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By Bilal Hafeez 12-12-2019
In: post | Newsletter

Macro Hive Exclusives: Boris Wins? / 10 Grey Swans / Fed Thinking

(5 min read)
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We have a bumper 5 Exclusives this week. First up, we have former Goldman Sachs partner and political maven Bobby Vedral give his 5 reasons for why the Conservatives will gain a majority in today’s UK election [bullish UK assets]. Next, we have our flagship “Macro Hive 10 Grey Swans for 2020” predictions – some swans are reasonable, others are outlandish.

This week, we featured US rates guru George Goncalves’ take on the Fed’s path [curve steepener]. We round out the newsletter with two pieces on emerging markets. Morgan Stanley’s Asia desk strategist, Mirza Baig, gives an excellent markets’ view on India [bullish India bonds]. Finally, Russia expert Tatiana Orlova provides an update on the recent Russia-Ukraine summit [bullish Russia/Ukraine assets].




5 Reasons Why The Conservatives Will Win The UK Election (2 min read) This election is all about Brexit. That means old vs young, town vs city. My view that is Boris will get roughly a 40 seat majority (see also Chart 1). The most credible YouGov poll predicts 28. Five reasons why I think Boris has got this one:

[Market implication: UK assets up, sterling up, and gilts down]

( Bobby Vedral | 10th December, 2019 )


Grey Black Swan



The Macro Hive 10 Grey Swans for 2020 (15 min read) Black swan events are the unknown unknowns that no one can even envisage, let alone predict. But their close cousin – grey swans – can enter our imaginations. These are low probability, high impact events that few expect. They aren’t even our base cases. But by imagining these risk scenarios, we can at least prepare for them should they erupt. Here are ten to think about for 2020:

( Bilal Hafeez | 9th December, 2019 )

FOMC Preview: Fed Aims For Smooth Passage Into 2020 (3 min read) Cracks are forming on the fringes of credit markets, but most asset classes are doing well year-to-date and have avoided any major corrections. Even the likes of BBB credit have managed to fully reverse the widening move of 2018 Q4. Meanwhile, stocks, which many portray as hanging on by a thread, are near record levels. Equally interesting is that equity indices have entered into each Fed meeting this year near their highs.


Governor Jerome H. Powell

The same is basically true for 10-year US yields. Even during the meetings where they delivered rate cuts, we saw conciliatory rises in yields ahead of the FOMC meeting (just in case it was a ‘hawkish cut’). After the meeting, yields would typically fall by a small amount. However, since the last rate cut the back end of the curve has been doing most of the work, albeit sitting in a range.

[Market Implication: US curve steepens]

( George Goncalves | 11th December, 2019 )





India Pivots Too Soon? (5 min read) India’s Q3 GDP was predictably weak at +4.5% YoY. It might have been even weaker but for a timely surge in government spending. The deterioration was fairly broad across consumption, investment, and external sectors. Real GDP growth rate has now slipped below headline CPI inflation. Unfortunately, Q4 is tracking no better than Q3: high frequency data through October has remained lacklustre, while vegetable price inflation continues to build and is likely to push headline CPI well above 5% in Q4.

[Base case: Indian bonds rally]

( Mirza Baig | 10th December, 2019 )



Russia-Ukraine: Tentative Progress (4 min read) On 9 December, leaders of Ukraine, Russia, France, and Germany met in Paris in a Normandy format as part of efforts to resolve the frozen conflict between Russia and Ukraine over territory in the Donbas region of eastern Ukraine. The meetings took six hours, including an hour-and-a-half meeting between the Ukrainian President Volodymir Zelensky and Russian President Vladimir Putin. It was hoped that the summit would be able to iron out all the differences between the Russian and Ukrainian positions. In that, it failed. But it did manage to name the next steps on the path to resolution.

[Market implication: bullish Russian and Ukrainian assets]

( Tatiana Orlova | 10th December, 2019 )




(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.)