Shout out to Macrodesiac partner Syscoin 👇
RBA Finally Lost Patience
The Australian Central Bank kept the cash rate on hold today, but dropped the promise to remain 'patient' on policy changes.
The Aussie took the opportunity to push right on through the 0.76 handle 👇
Well, unlike other developed economies, Australian inflation isn't above the 2-3% target band target yet. The RBA's preferred measure is the annual trimmed mean gauge, which hit 2.6% in the final quarter of 2021.
The RBA has tried to drag out the hiking decision for as long as possible, with the hope that this cycle could reverse a decade-long trend of sluggish wage growth.
The takeaway quote from Governor Lowe was as dry as ever 👇
"Over coming months, important additional evidence will be available to the Board on both inflation and the evolution of labour costs,"
The next meeting (May 3rd) will see things start to get interesting. The March labour force report is out on April 14th & quarterly CPI data will be released on the 27th April.
There's no doubt that the labour market is strong, and CPI is expected to come in above 3% this quarter.
- Will it be enough to hike at the May meeting?
- Or will the RBA wait to see the quarterly wage price index on the 18th of May?
Westpac noted a clue in the minutes 👇
In his (Lowe) Statement last month after the March meeting, he did refer to “labour costs” but in the Minutes of the March meeting the Board referred to the need for “aggregate wages growth to be consistent with inflation being sustainably at target.”
For the RBA, 3% annual wage growth is the goal. Westpac think they're unlikely to reach it this quarter (but there's a caveat)...
The Wage Price Index that prints on May 18 is likely to print 2.5% (0.8% for the quarter), well below the 3% target that the Governor has set in the past although the annualised six month pace is likely to be around 3%.
Handy table from @IFM_Economist here tracking the data that the RBA will have to work with at each meeting 👇
Summin up, June looks like the first truly 'live' meeting for the RBA, and losing 'patience' is another step in that direction...
How about the Bank of Canada? 👇
Headline says it all. BoC are about to rock out with their errm... hike 50bps at the next meeting,
Per BBG, investors in overnight swaps are pricing in about an 80% chance of an outsized hike. Another strong jobs report on Friday could push that number closer to 100%.
But the bar for surprises is high.
There's a boatload of tightening already priced in 👇
The black line is about 12 months from now, and we can see the Fed, BoC, RBA, & RBNZ pricing are all converging by that point.
For some reason the ECB are expected to tighten 100bps within the next 12 months and a further 75bps in the two years after that.
I aksed Michael Jordan his thoughts on that.
Back to Canada. We've spoken a lot with Premium members about the ability of the Canadian economy to prosper under higher rates, as well as the impact on different housing markets.
For the CAD, rate differentials could be a short-term driver, but presuming the OIS pricing 12 months out is roughly correct (a pretty big assumption I know), those differentials are expected to disappear.
If the BoC goes with a dovish 50bps hike (hike 0.5% then wait and see, rather than hike and commit to a sequence of hikes), then CAD is approaching a decent area to monitor for a reversal.
Not one I'd rush into, but the BoC have been reluctant hikers so far in my view. Likewise, I think CAD strength should fade if the data confirms the recent softening of global demand growth is more than just a blip.
Don't give me problems, give me solutions
"I want to invest in crypto, but it looks so complicated. There are so many coins and companies...
I want Bitcoin exposure in my pension but I don't even know where to start!"
An exchange-traded fund (ETF) is a type of pooled investment security that operates much like a mutual fund.
Typically, ETFs will track a particular index, sector, commodity, or other asset.
The guys at HanETF go all out to offer thematic ETF's and solve problems.
As big followers of macro themes, we're especially partial to thematic ETF's.
Take KOIN as an example:
KOIN provides exposure to companies that have business operations in the field of blockchain technologies including cryptocurrency mining, blockchain technology directly or cryptocurrency trading and exchanges.
Since the FCA has been absolutely fantastic and prevented any direct holdings of BTC ETPs in a portfolio for retail clients, it's worth checking Koin out as a BTC proxy, since the ETF's correlation to BTC is pretty damn high!
Here's the rolling 30d correlation coefficient (basically, what percentage of time do they move 1 for 1)...
You can see here that it's at about an R2 of about 0.9 (moves in lockstep 90% of the time) and has remained at this highly positive correlation throughout the ETF's short life.
For anyone wanting direct exposure to Bitcoin in their pension/portfolio, here's BTCE, but as mentioned above, this is only available for non-UK based clients.
HanETF offer a tonne of other thematic ETF's too
Does the furore about the Metaverse get you going? Take a look at METR.
Are you an eco-warrior activist investor who's passionate about the climate? HanETF offers a Decarbonisation Enabler ETF, CLMA.
Pretty much any major trend you want to look at and have access to, they have an ETF for it...
You can check out the charts of HanETF products by searching 'HANETF' on TradingView.
(BTW, we're not being paid for this, we just like Hector and the guys at Han).
ETF's offer optionality...
Holding groups of stocks linked to a theme rather than individual stock-picking plus access to regulatory burdened corners of the markets in traditional portfolios, such as Bitcoin.
Well worth looking at adding ETFs of sectors you have interest in to your watchlist!
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