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Welcome back to our weekly economic report!

Welcome back to our weekly economic report. What is the trend of the Fed Rate? Are there any assets over-valued? Everyone knows the trade war between the U.S. and China. Will it be resolved? 

 

What happened in the past week? Yaonology summarized it for you! Check us out to catch up with this changeable market!

  1. Fed Rate Cut again this month?


    In the last Fed official report, the Fed may pause cutting a rate for a while. However, the market investors don’t think about that. As the following chart, the probability of a rate cut this month is about 90%. (We mentioned the Fed Fund Rate on the Economic Charts Sep. 27th, 2019) Also, the Fed target rate looks following the investor’s prediction.

 Source: CME Group

  1. When will the US-China trade war end?


    According to Bank of America Merrill Lynch, there are around 40% of fund managers, who think the US-China trade war is the new normal and won’t be resolved.


    Source: Bank of America Merrill Lynch Global Fund Manager Survey. WSJ The Daily Shot.

  2. Which assets are overvalued?


    According to Bank of America Merrill Lynch report, there are over 45% of fund managers, who think that European government bonds are overvalued. Compared to the European assets, the US assets (US growth stocks, US BBB IG bonds, and US commercial real estate) are at the natural level.


Source: Bank of America Merrill Lynch Global Fund Manager Survey, WSJ Daily Shot.

 

  1. Surging Pork Prices impact the China inflation-adjusted yield.


    Due to African swine fever, China has been sulled 200 million pigs this year. It results in surging pork prices. The increasing pork price drives China’s consumer price index to breach 3% gains in September. The driving consumer price index impacts China’s inflation-adjusted yield going down around only 0.2%. China’s inflation-adjusted yield may turn to negative again since 2011.



    Source: Bloomberg, Suring Pork Prices May Mean Negative Real Yields in China.

  2. House Price

 

The Median Sales Price for New Houses Sold decreased to the lowest points since 2017.


However, the MBA purchase index increased in recent months. The MBA purchase index is the 3 months leading indicator for new home sales. The new home sales are not too pessimistic.

MBA Purchase Index: The MBA Purchase Index is The Mortgage Bankers Association’s weekly measurement of nationwide home loan applications based on a sample of about 75 percent of U.S. mortgage activity.


 

Source: Federal Reserve Bank of ST. Louis, Pantheon Macroeconomics, WSJ Daily Shot.

 

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