Assessing UK house price valuation: a real yield-based approach
April 26, 2024 | NS Partners
UK house prices were an estimated 52% expensive relative to history at the end of 2023, based on a comparison with rents and the real yield on index-linked gilts, a competing inflation-protected asset. The degree of overvaluation is below previous extremes and does not imply that house prices need to fall by an equivalent magnitude, or even at all – the deviation could be eliminated by rental growth and a reversal of the recent rise in real yields.
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Is the UK MPC already too late?
April 19, 2024 | NS Partners
A modest upside inflation surprise in March has been portrayed as confirming that inflationary pressures remain sticky, warranting further delay in policy easing. The stickiness charge is bizarre in the context of recent aggregate data. The six-month rate of change of core consumer prices, seasonally adjusted, has fallen from a peak of 8.4% annualised in July 2023 to 2.4% in March.
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What is the catalyst for EM equities?
April 17, 2024 | NS Partners
Is a potential double positive in global excess money set to boost EM equities?
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A “monetarist” perspective on current equity markets
April 4, 2024 | NS Partners
The quarterly commentary in mid-2023 noted that the cycle and monetary analyses were giving conflicting signals. The stockbuilding cycle appeared to be tracing out a low, a development usually associated with stronger performance of equities and other cyclical assets. However, greater weight was accorded to continued weakness in global real narrow money momentum, which suggested downside risk to economic activity and insufficient liquidity to support market gains.
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What do US money trends suggest about “neutral” rates?
March 27, 2024 | NS Partners
US economic “resilience” in 2023, recent inflation stabilisation and buoyant risk asset markets raise the question of whether the current level of policy rates is restrictive. A “neutral” level of rates, according to the monetarist view, is one that results in monetary growth consistent with target inflation.
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Global monetary update: minor recovery stalling?
March 20, 2024 | NS Partners
Global six-month real narrow money momentum – a key leading indicator in the forecasting approach employed here – has recovered from a low in September 2023 but remains negative and could be stalling. Allowing for the typical lead, this suggests a slide in economic momentum into mid-year with limited subsequent revival.
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AI supply chain bottlenecks are opportunities for EM tech leaders
March 18, 2024 | NS Partners
Summary A bounce in unloved Chinese equities led a positive month for EM stocks, with the MSCI EM Index up nearly 5% in USD terms. Among the leaders was portfolio holding Trip.com, which surged over 25%, reflecting a recovery in consumer demand for travel in China. Korean stocks continued a run of strong performance fed […]
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Why UK payrolls data could be misleading economy bulls
March 14, 2024 | NS Partners
Perceptions of UK labour market “resilience” rest partly on continued growth in the payrolled employees series, based on PAYE data. This series, however, is likely to have been boosted by a rise in the proportion of self-employed people included in PAYE.
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Weaker US business money trends
March 13, 2024 | NS Partners
The Fed’s quarterly financial accounts provide information on sector money trends and funds flows. Several features of the Q4 accounts, released last week, are noteworthy.
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Weaker US monetary data
February 29, 2024 | NS Partners
US monetary conditions eased during H2 2023, reflecting the Treasury’s decision to skew debt issuance towards bills and the Fed’s December pivot. This loosening is now reversing, partly because of the recent sticky inflation scare and associated back-up in yields, and prospectively as the Treasury scales back bill financing in Q2.
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Better Chinese monetary news
February 21, 2024 | NS Partners
Chinese monetary statistics for January suggest that policy easing is starting to become effective. Six-month growth of narrow money, as measured by true M1*, rebounded from a negative December reading to its highest level since May.
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Do monetary trends explain recent inflation divergence?
February 16, 2024 | NS Partners
Six-month core CPI momentum has returned to a target-consistent level in the Eurozone and UK, with January readings of 2.1% and 1.9% annualised respectively. US momentum is significantly higher, at 3.6%. What explains this gap?
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Super-cheap Korean equities rally on market reform talks
February 15, 2024 | NS Partners
Under-owned South Korean stocks are catching a bid via AI enthusiasm and potential market reforms.
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UK money trends still suggesting downside risk
February 15, 2024 | NS Partners
UK real money contraction warned of 2022 economic stagnation and 2023 recession. Weakness has abated but real money measures have yet to resume expansion, casting doubt on hopes of a sustainable economic recovery.
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Will “Treasury QT” sink markets?
February 8, 2024 | NS Partners
Recent US equity market buoyancy is likely to be related to a rebound in broad money momentum during H2 2023. The previous post argued that this was driven by monetary financing of the federal deficit – specifically, large-scale issuance of Treasury bills that were bought mainly by money funds and banks.
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