I have a feeling that equity markets are setting a trap for investors, but I can't quite figure out which kind it is. Will the last bull be sucked in before the disappointment sets in, or are we now on a sustainable glide path towards new highs with maximum frustration for the sceptics? We didn't get any decisive clues last week. Equity volatility rose a tad, but ranges remain incredibly tight across a number of key asset markets. False breaks are guaranteed, and vol-sellers will continue to play cat and mouse with the heroes trying to straddle the ranges, playing for a breakout.
Sometimes projects are best left unfinished. I hope this is not the case here, but I concede that it has been way too long since the first part of my attempt to tell the story of microfoundations in macroeconomics. I have been stuck doing this for almost six months, and I still feel that I have only scratched the surface. In any case, this show gets to the meat of the discussion, and tries to get to grips with the origins of microfoundations in macroeconomics.
So, why would you want to listen to this? I can think of two reasons. You might be a graduate/PhD student in macroeconomics who is confused about where the models you’re teacher is stuffing down your throat comes from. Alternatively, you might work with macroeconomics either as a journalist, investor, or analyst and you’re struggling to reconcile what you see when you read a piece of academic research with what you see in the real world.
I am generally a tolerant guy, but when it comes to a debate on international capital flows I am a raving lunatic. I have no time for amateurs, and it is my clear impression that president Trump’s trade advisors, and those who agree with them, are just that. You need to understand where I am coming from, though. Specifically, you need to read my two essays about QE, population ageing and the global paradox of thrift. Here is a summary if you don’t want to read the whole thing; read it carefully.
Global equities continue to mock the bears. The MSCI World was up 2.6% on the month in January, comfortably outperforming yours truly, which had to contend with 1%. The MSCI World is now up a cool a 8.1% since November, and while we saw faint signs last of weakness last week, it was really only a minor flesh wound for the bulls. Indeed, Friday's NFP number was a real treat for everyone. A solid headline and a poor wage print equal goldilocks and joy for both bond holders and equity bulls. As so often before, Spoos and Blues carried the day.