The Markets Daily

We really seem to be moving from one crisis to the next these days, and the crises seem to becoming in thick and fast. Obviously the dominant global crisis has been the pandemic, and while it continues to impact economic activity and health, it is far less of a crisis than it was a year or more ago.

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Our journey from policy announcement to policy announcement continues, but a significant milestone has been reached. The FOMC has announced that conditions continue to improve, thus the committee feels that it will be appropriate to start tapering asset purchases soon – which is seen by markets to mean before the end of 2021. 

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It is a week of holidays, China and Hong Kong have observed public holidays this week and I know I am not the only South African counting down the days to Friday’s observation of Heritage Day. 

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Fostering strong mental health is as, if not more, important than physical wellbeing. Since the onset of covid-19, there’s been a strong appreciation of social, emotional, and psychological welfare.

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Have you ever spun around with your eyes closed? In that moment, you’re completely removed from your surroundings and gravity doesn’t seem to exist. At some point, whether by choice or sheer exhaustion, you stop! Your eyelids open and lightness gives way to bewilderment. That pretty much sums up the way I feel this morning after perusing overnight trends and contemplating the data calendar for this week.

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Like Keynesians and Neo-Classicalists, there are chartists and fundamentalists. The former rely heavily on technical valuations to explain market movements, while the latter defer to economic theory. The intersection of the two practices often results in erratic pricing. 

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It’s one of those days where weaving a cohesive and well-structured storyline is proving challenging. Newspapers are brimming with headlines and yet we’re searching for catalysts to steer market moves. As anticipated, the monthly US CPI print heightened anxieties over Fed tightening. 

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And just like that, the US’ August CPI print has come and gone. With a slightly weaker-than-expected outcome in monthly terms (0.3% m/m relative to expectations of 0.4%) and with the measure excluding food and energy also coming in lower than expected, markets continue to speculate about the Fed’s timing and pace of asset purchase tapering, and will hopefully be given, at the very least, more direction a week from now

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Data dependency is something mentioned a lot these days when discussing expected policy decisions. What we don’t mention as much but is clearly the case is that markets have become just as data-dependent when forming expectations. 

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