US Mortgage Risk Premia has Bottomed
Mortgage risk premia has always bottomed between 3 months to 1 year before equity markets have bottomed, this suggests that US equity markets are bottoming right now or might bottom soon.
China being a factory for the world, its raw material imports have a direct effect on commodity prices. Chinese monthly import drives changes in oil prices.
Oil price prediction is a service we offer at Airtham, and so far, our forecasts have been accurate.
One of the ways we improve the accuracy of our forecasts is to look at the Chinese data. Since China is the world’s factory, its raw material imports have a direct effect on commodity prices. We use Chinese monthly import data as a coincident indicator. Predicting oil prices is a piece of cake if one is able to accurately forecast the upcoming trend in Chinese monthly imports.
Chinese import trend forecasting is not as complex as it may seem. However, we’ll save that study for another time. For now, changes in the monthly imports of China directly translate into changes in oil prices and thus unless China’s monthly imports are expected to rise, the oil prices won’t be climbing too high.
Indian Markets Remain Fairly Valued
Indian markets remain fairly valued as measured against inflation. The elevated levels of interest rates have not weighed on economic activity yet but are likely to show an impact in the second half of the year.
Time to Own Indian Bonds
Inverse Bond Yields & Inflation has a very clear relationship. If one believes inflation is destined to go down within a year's time, owning bonds certainly seems like an ideal choice.
Markets Bottom When PMI Bottom
Equity markets tend to bottom once coincident indicators such as the US ISM PMI Index bottom. Until that is clearly visible limiting equity exposure remains an ideal choice. For now, the drop in PMI is expected to translate into a further drop in Real GDP growth, which is also likely to impact earnings.
India Credit Impulse Impacts USD-INR Exchange Rates
A country’s credit impulse is a strong influencer of business cycles and thus directly translates into economic activity and to a certain degree inflation. For countries that have sizable economies
Milton Friedman’s Favorite Plot
Milton Friedman argued that inflation is entirely monetary in nature and the close relationship between CPI & M2/GDP validates this notion. Ideally, the plot of both these terms should trend together in tandem and with the exact same values. Distortions arise due to the incorrect magnitude & delayed actions of central banks that respond to changing economic conditions.