很多人把贷款利率控制在4%、3%甚至2%左右，导致供应有所限制。这些人不想出售房屋，因为他们认为贷款非常有价值，这也确实如此。现在，如果供应受限，这将支撑价格。然而，从长远来看，供应情况可能不会有太大改善，因为2%或3%的贷款真的非常有价值。但需求可能会增加。

So, if you look at mortgage rates over the past few months, you can see that the simple move from 8% to 7% mortgage rates stirred up a lot of activity in the resale market. Now, going forward, it's very likely that mortgage rates will continue to decline to have a 6% handle. On the one hand, so maybe, let's say the fed cuts rates, maybe we have an accident, but I think that the spread between mortgage rates and the 10-year yield, which remains historically quite wide, is probably going to narrow as the markets have been quite calm. Now, I continue to think that we have a 10-year yield that will continue to drift higher this year.

因此，如果你看过过去几个月的抵押贷款利率，你会发现从8%下降到7%的抵押贷款利率就已经在二手房市场中引起了很多活动。现在，展望未来，很有可能抵押贷款利率将继续下降至6%左右。一方面，也许，比如说美联储降息了，也许我们发生了意外，但我认为抵押贷款利率和10年期收益率之间的差额仍然是历史上相当大的，可能会在市场相当平静的情况下缩小。现在，我继续认为今年我们的10年期收益率将继续走高。

But as long as that spread between mortgage rates and the yield continues to narrow, then you could easily have a 6% handle mortgage. And that is probably going to unlock a whole lot of buying. Again, just the 8% mortgage rates were restrictive. It was very straining, 7% stirred up a lot of interest, a 6% handle is probably going to do even more. But when we look on demand for homes, I think it's too narrow to focus on the people who have to buy with a mortgage.

但只要抵押贷款利率与收益之间的差距继续缩小，那么你很容易就能得到6%的抵押贷款。这可能会释放出大量的购买需求。再次强调，8%的抵押贷款利率限制很大。7%已经引起了很多兴趣，6%的抵押贷款可能会带来更多的购买需求。但是当我们看待对住房需求时，我认为专注于那些必须用抵押贷款购买的人群太狭隘了。

Now, many people have been saying, ah, housing is unaffordable, looking at wages and looking at home prices. And that's correct. But again, that misses another big segment of buyers. That is to say, people who can buy without a mortgage. And there are many, many people like that. If you look at a recent earnings call from toll brothers, they'll tell you that 25% of their buyers buy all cash. Now, over the past few years, we've seen a tremendous surge in household wealth. Looking at Fed data, household wealth is at all time highs.

现在，很多人都在说，啊，房屋太贵了，看看工资和房价就知道了。这是正确的。但这又忽略了另一个重要的购房群体。也就是说，那些可以不需要贷款就能购买房屋的人。有许多人属于这一类群体。如果你看一下最近托尔兄弟公司的财报电话会议，他们会告诉你，他们有25%的购房者是全款购房。现在，过去几年里，我们看到了家庭财富的巨大增长。根据联邦储备委员会的数据，家庭财富达到历史最高水平。

No surprise, equity markets at all time highs and home prices remain elevated. So there's a lot of people who made a lot of money, read their encrypto and equities and so forth, and can easily convert that wealth into an all-cash purchase of a home. With wealth at record highs, there's probably a lot of people who can do that. Now, just look at, let's say, homeowners, about 40% of homeowners don't even have a mortgage. So they own tremendous amounts of equity. And their house, maybe their boomers who bought, you know, 20, 30 years ago and so forth. Those guys can easily just sell their house and buy another one. Or just take off some equity and buy another one.

毫无疑问，股票市场创历史新高，房价仍然居高不下。因此，有很多人通过加密货币和股票等方式赚取了大量资金，可以轻松将这些财富转化为全现金购买房屋。随着财富创纪录地增长，可能有许多人能够做到这一点。现在，只需看看，比如说，大约40%的房主甚至没有按揭贷款。因此，他们拥有大量资产净值。他们的房子，可能是购买了20、30年前的婴儿潮一代。这些人可以轻松地出售房屋购买另一处。或者只是拿出一些资产净值购买另一处。

This surge is this potential. Now, so you have a lot of people who could buy based on wealth and you have a lot of people who could buy based on decreasing mortgage rates. So that's a lot of demand. Now, the rise, the potential rise in home prices seems to be well anticipated by the market. If you look at an index of home builders, you can see that they've surged to the moon and still look like their poise is further take off.

这股涨势就是这种潜力。现在，你有很多人可以基于财富购买，也有很多人可以基于降低的抵押贷款利率购买。这就意味着有很多需求。现在，市场似乎已经充分预期了房价的潜在上涨。如果你看房屋建筑商的指数，你会发现它们一路飙升，并且似乎还有进一步的上升空间。

Now, looking into the earnings reports of these home builders, it's becomes obvious why. Let's look at Pulti, for example, a very mainstream builder. Now, the surge in home prices has fattened Pulti's margins. Right now, they're about 30%. Pre-pandemic, they are about in the low 20s. Now, again, this tremendous surge in margins has made it possible for them to offer sweeteners to home buyers, either buy down their mortgage, closing costs and so forth and still make a very handsome profit. So the market is also confirming that it's going to be a very good year for home prices.

现在，看到这些房屋建筑商的盈利报告，为什么能够变得很明显。让我们以普尔蒂为例，一个非常主流的建筑商。现在，房价的飙升已经让普尔蒂的利润率变得更加丰厚。现在，他们的利润率约为30%。在疫情前，它们大约在20%左右。现在，再次出现的巨大利润激增让他们能够向购房者提供优惠措施，比如降低他们的抵押贷款、成交费等等，同时依然能够赚取可观的利润。所以市场也确认了今年房价会是一个非常好的年份。

So I think that if you are anticipating some kind of crash, and I know there have been many channels dooming about that, but I think that you are fighting the last war and that just doesn't seem to be the case. And again, we are turning the corner in monetary policy. 8% mortgages is moving to 7% and maybe lower. So, again, careful not to fight the last war.

所以我认为如果你预期会发生某种崩溃，我知道有许多渠道在谈论这个问题，但我认为你正在与上一次战争作斗争，而事实似乎并非如此。而且，我们正在转变货币政策的方向。8%的抵押贷款利率已经下降到7%甚至更低。所以，要小心不要再次重蹈覆辙。

All right, so that's all I prepared for today. Thanks so much for tuning in. If you're interested in my thoughts, check out my blog at fenguy.com. And of course, if you're interested in learning more about markets, check out my courses at centralbanking101.com. Talk to you all next week.

好的，那么今天我准备的就是这些了。非常感谢你们的收听。如果你对我的想法感兴趣，请查看我的博客fenguy.com。当然，如果你想了解更多关于市场的知识，请查看我的课程centralbanking101.com。下周再和大家聊。