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Jul 12 2018

Inflation—Largely In Line

  • Jul 12, 2018

The year-over-year headline number was in line with market expectations but the month-over-month increase missed market consensus (0.1% vs. 0.2% expected). All else being equal, there is a good chance CPI might have peaked for 2018. A stronger dollar is disinflationary while the short term impact of tariffs is higher import prices.


Jun 12 2018

Inflation—No Surprises Here

  • Jun 12, 2018

Headline and Core CPI figures hit estimates right on the nose in May, continuing the trend of modest but not outrageous price increases. Energy prices have boosted headline CPI while core CPI continues to be driven by services. With both of the Fed’s mandates pretty much accomplished, appreciate this rare window of time.


Feb 14 2018

Inflation—Suddenly Relevant

  • Feb 14, 2018

The headline and Core CPI numbers for January both came in hotter than expected. Despite the resurrected interest and concerns about inflation we still haven’t caught inflation fever. Because of the narrative (correct or not) look for increased volatility surrounding inflation announcements.


Jan 16 2018

Inflation—A Small Upside Surprise

  • Jan 16, 2018

The latest Core CPI number beat expectations but the yield curve flattened. The market shows more conviction about the Fed’s rate hikes than longer term inflation. We recommend patience and we don’t believe missing out on the first few months of higher inflation will cost us dearly.


Dec 14 2017

Inflation-As Flat As The Yield Curve

  • Dec 14, 2017

The latest Core CPI number disappointed again. The divergence between inflation break-evens and the yield curve is puzzling. Given the lack of inflationary pressure and the Fed’s projected rate path, it would not surprise us to see a flatter curve without the help of fiscal stimulus in the next few months.


Sep 08 2017

Goldilocks—Alive And Well

  • Sep 8, 2017

If we look beyond the daily noise from North Korea, the global macro picture still fits our “Goldilocks” view pretty well.

Jun 15 2017

Inflation Disappoints Again

  • Jun 15, 2017

The CPI numbers have disappointed three months in a row. Weak commodity prices do not inspire higher inflation expectations. The global scope of inflation deceleration adds more weight to the recent soft readings. However, lower bond yields relative to nominal growth rate is inflationary and buffers the impact of weak inflation and rate hikes.


Apr 19 2017

Inflation-Weaker Sooner Than Expected

  • Apr 19, 2017

The latest CPI is weaker and the softness was sooner than we expected.  More alarming is the recent broad-based deterioration in economic data.  Lower inflation expectations have flattened the yield curve recently, which hurt Financial stocks. We believe inflation has likely peaked for the time being and patience is the right approach for the reflation trade at this point.


Mar 16 2017

A Dovish Hike--Positive For Inflation

  • Mar 16, 2017

The dovish rate hike is a positive for inflation and credit. A hawkish message right now would have been quite detrimental and self-defeating in terms of realizing two more hikes later this year. We believe achieving sustained 2-3% inflation could be harder than most people expect going forward. Overall, we are encouraged by the dovish hike but we think the real test for inflation is when the base effect starts to wane.


Feb 15 2017

Inflation-All About That Base

  • Feb 15, 2017

CPI numbers were strong and better than expected. A big part of the recent upturn in inflation has to do with the much lower base from a year ago. We are seeing upside inflation surprises on a global basis but wage inflation is still disappointing. We are encouraged by the general uptrend in inflation data but we think the real test comes after the positive base effect subsides.


Nov 05 2016

Reflation And Election Year Patterns—Not Much To Lean On

  • Nov 5, 2016

· One bright spot in last month’s lackluster market action was that inflation sensitive assets saw impressive relative returns.

Jun 17 2016

Inflation Remains Largely In Line With Expectations

  • Jun 17, 2016

The latest jobs report disappointed but we think it’s a short term aberration as other data still point to a healthy job market. Some of the key market-based inflation drivers, however, have reversed course a bit in the last couple weeks. Patience is still the right strategy.


Jun 07 2016

Inflation Hindered; Contributing To A Flattening Yield Curve

  • Jun 7, 2016

A stronger dollar and a weaker Chinese yuan dented the prospects for higher inflation in May.

May 18 2016

Inflation Exceeded Expectations In April

  • May 18, 2016

Inflation exceeded expectations in April. The more durable inflation measures such as wage inflation are also improving. We characterize the recent improvement in inflation as a relief from the threat of deflation but still quite far from being a catalyst for run-away inflation.


May 06 2016

Reflation Trade Back In Vogue? We’d Rather Be Late Than Early

  • May 6, 2016

Despite recent improvement in some inflation measures, we are not convinced the war against disinflation has been won. The risk of being too early on the inflation call far outweighs the risk of being too late.

Apr 15 2016

Inflation-Patience Recommended

  • Apr 15, 2016

Inflation missed expectations in March.  The three key inflation drivers this year - oil, the Dollar and the Chinese yuan, are all going in the right direction.  The risk of being too early on the inflation call far outweighs the risk of being too late.  Patience is still recommended.


Mar 23 2016

Inflation Modestly Exceeds Expectations

  • Mar 23, 2016

Inflation met or modestly exceeded expectations. The three key drivers for inflation (oil, the Dollar and the Chinese yuan) continued to improve. But we are not rushing to declare victory on disinflation. “Organic” inflation, such as sustained wage inflation, has been very elusive so far.


Feb 19 2016

Inflation Surprised To The Upside

  • Feb 19, 2016

Both CPI and PPI surprised to the upside.The three key drivers for inflation (oil, the Dollar and the Chinese yuan) all saw some improvements.  Despite the recent improvements, we are still in no hurry to call the bottom in inflation.  The downturn in the energy and manufacturing industries has wide-reaching effects. Patience and caution are still warranted.

