By Bilal Hafeez 13-08-2020
In: post | Newsletter

Exclusives: Turkey Is ‘Doing It Again’ / Equities Respond to Optimism / Fed’s Independence At Stake + China Growth Tracker

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We have a fantastic menu of Exclusives this week. First up, we discuss how equities seem oblivious to second waves. Instead, investors have a thirst for optimism around treatments, vaccines or softer lockdowns. Next, EM specialist, Rajeeb Pramanik, has written a piece on Turkey’s bad policy habits. That is, don’t be surprised if inflation returns and the lira continues to slide amid ultra-loose fiscal and monetary policies.

Also a must-read, Dominique Dwor-Frecaut sheds light on the Fed’s most recent trade-off. The dilemma: should it coordinate with the Treasury and risk undermining the axiom of independence, or maintain a large Treasury Government Account and have its hands tied on policy? Finally, we update our weekly China growth tracker. It looks as if geopolitical developments are yet to impact the country’s growth expectations– notably oil, and Baltic Dry are giving off bullish signals.




Equities Care About Vaccines, Not Second Waves (2 min read) Numerous countries are experiencing second waves of COVID-19 infections – not that you would know from their equity market performance. Take the US. Its second wave (or acceleration of the first) started towards the end of May and ended in early July. Over that period, stocks were still up around 6%. Admittedly, there was a short-lived correction of 7%, but that was considerably smaller than the 34% decline seen around the first surge in cases.

(Bilal Hafeez│ 13th August, 2020)




Turkey: Doing It Again! (3 min read) Turkish policymakers have returned to the populist policies of yesteryear that pushed the country to the brink in 2018, when inflation surged to 25% and the currency tanked 40%. The ongoing deluge of monetary injections amid negative real rates will cause inflation to spike again, current account deficit to deteriorate further, and currency to fall to new lows.

(Rajeeb Pramanik│ 13th August, 2020)



The US Treasury’s Cash Management Could Undermine Fed Independence (4 min read) The Treasury Government Account (TGA), which is the US Treasury’s checking account at the Fed, has become so large that the Fed may have to coordinate with the Treasury to adjust its stance, which market participants could view as inconsistent with Fed independence.

(Dominique Dwor-Frecaut│ 13th August, 2020)



Hive Indicators


China Growth Tacker – China Growth Expectations Strong Despite US Sanctions We recently published a note on how to track Chinese growth in real-time using financial and commodity market prices. In these weekly reports, we will update the indicator to help us track growth.

(Bilal Hafeez│ 13th August, 2020)


China Growth



(The commentary contained in the above article does not constitute an offer or a solicitation, or a recommendation to implement or liquidate an investment or to carry out any other transaction. It should not be used as a basis for any investment decision or other decision. Any investment decision should be based on appropriate professional advice specific to your needs.)



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