After two weeks on the road seeing investors, I am convinced that portfolio managers are becoming increasingly sceptical about the synchronized global recovery. That’s probably a good shout. I recently surveyed global leading indicators, and didn’t like what I was seeing. The data since have been worse. My in-house diffusion index of global leading indices has been flat since the start of the year. Its message is simple, global manufacturing accelerated sharply for most of last year, but momentum petered out in Q1. It doesn’t yet point to an outright slowdown, though other short-leading indices, such as the PMIs, do. The signal is more uniformly downbeat for the global economy if we look at liquidity indicators. Inflation is rising, with oil prices at a 12-month high, and nominal M1 growth is decelerating. Historically, this has been one of the more reliable omens for slowing growth in the global economy. Of course, investors don’t have to peruse economic data to tell them that something is afoot. Let me see whether I can remember everything. We have had wobbles in emerging markets, the return of political risk and higher bond yields, and even euro-exit chatter, in the Eurozone periphery as well as the morbid fascination that Deutsche Bank is going to blow a hole in the European, and perhaps even in the global economy.
Read MoreIt is a public holiday in Germany on Monday and that is probably a good thing. But that won't prevent the hot takes on Deutsche Bank from piling up faster than Donald Trump's tax liabilities. I have a lot of friends on the buy side as well as strategists at major sell side shops, and the debate between us has been lively in recent days. But we are no closer to a solution and neither, it appears, is the market given the ridiculous price action on Friday. The grapevine has it that the DOJ will lowball the fine, which should allow DB to stagger along in accordance with its original 2020 plan. But the results on October 27th will be a key event in either case. A bad downside surprise could bring coupon payments on the COCOs in danger, at least as far as I understand. I concede, though, that I have no strong take on whether this is indeed likely to happen.
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