After a seminar dedicated to "Building an Economy for Prosperity and Equality", which sounded a bit paradoxical given the increasingly heated tones of the American electoral campaign, Radcliff Day at Harvard University included a lunch which included some reflections by Ben Bernanke, followed by a conversation between Gregory Mankiw, a well-known economist who teaches at Harvard University and blogger and former adviser to George W. Bush, and Janet Yellen, President of the Federal Reserve.
Unexpectedly, (and ahead of a week full of US economic data which will be followed by her speech on June 6 in Philadelphia before the Fed meeting on June 14), Yellen took advantage of the 15 minutes available in the final phase of "Questions and Answers” (Q&A) to send a message in which he clarified that there will be an increase in the coming months, therefore before December, and that he will move cautiously and gradually.
All attention now turns to July with a US dollar holding strong and the Chinese on the barricades ready to defend their international reserves.
With the S&P surprisingly close to 2100bps, we are preparing for the outcome of the Brexit referendum, scheduled for June 23rd, and for this possible rate hike with the short-term part of Treasuries under pressure.
An upside scenario in July and then another in December would favor the maintenance of risk positions on equities, with the dollar and oil at their highest. And with Japan ready for extra maneuvers in terms of economic stimulus, the Nikkei is also expected to reach new highs.
The announcement came on Friday evening with an additional budget expected between 5 and 10 trillion yen, i.e. up to over 90 billion US dollars. The market has reacted quite well even if it was expecting something more.
So get ready for an exciting week with new interesting gold lows and macro data taking center stage. Obviously there is a behind-the-scenes discussion between those who see the speech as an important test for the US currency and gold and those who are quick to remind that Yellen is under a lot of pressure because in the event of a Trump victory it will be very difficult to future coexistence. Certainly real rates have jumped to the levels of the previous March speech measured on 5-year government bonds.
At the end of the event Yellen was celebrated with the Radcliff Medal, an honor which is intended to reward "a life and a profession dedicated to making a significant social impact", reads the dedication of the historic medal and this message was further reiterated by his predecessor Ben Bernanke during the evening and by his mentor James Tobin… that of the Tobin Tax, to understand…. And not in the “Italian” version.
Get ready for this scorching summer with a new chart-topping sound called TropicalHouseMusic and meeting in front of the World Affairs Council in Philadelphia, before the blackout period which is usually the week before the Fed. retail, inflation, unemployment benefits, home sales, industrial production and the Philly Fed Index. The new global locomotive is stars and stripes and Yellen rightly does not want to repeat the mistakes of Frau Merkel, therefore full speed ahead but ready to pull the handbrake without excesses.
