Street Signals State Street Global Markets

April brought a reality check to markets after a stellar Q1, sparking demand for safety across assets and currencies. The higher for longer rate environment, together with signs of slowing growth and sticky inflation, gives rise to thoughts of future weakness in risk assets. Naturally, investors begin to question where best to take shelter. Are traditional safe havens as effective as they have been in past cycles? How do US Treasuries, the dollar and yen, long the stalwarts of safety, stack up? This week, Fred Goodwin returns to the podcast to discuss the challenges of selecting a suitable safe haven, the intricacies of safe haven currencies and which assets are most appealing to him right now.
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Lee Ferridge returns to the podcast to give his latest take on FX, interest rate and risk markets. Ever the road warrior, we focus first on the consensus and conviction calls from the dozens of client meetings Lee has done in recent weeks, before tackling the questions we are all contemplating in macro markets could the Fed's next move actually be a hike? Can the risk rally resume if that's the case? Is there any room for further rate divergence across G10? Long or short JPY? Is the carry trade over? It all gets answered this week.
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The US labor market and consumer continue to defy expectations of slowing, yet we are encouraged to believe that monetary policy is in restrictive territory. Why is that? On this week's podcast, we are thrilled to speak to Claudia Sahm, Chief Economist of New Century Advisers, founder of Sahm Consulting and developer of the renowned 'Sahm Rule', a widely observed and often misunderstood recession indicator. The conversation covers the forces driving the resilient consumer, how labor shortages and wage growth issues are being resolved, the most persistent drivers of US inflation and what it all means for future Federal Reserve policy.
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Similar to Japan in the 1990s, China faces twin headwinds of excessive debt deleveraging and demographic deterioration, with the addition of a multi-year pandemic and its aftermath making these already considerable burdens even more challenging. Can the world's once-reliable engine for growth avoid a similar fate of disinflation and relative decline? The hurdles are high but the comparison is not entirely apples-to-apples. China's fate is not sealed, possessing key advantages in rebuilding their post-COVID economy. Ramu Thiagarajan, a senior investment advisor for State Street, and Yuting Shao, one of our emerging market strategists in Asia, join the podcast to discuss a recent paper outlining the steps China will likely need to consider in sidestepping the looming threats of debt and deflation.
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It was a great first quarter for risky assets and carry trades, perhaps surprisingly, given recent economic data and events have actually offered a few surprises. Yet rotation within equity markets and the stability of relative rate expectations kept volatility at bay. After a rockier first few days, will Q2 offer a change in sentiment? This week, we welcome Bill Walsh, head of our FX trading desk in the Americas, back to the podcast to offer his thoughts on a wide array of topics. Inflation, the Federal Reserve, volatility, the direction of the dollar and where both funding and risky currencies sit - they all get special attention on this whirlwind tour of the risk complex.
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A turn higher in inflation carries with it the potential to disrupt the current easing plans of central banks and create volatility, in similar fashion to the market upsets that recurred throughout 2022. The evidence in the official data is mixed, and this week, we have a genuine expert to help us answer the question of whether inflation, having cooled somewhat, is in danger of rising once more. Alberto Cavallo, professor at Harvard Business School and co-founder of PriceStats, one of our research partners, is back with us. We discuss whether and where inflation risks are rising and what implications that carries for monetary policymakers who otherwise plan to begin lowering rates around the middle of this year.
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