Here are a couple of things which recently hit my inbox and which have almost NOTHING (or everything) to do with each other but which might be of some interest.
First, from Zentner & Co (MS),
Capex Plans Index: Some Loss of Momentum
Our composite Capex Plans Index suggests capex remains solid into 2022 – remaining above the long-term average. Supply side issues continue to weigh on the manufacturing sector, pointing to some loss of momentum ahead.
Digging a bit deeper into THE REPORT (if permissioned), you’ll note 3mMA off a touch AND the decline in CapX plans led by Texas, KC and Philly…
The note ends with reminder
… Business investment remains an important engine powering the global capex cycle. In the US, capex in tech and equipment has been particularly strong. The level of investment has already returned to pre-Covid peaks, albeit with mixed dynamics across details. Overall, we see private capex growing 7.9% 4Q/4Q in 2021 (7.7%Y), 5.9% in 2022 (5.9%Y), and 5.3% in 2023 (5.6%Y), contributing 1.0pp, 0.8pp, and 0.7pp to 4Q/4Q real GDP growth in those years, respectively. See 2022 US Economics Outlook: The Great Inventory Build (15 Nov 2021)
Emphasis MINE.
IF we’ve returned TO PRE-COVID, then, begs the question as to WHAT IS NEXT. How much CapEX’ing left in the tank? Businesses and their leaders do NOT like uncertainty (fiscal spending, tax code, monetary) and CapEX plans will be watched closely. Not just by you and I but also by those with a seat ‘round the FOMC table.
Completely separate and different, the roster of the FOMC is a work in progress and I saw a brief update from EconODay on the topic, which may/may not be of interest.
I’m certain ALL of those with a seat at the table (above) will be watching how CapEX plans evolve in the months and quarters ahead. EconODay FOMC brief (and conclusion)
… There are a number of names being floated for the empty seats on the board including former Governor Sarah Bloom Raskin, Atlanta Fed President Raphael Bostic, and former CFP Director Richard Cordray. President Biden will be under pressure to pay attention to inclusion and diversity in naming his picks to the board. Given the sometimes lengthy and all too often contentious process of confirmation, it is hoped that the nominations will be made soon. The White House will have to renominate Powell and Brainard to the Chair and Vice Chair jobs again when the new Congress is sworn in. It is possible that at least one or two nominations for new governors will be done at the same time. Look for candidates that thread the needle of acceptability for both Republicans and Democrats. Choices are likely to be noncontroversial and as apolitical as possible to avoid a drawn out and ugly confirmation process.
I would suppose IF there was a clear mandate in this government with no other controversial policies and things going on, anyone could be put forth and pass. This is NOT the case as we turn the page and put 2021 behind us and stare down mid-term elections, though. Even Fed seats will be scrutinized.
What remains to be seen is how HAWKISH develops and for which markets one is most passionate about.
Since my entire life has had been spent in the day to day fight of the RATES space, I can’t help but think HAWKISH means further flattening of the yield curve. Over the years, I’ve always preferred the 5s30s curve
Most of the free world refers TO the 2s10s curve
… And many/most ALSO refer To 3mo10yr (financial curve) to prove their recession’ista predictor extraordinaire credentials.
I’ll spare you that one — head TO Koyfin on your own, if you’d like. I’m still feeling my way around life AFTER a Bloomberg.
Recall when, for example, the Fed prefaced this years Jackson Hole pivot back in JUNE, yields, well, took HAWKISH to mean BULLISH. 2s10s was closer TO 150bps!
To that logic, then, a somewhat less hawkish turn than is currently perceived would be a somewhat more BEARISH and steepening signal?
I’ll continue to attempt to play along at home here and can’t help but think that at the very least, the speculators are INCREASING 10yr short base (not yet extreme) and are indicating what THEY believe to be the path of least resistance.
This one is another one of those ‘cliff hangers’ which will be continued well on into 2022, for sure.
