Forward Guidance Patrick Perret-Green: China Will Export Deflation, The U.S. Labor Market Is Softening (For Real This Time)
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Jun 6, 2024 Expert in macroeconomics and global markets, Patrick Perret-Green discusses China exporting deflation, US labor market softening, central bankers' forward-looking strategies, Chinese national accounts, bond market dynamics, currency trades, and financial implications of war.
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Commodity Rally Looks Speculative Against China Fundamentals
- Commodities show speculative froth despite weak Chinese demand, with copper at record highs while Chinese inventories and discounts signal slack domestic buying.
- Housing starts are down
50%, removing an important chunk (7.5%) of global copper demand tied to construction.
End Of Fiscal Tailwinds Tightens US Consumption
- US fiscal support that boosted demand after COVID is ending, tightening the macro backdrop particularly for middle and lower incomes.
- Delinquencies are surging and consumer bank borrowing growth has slowed to near-zero year-over-year rates under 3%.
Prepare Portfolios For Labor Market Softening
- Prepare for a weakening US labor market and lower inflation by favoring front-end rates and having explicit game plans for bond allocation.
- Two-year notes around 5% are attractive for liquidity and risk-managed positions according to Patrick's playbook.