Read Chart, Learn Economic | Yaonology

Read Chart, Learn Economic | Yaonology

 

What happened to the World economy in the past week? Want to know what economics the World has this week? Want to learn World finance but don’t know how to start? Let’s Read and Learn World Economic charts. 

 

Yaonology has helped you sort out the 6 major world economic events that you must know about in the United States even over the World through charts.

  1. India cuts corporate taxes on September 20th.

    The corporate taxes cut from 30% to 22%. There is one more benefit for manufacturing companies. Sitharaman, Minister of Finance and Corporate Affairs, said: “Any manufacturing companies incorporated on or after Oct. 1 would be eligible for a 17 tax rate, with the condition that they start production by March 2023.”

    After India’s corporate rate cut, India’s tax is below the average of Asia countries.

 

After the tax cut announcement, India’s stock market skyrockets on 20th and 23rd September

Source: Reuters, India cuts corporate taxes to boost manufacturing and revive growth, KPMG, India Finance Ministry, Bloomberg, Tax Cut Gives Modi Perfect Pitch to Win American Investments

 

  1. S&P 500 TTM P/E vs Real Fed Funds


    The plot shows the market reaction 9 months after the peak of real rates in the past 30 years economic cycle.

 

Moreover, the plot shows that the negative correlation between S&P 500 TTM P/E ratio and the Real Fed Funds Rate. Therefore, the lower real Fed fund rate will lead to a higher S&P 500 P/E ratio.

Accordingly, investors are getting crazier when the real Fed funds rate is lower.



 

 

It looks like the Fed Funds Rate will continue going down

Sep 2018 – Target Fed Fund Rate in the long run is 3%

Sep 2019 – Target Fed Fund Rate in the long run is 2.5%

However, market investors think the target Fed Fund Rate will be around 1%.

 

 

 

Source: Wall Street Journal, Daily Shot. Stifel. Baloise Asset Management, Bloomberg Finance, Federal Reserve System

 

  1. Germany Manufacturing PMI

    Germany’s Economic might be in trouble! The IHS Markit Germany Manufacturing PMI drop down to 41.4 in September 2019, the sharpest pace of decline since 2009. Furthermore, there are several reasons, uncertainty about the economic outlook in the automotive sector, trade war, and Brexit.

     


 

Germany manufacturing PMI is a leading indicator of Germany’s manufacturing employment. Therefore, it’s not a good sign for Germany’s labor market.

Greenline: Germany, manufacturing PMI
Blackline: Germany manufacturing employment

 

             Source: tradingeconomics.com, Pantheon Macroeconomics

  1. Home Price Data

     

The S&P Case-Shiller 20-City Composite Home Price seeks to measure the value of residential real estate in 20 major US cities.


S&P Case-Siller 20-City Home Price Index shows that home price appreciation continues to slow down.

 

Note: The Case-Shiller Home Price index is developed by Nobel Prize Laureate Robert J. Shiller


 

The house price index is a broad measure of the movement of single-family house prices.

 

In addition, the growth of the home price index is also in the downtrend, but the growth is still around 5% compared with last year.


 

The growth of house prices is much higher than wage growth.

 

Blueline: House Price Index

Redline: Average Hourly Earnings of Employees

 

Source: Federal Reserve Bank of ST. Louis

 

 

  1. Decision Tree for Brexit


    Brexit, it seems never to end. Here’s the Brexit decision tree. 


Which Brexit result you think??
1. Exit EU with a deal
2. General Election
3. No Deal
4. Delay up to March 2020

 



Source: Rathbones

 

  1. Repurchase Agreement(Repo)/World Economic Charts


    Demand for the Fed’s repo financing robust again since 2008. It will probably involve increasing bank reserves(via Treasury securities purchases) and a standby repo facility.

 

The first thing we need to know is why did that happen?
According to The Washington Post, it’s probable that a big swath of new Treasury debt settled into the marketplace, landing on dealer’s balance sheets just as cash was being sucked out by quarterly tax payments companies need to send to the government.

Therefore, in an overnight system repurchase agreement, the Fed lent cash to primary dealers against Treasury securities or other collateral. As a result, it causes the FED balance sheet increasing last week.

 

 

The figure shows the FED balance sheet. The FED balance sheet increase due to QE1, QE2, and QE since 2008. The Fed began quantitative tightening and retiring some debt on the balance sheet since 2018. However, the FED balance sheet increased from last week because of the repurchase agreement.

 

Quantitative Easing: A monetary policy in order to inject liquidity directly into the economy.

 

On the other hand, in the Fed September meeting, the Fed considers introducing a new tool, called a standing overnight repo facility, which would amount to a standing offer to lend a certain amount of cash to repo borrowers every day. 

 

Source: Federal Reserve Board, Federal Reserve Bank of St. Louis, The Washington Post The Repo Market’s a Mess(What’s the Repo Market?)

 

 

Click here if you want to learn more chart and economic news. Keep an eye on Yaonology.com and give you the most immediate economic news.

 

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