Wednesday, December 28, 2016

Société Générale's Albert Edwards Not His Usual Jolly Self (II)

Still, all in all, doing better than that time we posted "Société Générale's Albert Edwards Descends Into A Nightmare World of Dream Demons and Market Depravity".

From Bloomberg Gadfly:
The great bond selloff is no match for Albert Edwards.

Societe Generale's top-rated global strategist and perennial doom monger is hanging on to his long-held view for yields to turn substantially negative. Never mind all the chatter about the end of the 35-year bull market in bonds and the Great Rotation back into stocks, and that President Trump's spending means inflation is back for good.

Trumpled Underfoot
U.S. bonds hardest hit by prospects for rising inflation under Trump...
...The herd has spoken, and Edwards doesn't buy it. And for those of us who remember that ignoring outliers is what got us into the financial crisis in the first place, he's worth listening to.

Don't Stop Me Now I'm Having Such a Good Time
And we're off to the races as equities are lovin' The Donald...
 
To be fair, he's not completely off piste. Near term, he sees U.S. inflation picking up to about 2.5 percent to 3 percent and the 10-year yield headed to 3.25 percent, same as a lot of people.
 
The similarities end there. For Edwards, this is merely the natural end of the growth phase of the business cycle, and in the normal order of things should be swiftly followed by a recession.
But this won't be just any recession. Wage growth is now pretty close to its pre-crisis average and he says it should accelerate in the early part of 2017. That will force the the Fed to raise rates at the wrong time, as growth sags, and for the wrong reasons, focusing on pay rather than the underlying economic weakness.

Got Yourself a Wages Problem?
The Fed's preferred survey diverges from the one favored by SG's Albert Edwards, with different implications for the growth and inflation outlook...MUCH MORE