Oct 25, 2024
“the research on horror says there are a few good reasons why some people like it”
Perhaps it’s just us, but as the spooky season returns and jack-o-lanterns bedeck porches, we notice that markets and commentators also seem a bit skittish. Maybe it’s the looming election, or perhaps the geopolitical horror shows, but folk seem surprisingly easy to spook. Case in point was the hullabaloo around the $44bn jump in US (government) debt. The hue and cry of folk such as ZeroHedge were enough to get more mainstream interest, including the owner of X and a son of FP Trump, to take notice. The jump is seasonal, as Constan and others pointed out, rather than some ghoulish trick, but of course it’s easy to make fun of those who took fright. But perhaps this misses the point about horror movies. Some argue that the genre works for some because it allows them to push their boundaries and learn the limits of their fears. If that describes you, we recommend reading the CBO Long-Term Budget Outlook. For others, referred to as “dark copers”, the appeal of horror movies might lie in “anxiety or fear that they’re feeling in their life, and they use scary genres like horror to kind of work through those feelings”.
Of course, as with any good horror movie, we have to deal with false resolutions: moments when the danger seems to have passed, only for the mood music to change, telling us we have been duped. The market analogue are revisions to data, which can fool even the best of us (best, of course, being a matter of perspective). See Jerry Powell’s comment on GDI revisions here, which we missed earlier and were “quite interesting” (perhaps “embarrassing” is more accurate, but who’s to say?). The alternative is to stick to our knitting, tighten up our Bayesian conditionals a la the discussion last week, and focus on fun(ny)damentals as best we can.
One of the fundamentals we like to keep on top of is the housing market, for two very good reasons. First, as we note every so often, “housing is the business cycle”, but second, given we can only know the tightness of monetary policy by its works, housing activity, particularly construction, is useful as a first point of contact for restrictive policy. So far, there are few signs that the punch bowl is running dry. New Home sales hit “the highest level in nearly 1-1/2 years”, beating month-on-month estimates handily, even with last month’s numbers being revised up, and the broader market appears to be in rude health, with Redfin’s research showing jumps in pending home sales and decent month on month price growth (though the annual growth rate of prices was the smallest since December).
Employment is another “fundamental” we all pay close attention to. This week, several regional Fed employment readings improved (if they did not cross into positive territory), and while continuing claims did increase, some might be tempted to use the hurricanes as an ongoing excuse. In a dive into the latest employment readings, Bloomberg’s Anna Wong asks if the latest drop in the unemployment rate indicates “that the worst is over for the labor market” only to conclude… “probably not”. (“Hurricanes, flood, wildfires may be driving up emergency personnels.”)
Did we detect a lack of conviction from Anna? Well, it is Halloween. Trick or treat!
https://www.gocomics.com/calvinandhobbes/1986/10/30
While it may be the season of tricks… MI2 is looking forward to offering a new treat!…
You’ve been asking for more actionable insights, real-time updates, and a closer connection with our team—and we’ve been listening.
That’s why we’re excited to announce MacroCapture by MI2 Partners, launching this November. Built specifically based on the feedback from individual investors, it will deliver the macro analysis, trade ideas, alerts and live interaction with Julian Brigden and the MI2 team you’ve been waiting for.
No tricks—just real insights, coming soon!