Jan 08 2016

2015 - All Risk And No Reward

  • Jan 8, 2016

The U.S. 10-year yield was quite volatile, fluctuating in a 100 bps range between 160 and 260, and ending up a mere 10 bps higher for the year. But it was still better than most other major asset classes which saw all risk and no reward.

Jul 20 2015

Inflation—Expecting More Drag From Oil

  • Jul 20, 2015

With the recent weakness in oil prices and the renewed strength of the U.S. dollar, we would not be surprised to see weaker headline numbers in the next few months. The expectations of a rate hike might actually end up pushing the rate hike further out. We are now less sanguine about a pick-up in PPI in the rest of the year.

Jul 08 2015

A Venerable Monetary Indicator Turned Negative

  • Jul 8, 2015

The smoothed, 26-week rate-of-change in the DJ Corporate Bond Index, a reliable indicator of monetary conditions over many different market and economic cycles, turned negative in mid-June.

Jul 08 2015

Navigating The First Rate Hike

  • Jul 8, 2015

Our current view is the lift-off will be December or later. Assuming inflation will pick up and the Fed hikes the rate by the end of 2015, stocks will perform relatively well, with international stocks a better bet than U.S. stocks.

May 07 2015

End Of The QE Trade? Too Early To Call

  • May 7, 2015

The common driver behind the sharp reversal of many recent asset class trends is the unwinding of the ECB QE trade.

Apr 08 2015

Another Take On The Inflation Debate

  • Apr 8, 2015

While there’s understandable obsession over the likely level of inflation (especially with the year-over-year CPI dipping below zero in the past two months), equity managers with no interest or skill in inflation forecasting might be better served by monitoring the character of inflation—i.e., whether it was led by changes in consumer or producer prices.

Mar 06 2015

Inflation & Monetary Policy—A Feedback Loop

  • Mar 6, 2015

Inflation and inflation expectations are key inputs to central banks’ policy decision process. Divergent policies have very different impacts on inflation.

Nov 07 2014

Inflation & The Dollar

  • Nov 7, 2014

Are U.S. markets for labor and capital actually getting tight?

Apr 07 2014

Twisty Curves

  • Apr 7, 2014

The short end of the yield curve sold-off to price in an earlier-than-expected rate hike, while the long end rallied as the prospect of tightening reduced longer-term inflation expectations.

Feb 07 2014

High Correlations And Their Meaning

  • Feb 7, 2014

While our tongue-in-cheek “Correlation Of Everything” measure has retreated from record levels, it remains far above anything seen prior to 2010.

Feb 07 2014

U.S. 10-Year: 245-250 Area A Strong Barrier

  • Feb 7, 2014

We expect the 245-250 area, the upper bound of the previous lower range, to be a strong barrier.

Jan 17 2014

Inflation Pressure Anemic

  • Jan 17, 2014

Inflation measures are broadly in line with expectations, and overall inflation pressure is anemic.  We maintain our view that inflation will be a non-factor in the first half of 2014, and it might increase moderately in the second half.  Inflation on the producers’ level is weak, too and the PPI inflation pipeline doesn’t seem to pose any immediate inflationary threat either.


Jan 08 2014

A Taper & Hibernating Bears

  • Jan 8, 2014

The rise in interest rates after the taper was on the back of low liquidity around the holidays. 3% is a pretty strong upper bound for the 10-year, and a failure to stay above this level will probably see a re- test of the 275 level in the near term. 

Dec 06 2013

The Dual Mandate Presents A Clear Dilemma For The Fed

  • Dec 6, 2013

The “dual mandate,” which means the Fed is paying close attention to both inflation and employment, presents a clear dilemma for the Fed when it comes time to decide on a taper.

Nov 22 2013

Inflation Lower Still

  • Nov 22, 2013

We maintain our view that inflation will be a non-factor for the next six months but will increase moderately in the following six months.

Nov 07 2013

Five Reasons Inflation Is Still Missing

  • Nov 7, 2013

Overall demand slack, stubbornly low velocity of money, an overall stronger dollar, painfully low labor cost inflation and weakness in commodity prices are strong disinflationary forces.

Oct 08 2013

Inflation Still Going Nowhere In The U.S.

  • Oct 8, 2013

Inflation at both consumers’ and producers’ level is still modest. A drawn out government shutdown and debt ceiling debate will hurt the economy, which could further push out the taper timeline.

Sep 18 2013

Inflation - Still Going Nowhere

  • Sep 18, 2013

Inflation measures are anemic and mostly lower than expectations. We maintain our view that inflation will be a non-factor for the next six months but will increase moderately in the following six months. Inflation on the producers’ level to be modest too. We don’t see strong evidence for a big rise in the near term.

Aug 07 2013

10-Year: Taper the Taper—Upside Limited

  • Aug 7, 2013

If interest rates keep going higher from here, we would run the risk of derailing a still-fragile recovery. As long as the Fed tapering uncertainty exists, we expect higher volatility on the 10-year yield to persist in the mean time.

Apr 05 2013

"Muddle Through"

  • Apr 5, 2013

The global economy is stuck in a “muddle through” mode with developed and emerging countries showing divergence in terms of leading indicators. Despite this divergence, they share one thing in common: an upturn in inflation. How much more room there is for easing is a key determinant of asset market performance.


Mar 06 2013

Implications Of The End Of Negative Real Yield

  • Mar 6, 2013

The 10-year real yield turned positive at the end of 2012 and has stayed there. We expect higher interest rates, a stronger dollar, and lower gold prices in the next twelve months.

Jan 07 2013

Inflation Slightly Lower Than Expected

  • Jan 7, 2013

The non-seasonally adjusted CPI fell 0.5% from October to November, lower than expected.