Stagflation, a scenario of high inflation, weak growth and elevated unemployment, has become a topic of concern for economists and traders amid US trade tariffs, sticky services inflation and slowing GDP growth. Recent tariff hikes have pushed costs higher for many imported goods and consumer inflation expectations have risen with annual headline inflation projected to approach 3.9% by year end as tariffs are implemented. However, the argument for stagflation remains limited due to continued weakness in goo ...

Summary of Key Points from the Conference Call Industry Overview - The conference call primarily discusses the foreign exchange (FX), interest rates, and commodities markets, with a focus on the implications of stagflationary risks and monetary policy adjustments in various regions. Core Points and Arguments Foreign Exchange (FX) Market - **EUR-USD Forecast Revisions**: The end-2025 EUR-USD forecast has been revised to 1.20 from 1.17, and the end-2026 forecast has been raised to 1.25 from 1.20, reflecting expectations of further USD weakness [3][22][39]. - **USD Weakness**: The dollar's recovery in July is viewed as short-lived due to rising stagflationary risks and expectations for faster rate cuts by the Federal Reserve [20][21]. - **Market Sentiment**: There is a focus on ongoing USD hedge adjustments by non-US asset managers and expectations of fiscal stimulus in other major economies, which may support growth [21]. Interest Rates - **US Rate Forecasts**: The forecast for the end of 2025 2-year and 10-year US Treasury rates has been revised to 3.5% and 4.25%, respectively, reflecting a shift in the balance of rate risks [4][16][19]. - **Fed Policy Outlook**: The Federal Reserve is expected to reassess risks around employment and inflation, potentially leading to lower rates in the near term [14][17]. - **Global Rate Trends**: The Bank of England (BoE) is expected to cut rates further, while the European Central Bank (ECB) may also implement cuts despite a hawkish tilt in recent communications [27][58]. Commodities Market - **Energy Price Forecasts**: Revisions have been made for core energy commodity prices, including Brent and WTI oil, while forecasts for industrial and precious metals remain unchanged [8]. Additional Important Insights - **Emerging Markets**: The report maintains a structurally bullish outlook on EEMEA FX due to US stagflationary risks and concerns about the Federal Reserve's independence [6]. - **Latin America Growth**: The GDP growth outlook for Latin America has been upgraded due to resilient growth in Mexico, despite external volatility [7]. - **Risks to Forecasts**: Risks to the forecasts are considered balanced, with potential upside from inflation data and downside from economic slowdowns [17][23]. Conclusion - The conference call highlights significant revisions in FX and interest rate forecasts driven by macroeconomic conditions, particularly stagflationary risks and central bank policies. The outlook for commodities, especially energy, is also addressed, with a focus on the implications for emerging markets and Latin America.

Summary of Key Points from the Conference Call Industry Overview - The conference call primarily discusses the foreign exchange (FX), interest rates, and commodities markets, with a focus on the implications of stagflationary risks and monetary policy adjustments in various regions. Core Points and Arguments Foreign Exchange (FX) Market - The EUR-USD forecast has been revised upwards, with expectations of further USD weakness. The end-2025 forecast is now set at 1.20 (up from 1.17) and 1.25 for end-2026 (up from 1.20) [3][22][39]. - The dollar is expected to depreciate further due to rising stagflationary risks and potential rate cuts by the Federal Reserve, which could lead to lower relative real interest rates [20][21][22]. Interest Rates - US interest rates have been revised lower, with the end-2025 forecast for the 2-year Treasury yield at 3.5% and the 10-year yield at 4.25% [4][16][19]. - The Federal Reserve is anticipated to reassess its risk balance, potentially leading to lower rates in response to cooling employment data and inflation concerns [14][17]. - The Bank of England (BoE) is expected to cut rates further, with a forecast of 3.5% by the end of 2026, reflecting ongoing economic challenges [58][64]. Commodities - There have been revisions to core energy commodity price forecasts, including Brent and WTI oil, while forecasts for industrial and precious metals remain unchanged [8]. Regional Insights - **Emerging Markets (EM) Asia**: The forecast for the Chinese Yuan (CNY) remains stable at 7.10, with a mildly bullish outlook for the Indian Rupee (INR) [5]. - **Latin America (LatAm)**: The GDP growth forecast for the region has been upgraded due to stronger expected growth in Mexico, despite external volatility [7]. - **EEMEA**: A structurally bullish outlook is maintained for EEMEA FX, driven by US stagflationary risks and concerns over Federal Reserve independence [6]. Important but Overlooked Content - The potential erosion of US data credibility poses additional risks for the dollar, complicating the market's outlook [20][23]. - The ECB's recent hawkish tilt may not be sustainable, as the economic implications of the US-EU trade deal could negatively impact the euro area [27][29]. - The Japanese government is expected to adopt a more expansionary fiscal policy, which could influence the JGB market and yield forecasts [43][45]. Conclusion - The conference call highlights significant shifts in FX and interest rate forecasts due to evolving economic conditions, particularly in the context of stagflationary risks and monetary policy adjustments across major economies. The outlook for commodities remains stable, with specific regional insights indicating varied growth trajectories.

