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The End of Inflation?30 September 2015
War Room
HiddenLevers War Room
Open Q + A
Macro Coaching
Archived webinars
CE Credit
Idea Generation
Presentation deck
Product UpdatesScenario Updates
Market Update
Inflation Trends: US vs World
Deflation Risk Factors + Impact on Fed
Scenarios: End of Inflation
The End of Inflation?
HiddenLevers
MARKET UPDATE
No Rate Hike = Fed Losing Credibility
Market Update
sources: HiddenLevers, Goldman Sachs, Bloomberg, CNN Money, NY Times, Forbes,
1
Goldman says 20usd Oil – Seriously?
Biotech Bubble Bursting
spring 2008 goose egg
2
3
BRICS Divergence due to Oil Crash4
sources: HiddenLevers 1 2
CURRENCIES
MARKETS
MB
I C
I C
BR
Hello Rate Hike: HiddenLevers quite helpful
Research+
Content+
Functionality
HiddenLevers
INFLATION TRENDS: US VS WORLD
INFLATION TRENDS: USA
sources: Advisor Perspectives, HiddenLevers
PCE personal consumption(Fed’s Inflation Measure)
CPI conventional inflation metricBoth below 2% target.
CPI fell to 0.0% in 2015(includes Food + Energy)
INFLATION TRENDS: USA FALLING INCOMES
sources: FiveThirtyEight
Why do Americans feel poor?
Inflation – NO
Falling Wages - YES
INFLATION TRENDS: EMERGING MARKETS
sources: Trading Economics
China: 2% Inflation. Reverting Recent Fall
India: 4% NowFalling
INFLATION TRENDS: Japan
sources: Trading Economics
Japan QE
Japan’s 0% ReturnsDeflation Posterchild
0
0
INFLATION TRENDS: EUROPE
sources: Trading Economics
0
0
Euro Area: 2000s 2% Stability
Now: 0%
HiddenLevers
DEFLATION RISK FACTORS + IMPACT ON FED
RISK FACTOR 1: Baby Bust + Consumer Shift
source: HiddenLevers, WSJ, Huffington Post, Time Magazine
Largest Generation Aging + Birthrates Slowingmore whites dying than being born
sharing economy
for all
Latino birthrate
decreasing
youth buys experiences
not stuff
RISK FACTOR 2: Robot Takeover
reduces commodities
demand
Technology + Automation render humans jobless
source: HiddenLevers, Forbes, Business Insider, Zero Hedge
more jobs eliminated
than created
professional services now under attack
less jobs = less
consumption
tech only gets cheaper
RISK FACTOR 3: Commodities Perfect Storm
bumper crops last two years
source: HiddenLevers, EIA, DOT, Business Insider,
less China demand for
metals
Crude Oil + Food Prices + Metals Goin’ Down
oil production approaching 1970 peak
oil demand 15%
below peak
secular stagnation
HiddenLevers
SCENARIOS: END OF INFLATION
Scenario Complete – Hello Rate Hike
Scenario Updates due to Fed (in)action
Scenario Updates
Inflation Global Deflation
Fed Delays
Super Tantrum
Fed PopsBubble
Scenario: Global Deflation
GoodFlat CPI +
Growth
NeutralUS Treads
Water
UglyUS Turning
Japanese
CPI
-3S&P
-33%
CPI
0S&P
-9%
CPI
0.2S&P
15%
Global QE coupled with modest growth might enable bull market to continue
Drop in inflation and global growth fears lead to mild bear market (including S&P correction to date)
If deflation grips all first world economies, drop in demand leads to significant equity correction, but bond market rallies strongly
GoodFlat CPI +
Growth
NeutralUS Treads
Water
UglyUS Turning
Japanese
Scenario: InflationIf US economic growth propels inflation, the Fed can start its rate hike schedule and begin normalization
An unexpected burst of inflation could force the Fed to move faster than expected, leading to equity market declines.
A strong inflationary surge could lead to a mild recession, causing a deeper market correction
GoodFed
Target Hit
NeutralRapidly
Rising Prices
UglyStagflation
CPI
4.0S&P
-20%
CPI
3.0S&P
-10%
CPI
2.0S&P
10%
The End of Inflation? – Take Aways
Inflation tanks are empty across the first world – 0.0
Primary causes of deflation are tech + demographic shift
Global QE has not beat backdeflationary forces
Technology has broken normal commodities cycle
Client Screen
Product Update
Print Blank Risk
Questionnaire
Loss Tolerance Capture
INTEGRATIONRiskalyze