| | | | | | | Presented By Northern Trust | | | | Axios Markets | | By Dion Rabouin ·Nov 09, 2020 | | Good morning! Was this email forwarded to you? Sign up here. (Today's Smart Brevity count: 1,003 words, 4 minutes.) 🎙 "Be kinder to each other. I see America in a crisis situation right now in so many ways. And I want people to open up their hearts, and open up their hands, and open up their wallets to help each other. Because if ever there was a time when we needed to do that, that time is now." — See who said it and why it matters at the bottom. | | | | | | 1 big thing: Another central bank easing cycle begins |  | | | Illustration: Aïda Amer/Axios | | | | Central banks already have started priming their collective money printers and in the coming months are poised to crank them up to 11, buying up more bonds and delivering more liquidity to markets. Why it matters: The recent rally in equities now has more backing from central banks. - This could be especially beneficial in the U.S. where companies have thrived on low rates and easy money while trimming their bottom lines through layoffs.
- And while the possibility of lockdown measures returning could again wreak havoc on real and local economies around the globe, as COVID-19 cases increase and hospital beds fill up, stocks could race to new highs.
What's happening: On Thursday, the Bank of England said it would buy an additional $197 billion of U.K. government debt, following the Reserve Bank of Australia's announcement that it would engage in QE for the first time, buying $73 billion in government bonds. Back home: Fed chair Jerome Powell made clear at November's FOMC press conference last week that the Fed is prepared to join the party. - "We're strongly committed to using these powerful tools that we have to support the economy during this difficult time for as long as needed and no one should have any doubt about that," Powell said.
By the numbers: As of October, the Fed, ECB, Bank of Japan and People's Bank of China held $26.8 trillion on their collective balance sheets, having increased their bond-buying programs by 38.5% over last year, per Yardeni Research. - The Fed, ECB and BOJ have increased their collective programs by 50%.
Between the lines: September marked the 20th straight month of interest rate cuts for central banks in developing countries. - At least 18 emerging market central banks have set up and carried out asset-purchase programs of some kind, according to the IMF, with many delivering outright quantitative easing. (The only real difference being that some central banks are buying their country's government bonds even before cutting interest rates to 0%.)
Yes, but: Some argue, monetary policy is reaching the limits of its effectiveness. - "Markets aren't facing liquidity issues," WSJ's Jon Sindreu writes. "When a car isn't short on fuel, adding more gas to the tank doesn't make it run faster."
- "Buying more bonds is mostly meaningless because it doesn't tell the market anything it doesn't know."
|     | | | | | | 2. Catch up quick | | Pfizer's potential coronavirus vaccine prevented more than 90% of infections in the first 94 subjects during a study of tens of thousands of volunteers. The company is seeking to distribute the vaccine before the end of this month. (Bloomberg) Joe Biden is expected to tap Gary Gensler to advise on plans for Wall Street oversight. Gensler spearheaded the overhaul of derivatives markets through the 2010 Dodd-Frank Act and the prosecution of big investment banks for manipulating LIBOR. (WSJ) Biden also is expected to name a 12-member task force to combat and contain the spread of the coronavirus today. (Axios) The frenzy in betting markets on election night was largely the result of uninformed gamblers who misunderstood incoming vote totals. (Bloomberg) | | | | | | | | 3. The jobs recovery remains far from complete |  Data: U.S. Bureau of Labor Statistics; Chart: Axios Visuals The U.S. economy added more jobs than expected last month — 638,000 — marking the sixth month of consecutive declines in the unemployment rate, but there are still 10 million fewer jobs filled than there were in February. What they're saying: "The combination of elevated unemployment and part-time employment and low participation all point to significant slack in the labor market," economists at Jefferies write in a note to clients. - Additionally, they note, "permanent layoffs now exceed temporary layoffs for the first time since the start of the pandemic, which points to slower job growth ahead."
- The Fed noted in its policy statement Thursday, "Economic activity and employment have continued to recover but remain well below their levels at the beginning of the year."
Keep it 💯: "Payroll growth is nothing like strong enough to recover the lost ground, despite the October beat," Pantheon Macroeconomics chief economist Ian Shepherdson writes. - "And the omens for November are grim, as rampaging Covid scares people into staying home."