Group 1 - Federal Reserve Chairman Jerome Powell's speech at the Jackson Hole conference conveyed a more dovish stance, signaling potential easing of monetary policy, which led to a significant market rally, the largest since April [1] - Powell indicated that changes in risk balance may necessitate adjustments in policy, hinting at a possible rate cut in September, although he did not provide a firm commitment [1] - The immediate market reaction included a sharp decline in Treasury yields, with the two-year yield dropping 10 basis points to 3.69%, and the implied probability of a September rate cut rising from 70% to 80% [1] Group 2 - Some Wall Street strategists view Powell's remarks as a reassurance to the market, but caution that the market may be overreacting [2] - Concerns about the Federal Reserve's independence have resurfaced, particularly due to President Trump's public pressure on Powell to cut rates and his comments regarding Fed Governor Cook [2] - The market's enthusiastic response reflects a mixed sentiment among investors, who are hopeful for liquidity easing but worried about the economic fundamentals supporting long-term market growth [2]

We're a few moments away this morning from Fed Chair Powell's speech at the Fed Symposium in Jackson Hole. Let's bring in Apollo's global management chief economist Torstson joins us here at Post9. Happy Friday.It's good to have you with us, especially today. I mean, we we look at your charts every day. You clearly have some sympathy for the conundrum the Fed finds itself in.>> Yeah, because on the one hand, inflation is going up and as Sarah was just saying, anecdotes in this earning season have certainly ...

A big day for the markets as we get ready for Fed Chair J Pal's address in Jackson Hole. Steve Leeman is there and he joins us right now along with former Philadelphia Fed President Patrick Harker and CNBC contributor and former Fed Vice Chair Roger Ferguson. Steve, uh, a lot of anticipation ahead of this. Yes, an awful lot. And I think I have a great panel to talk about ahead of time, but before I do, I want to just update viewers on where the Fed funds futures market is going into this speech. And there's ...

Monetary Policy & Economic Outlook - The Fed faces a tug of war between employment/growth and inflation, striving to avoid stagflation [1] - Uncertainty prevails regarding which side (employment/growth vs inflation) poses a greater threat, leading the Fed to maintain current interest rates [2] - The Fed is potentially tilting towards a rate cut, possibly starting in September, influenced by recent softening employment numbers and declining workforce participation [3][4] - A 50 basis point cut is unlikely, as the Fed aims to maintain credibility and independence, and current data doesn't warrant such an aggressive move [6][9] - Employment data is the key indicator the Fed is closely monitoring to determine the timing and extent of potential rate cuts [12][13] Economic Factors & Market Dynamics - Tariffs' impact on inflation is still unfolding, with the value chain potentially absorbing some of the costs [11][12] - The US economy is viewed optimistically in the next 12-18 months, driven by innovation and significant investment in AI [15] - The US private sector and China are the primary forces driving AI development, with both vying for their standards to prevail [16][17] - AI has the potential to transform industries, job markets, and the central bank's reaction function, creating both winners and losers [19][20] - Breakthrough technologies like AI historically create more jobs over time, although the transition period may present employment challenges [21]

Market Outlook & Economic Concerns - Consumption is expected to slow down in the second half of the year [2] - Real wage income may face pressure due to hours worked and hourly earnings [3] - Big tech core businesses are sensitive to economic slowdown, potentially leading to negative operating leverage [3] - Stagflation, though not as severe as in the 1970s, could put the Federal Reserve in a difficult position [4] - Bull market psychology is present but prone to sudden breaks, with several risks in the latter half of the year [7] Inflation & Monetary Policy - Core PCE inflation is projected to be near 3% into the first half of 2026, which is not aligned with the Federal Reserve's goals [3] - The market may need to adjust expectations for rate cuts in 2026 [4] - There is a potential conflict between the Federal Reserve's desire for low inflation and the President's preference for a "red-hot" economy with strong nominal growth [13] S&P 500 & Potential Correction - The S&P 500 could potentially decline to 5500 in a significant economic slowdown, representing a mid-teens correction [9] - A milder correction could see the S&P 500 at 5750, a roughly 10% decrease [9] - Economic profits versus enterprise value to invested capital are close to levels seen in late 1999 before the market downturn [10] Investment Strategy - Investors should consider defensive, value-oriented sectors like beaten-up healthcare, waste companies, and utilities [14] - Caution is advised against being overly bullish, especially with cash needed within the next year [12]

And this week's economic reports haven't made it easy to decipher the state of the economy. This morning's retail sales showed consumers kept spending in July, but consumer sentiment for the month month dropped to its lowest level since May. These reports come after yesterday. We saw wholesale prices rising far more than expected, but CPI was lighter than expectations, at least on the top line. Joining us now is Gene Sperling, former director of the National Economic Council under President Obama and Presid ...

Inflation and Interest Rate Expectations - Consumer sentiment has decreased for the first time since April due to rising inflation expectations [1] - The market is actively repricing expectations from the Federal Reserve (FED) for the September 17th meeting [5] - There is a wide range of expectations regarding potential rate cuts, from no urgency to a cut of 100 basis points this year [2][3] - The University of Michigan indicates consumers expect inflation to rise, causing market reactions [3] - The current level of policy rates, 425% to 450%, is considered modestly restrictive [7] - Some analysts suggest the FED funds rate should be around 260%, while others disagree, citing inflationary risks [9] - The market is pricing out the prospect of a rate cut in September, but the next payrolls report is crucial [15] - FED Chair Powell is expected to balance the dual mandate, acknowledging the distance from the inflation target while opening the door to potential rate cuts [19][20] Credit Market Dynamics - Monday saw the most active day in credit deals and volume in three months, though sales fell $9 million short of weekly predictions [26] - High-yield credit market is experiencing a supply boom, with the busiest start since 2021 [26] - Fundamentals are considered strong, with high-quality spread products making sense due to solid consumer fundamentals [27] - Corporate sector is showing resilience, allowing selective movement down in credit quality [29] - Demand dynamics are robust across the credit spectrum, supported by light issuance and inflows into ETFs and mutual funds [30][34] - Geopolitical issues are considered more of an equity market story than a credit market story [40]