As concerns about the “bull market in everything” grow among investors, market conditions appear surprisingly calm, as indicated by rolling 90-day volatility metrics (standard deviation). This tranquil period could be a precursor to turbulent times ahead; however, studies on volatility clustering indicate that these placid phases can persist longer than anticipated. Eventually, shifts are inevitable, possibly sooner rather than later. Currently, a glance at recent trends in major asset classes suggests an unusually peaceful environment, as evidenced by a set of exchange-traded products based on the rolling 90-day standard deviation of daily percentage returns.
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China’s Q3 GDP growth rate slightly declines to 6.8% compared to the previous year: RTT
Spain prepares to enforce direct rule over Catalonia on Saturday: Reuters
One-year inflation expectations in the US drop to a 1.8% pace: Atlanta Fed
Dallas Fed president warns that lower 10-year Treasury yields may signal trouble: Reuters
US housing construction shows signs of slowing in September: HousingWire
Conservative groups oppose Yellen’s reappointment to the Federal Reserve: Bloomberg
Treasury Secretary warns of significant stock market declines without tax reform: LA Times
Dow Jones Industrials reach a new milestone by closing above 23,000: Reuters
Federal Reserve officials have been advocating for an interest rate hike, with futures markets indicating a strong probability for this in the upcoming December monetary policy meeting. However, the justification for a tighter monetary policy might not be as compelling as it seems when considering the latest data on the real (inflation-adjusted) year-over-year changes in M0 money supply.
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Xi Jinping declares a “new era” of power and influence for China: Guardian
Speculation on whether China’s party congress will affect markets: Bloomberg
US industrial production shows a larger than expected rebound in September: RTT
Homebuilder sentiment in the US reaches a five-month high in October: Bloomber
Import prices in the US rise at their strongest pace in over a year for September: Dow Jones
Economists warn that rising debt and elevated asset prices could threaten the global economy: VoxEU
Analysts predict a slowdown in GDP growth for the third quarter, as indicated by the upcoming advance estimate from the government due at the end of the month. This slowdown is partly attributed to temporary disruptions caused by hurricanes that have impacted economic activity.
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Iraq undertakes efforts to reclaim oil fields from Kurdish control: Independent
UK experiences inflation at a five-year high, raising expectations for interest rate hikes: Reuters
Brexit negotiations face potential collapse: Independent
NY Fed manufacturing benchmark soars to a three-year high in October: MarketWatch
China’s central bank chief forecasts a 7% growth for H2 2017: RTT
Republican support for tax reform gains momentum in the Senate: Reuters
Federal Reserve’s interest rate hikes risk diminishing economic performance amid low inflation: Fed Watch
Goldman Sachs: Growing geopolitical risks are propelling oil prices higher: Bloomberg
Commodities broadly experienced a resurgence last week, achieving the most substantial gains among the major asset classes.
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Austria elects a right-leaning populist government: Politico
Catalonia keeps Spain on edge regarding independence:Politico
North Korean cyber-hacking is an escalating global threat: NY Times
US retail spending surged in September, marking the most substantial increase in two and a half years: USA Today
US consumer inflation rises sharply in September: CNBC
The US Consumer Sentiment Index reaches its highest point since 2004 in October: UoM
Fed Chair Yellen suggests a rate hike is on the horizon, citing the strength of the US economy: Reuters
China’s role in international markets is anticipated to expand: Bloomberg
Gold and inflation-indexed Treasuries maintain a strong correlation: Scott Grannis
The October 15 edition of The US Business Cycle Risk Report has been published and distributed to subscribers.
By Brink Lindsey and Steven Teles
Summary via publisher (Oxford University Press)
The United States has grappled with sluggish economic growth and increasing inequality for years. Traditionally, economists assert that there is a tradeoff between equity and efficiency—i.e., between enlarging the economic pie and distributing it more fairly. Yet, our current situation is perplexing: we face both stagnating economic growth and significant inequality. In The Captured Economy, Brink Lindsey and Steven M. Teles identify a common factor behind these crises: the collapse of democratic governance, allowing affluent special interests to dominate the policymaking process for their own gain.
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