Omicron’s Effects On Markets: Macro Charts You Must Know #21
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Concerns and uncertainty over Omicron has exacerbated recent trends, pushing macro markets that were recently pricing in lower growth into panic mode. Here’s a summary of what has happened in macro markets so far.
- USD is broadly stronger (look at the Broad Dollar Index)
- Indicates tightening Dollar liquidity across the globe, and is often an indicator of deteriorating global financial and economic conditions
- Interest rates at the long end of yield curves are falling
- The US yield curve has flattened sharply, and is almost back at its lowest level for the year; breakevens have also come down sharply after making highs a few weeks ago
- European yield curves have started to flatten in tandem again
- Commodity prices are also lower
- Oil is sharply lower after hitting yearly highs just a few weeks ago
- Copper and Aluminium remain off their highs
- Higher prices arising from shortages and supply chain issues now have the potential to drive the global economy into short term disinflation, if not outright deflation, instead of merely stagflation (as was the case a few weeks ago)
- However, at this point, markets are not yet pricing in a potential systemic crisis
- But this can change quickly, watch T Bill yields closely!
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