Global Macro Monitor

What A “Blue Wave” Means To Markets

Posted on September 14, 2020 by macromon

Posted in Uncategorized | 1 Comment

O, How We Love Technical Analysis

Posted on September 14, 2020 by macromon

You know what they say,

If you stare at the sky long enough, you will see pink elephants.

We don’t see pink elephants but rather trade setups, among other things, and have discovered a failproof trade.

After studying many patterns of rainbows and lightning strikes, we present the Double Rainbow Resistance Short. Sell or short when the index hits the rainbow resistance on its second try and fails to breakout. You gotta be quick, however.

Maybe, even more important, we found a new weapon or monetary tool for the Fed’s quiver, Time Reversal, but it doesn’t appear to work in propping up this asset market, especially when the index is in a Tree Pattern.

Mercado socialismo is so boring, and such an inconsistent space where professing capitalists are really closet central planners — i.e., socialists. Killing time and waiting for it.

Here’s a newbie Robinhood trader discovering the Double Rainbow setup for the first time. Note the trader can’t pull the trigger and asks 1:17 minutes in,

What does it mean?

It’s surprising with a name such as Yosemitebear he can’t pull the trigger on a short setup. Moreover, it kind of sounds he is shitfaced on liquidity or hopped up on the Fed crack.

Q3 GDP Growth Set For 30% But No V-Shaped Recovery

Posted on September 13, 2020 by macromon

The Atlanta Fed’s GDPNow estimate for Q3 GDP growth is currently running at 30.8 percent on an annualized basis (6.9 percent quarter-on-quarter), which will shatter by a wide margin the prior highest print on record of 16.7 percent registered in Q1 1950.

Source: Custer Consulting Group

No V-Shaped Recovery

Even with such robust Q3 growth, the economy will only have recovered around 60 percent of its Q1 & Q2 losses, and real output will still be 4 percent below its Q4 2019 level.

Economy In A Holding Pattern

The easy money has been made and the heavy lifting to get the economy “back to even” on a sustained basis may take a year or two or three.

Short-term growth will now largely depend on concerns over a second wave of the pandemic and a new stimulus package as the the massive rescue package is what kept the economy from collapsing after the lights were shut off during, what the IMF has labeled, The Great Lockdown.

The Great Lockdown is expected to play out in three phases, first as countries enter the lockdown, then as they exit, and finally as they escape the lockdown when there is a medical solution to the pandemic. Many countries are now in the second phase, as they reopen, with early signs of recovery, but with risks of second waves of infections and re-imposition of lockdowns. – IMF

Once the pandemic passes, there will surely be a short-term burst of economic activity as the massive pent-up demand is unleashed provided, that is hysteresis or the permanent damage to the economy is not too significant.

Watch This [Air]space

We posted last night about our new real-time leading economic indicator and COVID fear gauge, the TSA passenger count.

Thus we now perceive and will use the passenger count data not only as a real-time indicator – using the first derivative or rate of change – of the direction of the economy but also a fear gauge of how the fear of COVID affects consumers’ choices. As the fear of the pandemic subsides air travel should pick up markedly.

Of course, the overall economy has not been hit as hard as the air travel industry and its rebound has been much sharper. – GMM

The Upshot

The GDPNow quarterly estimate is a dynamic number and will change as new economic data is released. It does, however, have a pretty good track record.

Nevertheless, even if the GDP does come in as strong as estimated, at 30 percent-plus, the economy will have only recovered 60 percent of what it lost in Q1 and Q2.

The Q3 GDP advance estimate is scheduled to be released on October 29th just a few days before the presidential election. We can already hear the crowing from 1600 Pennsylvania Avenue.

The economic illiterati do not understand downside-upside asymmetry, that is if you lose 50 percent, it takes a 100 percent to get back to even.

Prepare your talking points, Uncle Joe.

Posted in Economics | Tagged GDPNow, Q3 GDP | 2 Comments

Developed Market Economic Calendar – Week of September 14th

Posted on September 12, 2020 by macromon

Source: ING

Posted in Economics | Tagged Economic Calendar | Leave a comment

A COVID Fear Gauge & Real-Time Economic Indicator

Posted on September 12, 2020 by macromon

After giving some thought to our last post on Air Travel. we constructed our own chart with the data, which is pretty damn interesting, informative, and depressing. We have also added the Bloomberg chart on the collapse of international travel in July.

Theses two charts illustrate how the air travel industry has been decimated by the COVID crisis.

96 Percent Year-on-Year Decline In Passenger Count On April 16

On March 1, 2020, for example, the TSA screened about as many passengers and crew members as the same weekday in 2019. Air travel then soon collapsed as fear of the coronavirus gripped the nation, and within 46 days, on April 16, passenger screenings reached its nadir of only 3.6 percent of the 2019 level, or down a stunning 96 percent. April 16 also marked the bottom in the 7-day moving average of screenings at 4.0 percent of the 2019 levels.

Air travel has since rebounded along with the economy but the passenger count still remains about 70 percent below 2019 levels, and seems to have hit a plateau at around 30-40 percent, which is also our sense of the same dynamic of the overall economy is experiencing right now — a very strong bounce in the first two months of Q3 and now moving into a holding pattern.

Real-Time Economic Indicator & COVID Fear Gauge

Of course, the overall economy has not been hit as hard as the air travel industry and its rebound has been much sharper.

Structural Changes

We do believe there will be big structural changes in air travel, especially as companies realize they can cut expenses by replacing zoom meetings for nonessential business travel. It’s too early to judge the magnitude, however, but we suspect it will be significant.

IAG SA, owner of British Airways and Iberia, said in July that leisure demand will recover before corporate travel, and this “structural change” in the market will lead to new cabin layouts. On a conference call, IAG Chief Financial Officer Stephen Gunning said British Airways retired its Boeing Co. 747s early partly because they had so many premium seats.

Virgin Australia Holdings Ltd. Chief Executive Officer Paul Scurrah said at a conference this month that business travel would rebound slower than the overall market as some companies maintain work-from-home policies. Qantas Airways Ltd. CEO Alan Joyce was optimistic that demand would fully recover, but not until 2023 or 2024. – Bloomberg

Big Post-COVID Spike On Pent-Up Demand

We also expect a massive spike in travel for several months after COVID passes as enormous pent-up demand to hit the sky is unleashed.

Watch this [air]space.