- "The chance of a lame-duck stimulus bill is rising, but it won't be big enough; more will be needed in Q1."
| | | | | | | | A message from Northern Trust | | The wealth planning trifecta | | |  | | | | The trifecta of low interest rates, high exemption amounts and uncertain tax policy future make it a good time to revisit your wealth plan to prepare for an uncertain future. Learn how to take advantage of this window of opportunity from Northern Trust's The Wealth Planning Trifecta report. | | | | | | 4. Emerging market assets are back in the spotlight | | The expected gridlock in Washington and more monetary easing across the globe combined with a less antagonistic approach to countries like Mexico and China from President-elect Biden is getting asset managers excited about emerging markets again. State of play: Fund managers at JPMorgan Asset Management say EM assets are in a "sweet spot" in the months ahead, especially bonds denominated in local currency. - "With the dollar depreciating in the coming quarters, EM local is one of our top trades," Diana Amoa, who specializes in EM debt, told Bloomberg.
- Limited fiscal spending suggests interest rates will remain lower for longer and an extended period of dollar weakness will boost bond prices and lure more investors as the desperate hunt for yield continues, she added.
Analysts are also bullish on equities. - "Emerging market (EM) assets should perform on improved trade sentiment, we believe, especially in Asia ex-Japan," strategists at the BlackRock Investment Institute said in a note to clients.
- "Many Asian countries have contained the virus and are ahead in the economic restart."
Yes, but: Both JPMorgan and BlackRock strategists agree that the development of the virus and possible vaccine distribution will be deciding factors for the trade. | | | | | | | | 5. Turkish finance minister resigns on Instagram | | A screenshot of Turkish finance and treasury minister's Instagram page. Turkey's minister of finance and treasury, who is also President Erdoğan's son-in-law, announced in an Instagram post that he is stepping down from both roles to spend more time with his family. Why it matters: Read that sentence again. The big picture: Erdoğan also fired his handpicked central bank chief over the weekend amid a currency crisis that has seen inflation skyrocket and the value of the lira sink by 30% against the dollar so far this year. - The lira strengthened in response to news about the Cabinet reshuffling.
Background: Neither former Finance and Treasury Minister Berat Albayrak nor former central bank Governor Murat Uysal ever held serious credibility in the eyes of U.S. asset managers. - Albayrak presided over a closed-door meeting with investors at the 2019 IMF-World Bank meetings that multiple sources who attended told me was the worst they've ever had with a high-ranking government official. One even described the meeting as "an absolute shit show."
- Uysal was seen as an extension of Erdoğan, and his replacement, former Finance Minister Naci Agbal, has no experience in monetary policy but is at least "regarded as a market-friendly technocrat," Brown Brothers Harriman global head of currency strategy Win Thin said in a note to clients.
Go deeper: Turkish lira's crash shows the value of central bank confidence | | | | | | | | A message from Northern Trust | | How to relocate with taxes in mind | | |  | | | | Relocation is top-of-mind for many people this year because of potential tax savings and remote working becoming the norm. But before relocating, consider the broader impact of the move and understand the requirements to establish residency. The tax factors to consider. | | | | Thanks for reading! Quote: "Be kinder to each other. I see America in a crisis situation right now in so many ways. And I want people to open up their hearts, and open up their hands, and open up their wallets to help each other. Because if ever there was a time when we needed to do that, that time is now." Why it matters: On Nov. 8, the great Alex Trebek, the brilliant mind who hosted "Jeopardy!" for 36 years, died. He was my absolute favorite TV show host and one of the all-time greats. He finished the quote above by saying this... - "We can get through the pandemic if we follow the suggestions, the rules, laid out by the CDC, by the doctors, the epidemiologists, by the scientific people. If we follow what they want us to do, and if we are assiduous in doing that, we can get a grip on this pandemic. And if we get a grip on the pandemic, then the economy will follow right behind."
- "But, hey, this is a time where we have to come together. ... These are the United States of America, and yet we're so far apart in so many ways. And that, that upsets me. Let's come together. Let's be united. We've got nothing to lose."
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