SEARCHING FOR A BOTTOM
It was a difficult week in the markets last week, broadly brought about by FI selling, a disappointing budget, a change in sentiment, and generally dismal earnings.
Where are we in the Business Cycle?
Short Rates are Falling
Short rates are declining, driven lower by a slowing economy, monetary and fiscal policy. While much action has been focused on the long bond, short rates have fallen from 7.65% to 5.86% over the past year, a meaningful drop of 179 bps. The action in short rates is indicative of a slowing economy.
Inflation Remains in the RBI’s Glide Path
Inflation continues to remain generally low, and within the RBI’s glide path. Given a below expectations monsoon to date, some pressure is likely to emerge in food prices but likely to be offset by slowing demand in other inflation contributors.
The Global Commodity Cycle Has Rolled Over
Global commodities were in a bull market from 1998 to 2007, and finally peaked in 2011, driven by China’s expansive buildout. Since 2010, commodities remain in a lacklustre downtrend, highlighting the weak global economic conditions and weak demand for raw materials. Commodities rallied recently on the back of positive news flow in the U.S. and China, but have convincingly rolled over late last year.
https://sanctumwealth.com/wp-content/uploads/2019/07/sfb-img1.jpg
The Yield Curve is Flattening, and Short & Long Rates are Falling in Tandem
Read More
https://sanctumwealth.com/market_commentary/searching-for-a-bottom/
Short Rates are Falling
Short rates are declining, driven lower by a slowing economy, monetary and fiscal policy. While much action has been focused on the long bond, short rates have fallen from 7.65% to 5.86% over the past year, a meaningful drop of 179 bps. The action in short rates is indicative of a slowing economy.
Inflation Remains in the RBI’s Glide Path
Inflation continues to remain generally low, and within the RBI’s glide path. Given a below expectations monsoon to date, some pressure is likely to emerge in food prices but likely to be offset by slowing demand in other inflation contributors.
The Global Commodity Cycle Has Rolled Over
Global commodities were in a bull market from 1998 to 2007, and finally peaked in 2011, driven by China’s expansive buildout. Since 2010, commodities remain in a lacklustre downtrend, highlighting the weak global economic conditions and weak demand for raw materials. Commodities rallied recently on the back of positive news flow in the U.S. and China, but have convincingly rolled over late last year.
https://sanctumwealth.com/wp-content/uploads/2019/07/sfb-img1.jpg
The Yield Curve is Flattening, and Short & Long Rates are Falling in Tandem
Read More
https://sanctumwealth.com/market_commentary/searching-for-a-bottom/
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- Last Updated
- August 1, 2019