Ottobre rosso: l’analisi di Pimco
A cura Joachim Fels Managing Director e consulente economico globale di PIMCO
Fels sottolinea come, arrivati alla fine di ottobre, tutti i risultati dell’anno sembrano evaporati, disegnando così un quadro che l’esperto di PIMCO definisce “Ottobre Rosso”. Ottobre è solitamente un mese caratterizzato da una forte volatilità per quanto riguarda le azioni mentre i mercati sono inclini a mode e a “comportamenti da branco”. Secondo Fels, dunque, in questa fase del ciclo economico è normale riscontrare questo tipo di volatilità.
Secondo l’esperto di PIMCO, l’economia globale è entrata in una delle ultime fasi del ciclo: la crescita rallenta, l’inflazione aumenta, i tassi di interesse aumentano e i rendimenti delle attività diventano più volatili.
Tuttavia, Fels sottolinea che le ultime fasi del ciclo non coincidono necessariamente con la fase finale.
Per questo è probabile che l’economia si trovi ora in uno step relativamente iniziale delle ultime fasi del ciclo.
L’esperto identifica, a supporto di tale affermazione, i seguenti motivi:
• i modelli di PIMCO mostrano la probabilità di una recessione nei prossimi 12 mesi intorno al 20-25%
• il miglior indicatore di recessione – lo spread tra i tassi brevi e quelli a lungo termine degli Stati Uniti – è ancora lontano dall’essere negativo
• il tasso dei fondi della Fed molto probabilmente non supererà il tasso neutrale, il che implicherebbe una politica restrittiva
• non vi sono evidenti squilibri interni nell’economia degli Stati Uniti
• la politica fiscale degli Stati Uniti continuerà a favorire l’economia per almeno un altro anno.
L’esperto di PIMCO infine analizza le parole recentemente utilizzate da Richard Clarida, il nuovo vicepresidente della FED: “Se i dati saranno come mi aspetto, credo che alcuni ulteriori aggiustamenti graduali nel tasso dei fondi federali saranno appropriati”.
Confrontando tale affermazione con l’ultima dichiarazione FOMC, che afferma “Il comitato si aspetta ulteriori aumenti graduali nella fascia obiettivo” emergono alcune differenze.
In particolare, l’utilizzo della parola “alcuni” e l’uso di “aggiustamenti” piuttosto che “aumenti” suggeriscono entrambi che il nuovo vicepresidente sembra preferire un approccio più cauto rispetto al FOMC.
* Joachim Fels, PIMCO Global Economic Advisor
What a difference three weeks make. When I embarked on my trip to Asia and Australia in early October, the S&P 500 was up almost 10% year to date. Now that I’m back, all of this year’s gains, plus some more, have evaporated. It’s almost as if investors fully endorsed the Indonesian president’s verdict at the IMF meetings in Bali that I highlighted two Sundays ago: ‘Winter is coming’.
Speculating on what exactly caused this ‘Red October’ is futile. Markets are prone to fashions, fads and herd behavior and thus often lead a life of their own. Also, October has traditionally been the most volatile month for stocks. That said, rising real interest rates in the run-up to the sell-off, more signs that output and earnings growth have peaked, and indications that trade tensions between the U.S. and China are more likely to intensify than ease in the next few months certainly didn’t help investor sentiment. And Jay Powell now probably regrets his off-the-cuff remark in a interview on October 3rd that the Fed funds rate is “a long way from neutral”, which markets interpreted as a hawkish signal.
Forecasting equity markets is neither my job nor my forte, so I will also refrain from speculating where we go from here. However, I stand by what I told Bloomberg in Hong Kong earlier this week: I do not believe this is already the start of the next big bear market; rather, this kind of volatility is quite normal at this stage of the cycle. I also mentioned that this could prove to be a healthy correction that might even help to extend the current expansion. Let me explain.
As we laid out in our Growing But Slowing Cyclical Outlook last month, we see clear signs that the global economy has entered the late stage of the business, where growth slows, inflation picks up, interest rates rise and asset returns become more volatile and dispersed. Recent developments, including the equity market sell-off, fit the late-cycle script.
However, we also pointed out that late cycle phases can last for quite some time before they end – late cycle is not the same as end-cycle. As I see it, we are probably still in a relatively early stage of the late cycle phase, for several reasons.
- First, our models still show the probability of a recession occurring in the next 12 months hovering at around 20-25%.
- Second, the single best recession predictor – the spread between U.S. short rates and long rates – is still far from becoming negative.
- Third, the Fed funds rate may not be “a long way from neutral”, but is very likely not above the (unobserved) neutral rate, which would imply a restrictive policy stance. Rather, policy remains accommodative.
- Fourth, there are no obvious domestic imbalances in the U.S. economy that need to be purged.
- Fifth, U.S. fiscal policy will continue to be a tailwind for the economy for at least another year.
If the above is right and the economic expansion thus still has room to run, and given that equities usually don’t fall into a bear market until we are close to or in recession, it is unlikely that we’re about to enter a big bear market in equities already now.
Next, what about my second claim that this market correction should be viewed as healthy and might even prolong the cycle?
This is where the Fed’s reaction comes in to play. If the rout in equities continues for a while, monetary policy makers may have second thoughts about their current baseline plan to raise rates four more times between now and the end of next year and twice more thereafter. Such a reconsideration and softening would reduce or postpone the risk of monetary overkill and keep the economy in the late cycle phase for longer.
It is probably too early to expect the Fed to blink already now, but the chances are rising that it will if equities continue to sell off. In this regard, I found the language tweaks used by our former colleague Richard Clarida, the Fed’s new Vice Chair and freshly appointed head of the FOMC’s sub-committee on communication, in his superbly crafted speech this past Thursday notable (bolding is mine):
“If the data come in as I expect, I believe that some further gradual adjustment in the federal funds rate will be appropriate.”
Contrast this with the wording in the latest FOMC statement, which reads:
“The committee expects that further gradual increases in the target range…”
The qualifier “some” and the use of “adjustment” rather than “increases” both suggest that the new Vice Chair seems to favor a somewhat more cautious approach than the current FOMC consensus. While it is early days, the next few months will show whether or not his first speech foreshadowed a slightly dovish shift in the FOMC’s collective view on the future rate path. If so, this could become a trigger for a recovery of risk assets.
So much for today. Before I forget, take a look at Janet Yellen’s ‘Lunch with the FT’ in the Weekend Financial Times where she finds clear words for the recent verbal attacks by the U.S. President on the Fed. Along with Rich Clarida’s programmatic first speech, this is required reading for anyone interested in monetary policy.