Perhaps because it is midsummer, liquidity is light, and the market narrative often becomes a little more blurred, but we were struck by three somewhat incongruous headlines in the FT this week, all side-by-side: “Oil slides as Delta worries dent outlook for Asia demand”; “Aluminium prices melt up on booming recovery in global economy”; and ”Reflation trade losses pile up for hedge funds in July.” The question is, which is it? Is the economy now rapidly accelerating or is growth being curtailed once again by the Delta variant? It seems most hedge fund managers are struggling with the very same questions. The bond market has been similarly indecisive, as 10-year yields increased from 1.30% to 1.34%. While the move is slightly higher, (real) yields are still very far below the level that might be considered normal relative to current expected future GDP growth—a divergence that may not last much longer.
In this Economics Weekly we look at what the recent data has been telling us about growth in the economy through the prism of the recent employment data.
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Richard de Chazal, CFA is a London-based macroeconomist covering the U.S. economy and financial markets.