Investment philosophy

US broad money growth has slowed significantly despite a strong pick-up in bank lending expansion. How has this occurred and does lending strength portend a rebound in money growth? The broad money aggregate calculated here* rose by 2.6% (5.2% annualised) in the six months to April, down from 4.5% (9.2%) in the prior six months […]

Global* six-month real narrow money momentum turned negative in March and is estimated to have fallen slightly further in April, based on monetary and CPI data covering two-thirds and 90% of the aggregate respectively – see chart 1. Chart 1 Current weakness is more pronounced than before the 2001 recession and almost on a par […]

Six-month growth rates of UK narrow and broad money – as measured by non-financial M1 / M4 – fell in March. With six-month consumer price momentum rising further, real rates of change moved deeper into negative territory – see chart 1. Chart 1 The six-month contraction in real narrow money in March was slightly larger […]

Global six-month real narrow money growth fell to zero in March*, the weakest since the GFC and a level historically consistent with recession – see chart 1. (The current reading matches a low before the 2001 recession.) Chart 1 A rebound in six-month industrial output growth, meanwhile, extended in March, reflecting a production catch-up from […]

March CPI numbers globally have mostly surprised on the upside (again) but monetary trends and other considerations continue to suggest significant relief in 2023-24. G7 annual CPI inflation rose to 6.8%* in March, the fastest since 1982. A post in September 2020 presented a “monetarist” forecast that G7 inflation would average 4-5% pa in 2021-22, i.e. between […]

The monetary indicators followed here continue to give a negative signal for the global economy and risk assets. The indicators have been depressed by an inflation squeeze on real money balances and this drag is probably peaking. Any relief, however, may be offset by a further slowdown in nominal money growth due to over-aggressive withdrawal […]

International equity strategy

Emerging markets were weak in Q1 2022 initially on higher inflation as the Federal Reserve turned more hawkish then in response to the Russian invasion of Ukraine.  Markets hit a closing low on 15th March and recovered a little into the quarter end.  The EM index fell 6.06% in local currency terms and 6.92% in […]

The monetary indicators followed here continue to give a negative signal for the global economy and risk assets. The indicators have been depressed by an inflation squeeze on real money balances and this drag is probably peaking. Any relief, however, may be offset by a further slowdown in nominal money growth due to over-aggressive withdrawal […]

Monetary indicators continue to give a cautionary signal for global economic and equity market prospects. EM equities could show relative resilience based on Chinese policy easing, pre-emptive policy tightening elsewhere, an absence of major imbalances and favourable valuations. Underperformance of the MSCI EM Index relative to MSCI World in Q1 was entirely due to Russian […]

US broad money growth has normalised even as the numbers remain inflated by the tail end of the Fed’s QE programme. The broad money measure calculated here – “M2+”, which adds large time deposits at commercial banks and money fund balances to the official M2 measure – rose at an annualised rate of 5.4% in […]

The Chinese economy regained some momentum around year-end, as had been suggested by a turnaround in six-month real money growth in mid-2021. Monetary trends remain moderately hopeful but the recovery faces challenges from covid disruption, slowing global demand and ongoing property sector weakness. Most official economic data are presented as year-on-year growth rates. Chart 1 […]

Why did high inflation become entrenched in the 1970s? The consensus view is that an initial inflation shock became embedded in expectations, resulting in inflationary price- and wage-setting behaviour. The “monetarist” view is that the underlying driver was sustained high money growth, which played a key role in allowing inflation expectations to become dislodged. A […]

Global real money trends were signalling economic weakness before Russia’s invasion of Ukraine. The consequent spike in commodity prices threatens a recession warning signal.

Global real money trends were signalling economic weakness before Russia’s invasion of Ukraine. The consequent spike in commodity prices threatens a recession warning signal. Global six-month real narrow money growth – the key monetary leading indicator followed here – turned negative before the six global recessions preceding the covid shock – see chart 1. The […]