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Oil Prices, Exchange Rates and Interest Rates (Dallas Fed, 32 Pages) This study attempts to disentangle oil prices, US interest rates, and the value of the dollar in an attempt to clarify the simultaneous relationships interlinking them. Essentially finds less than 10% of the variability of the dollar is due to oil prices.
Regression to Trend: Another Look at Long-Term Market Performance (Advisor Perspectives, 4 min read) A regression trendline of the S&P Composite Index indicates that current equity prices are 125% above their long-term trend. The last time this happened was in 2000 when the index overshot by 137%. Mean reversion implies that the current strong equity figures can’t sustain for too much longer. [Bearish US Equity]
When Can We Stop Talking about ESG? (CFA Blogs, 3 min read) ESG analysis may be a redundant part of standard investment valuation because many of the ideas driving it are already incorporated in the long-term strategies of successful non ESG businesses. Further, many corporate executives resist ESG discussions and find them to be overly focused on moral concerns, which is causing ESG proponents to rethink their messaging. [Bearish ESG]
The Most Important & Overlooked Economic Number (Advisor Perspectives, 5 min Read) The Chicago Fed National Activity Index is a forward-looking metric that forecasts economic conditions in the coming months, with specific focus to production, employment, personal consumption, and inventory levels. The index currently forecasts weaker employment numbers and increasing layoffs in the next few months. [Bearish US]