The Macro Report | September 2018

Market wild cards

The global economy is expected to enjoy relatively solid growth even as emerging markets tumble and the trade wars escalate. But rising real interest rates and a strong dollar are beginning to complicate the relationship with risky assets. Economic expansions may allow real rates to rise and risky assets to perform well. But rising rates that prompt global volatility or overeager central banks that raise rates more than warranted may cause risky assets to tumble. A strong U.S. economy has buoyed equity markets and prompted rate increases. Still, to the rest of the world, especially emerging markets, tightening dollar liquidity is an exogenous shock.

President Trump recently hailed the strength in U.S. consumer confidence. Strong growth, rising stock markets, and a plentiful job supply have lifted confidence levels among households. However, we are beginning to see a substantial gap between two confidence measures: The Conference Board and the University of Michigan. The disparity points to weaker-than-normal wage gains and spending despite a strong labor market. Over in the eurozone, inflation is beginning to reflect the rise in global energy and food prices. Core inflation is forecast to increase later this year and in early 2019 as wage growth improves.

Real rates and risky assets in tug-of-war

Real rates and risky assets in tug-of-war

The health of the global economy and swings in risky asset prices are intricately linked, and it is unlikely higher real rates will bode well for risky assets.

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Clues on U.S. spending, confidence

Clues on U.S. spending, confidence

The economy continues to look stable, but the gap between two consumer confidence measures points to weaker wage gains and spending.

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ECB and the inflation game

ECB and the inflation game

Core inflation is forecast to increase over the coming months, and wage growth is picking up pace in Europe, prodding the ECB to keep a closer eye on monetary policy.

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About the macro report

The Macro Report is written by members of Putnam’s Fixed Income team. With backgrounds in applied economics, currency and interest-rate analysis, and sovereign and local bond market dynamics, this group conducts macroeconomic research in support of Putnam’s global fixed-income strategies.

Michael Atkin, Portfolio Manager
Investing since 1988
Sovereign debt, global growth analysis

Albert Chan, CFA, Portfolio Manager
Interest-rate derivatives, government debt, risk analysis

Onsel Emre, PhD, Analyst
Inflation, risk analysis, global growth dynamics

Sterling Horne, Analyst
Politics and economics

Irina Solyanik, CFA, Analyst
Quantitive analysis, growth forecasting

Izzet Yildiz, PhD, Analyst
Labor market analysis, global growth dynamics