Attack the Week
Sunday Thoughts
“Predictions are tough. Especially about the future.”
- Niels Bohr
by Macro D
If there is one thing that can bring a reality check to anyone who gets caught up in the allure of the future, it's the 'Forecast Lady'. Her predictions, often touted as gospel, can be as unreliable as a broken compass.
Nowadays, you see all the colours around: they told you that red would come, and instead, you see black appear. They tell you that the number ten will come out, and here, twilight appears with the number five.
There is something for all tastes, from London to Wall Street: raise your antennas.
Let's start with the latest fireworks that lit up my days.
Is it a signal or just noise?
After the GDP data, the subsidies also did not want to be outdone and pulled their heads out of the sand with an unexpected hairstyle. You were expecting a bob, and here you are, surprised by a ponytail.
But we know that beautiful surprises love to knock on the door of your nest accompanied by old friends.
I almost believed it: I was just reading about the next sprint in oil futures contracts when I thought, "Do you want to see that this time, that rowdy contract guy shoots towards the sky like a rocket?".
After all, if you want to look for reasons in his favour, you certainly don't risk being forced to dig until late at night. One reason is enough and goes beyond all the others — the geopolitical situation. We have seen the stalemate in negotiations for a truce in Gaza, Israel beginning the evacuation of civilians from Rafah, and Putin ordering exercises with tactical nuclear weapons to intimidate the West.
The table was beautifully set for a feast at high temperatures, and instead, we got the following.
There was no explosion but a low that reached $77. I could do nothing but retreat into my own thoughts.
But since stubbornness is among my many defects, I couldn't resist and continued to hurt myself. As?.
I peeked into a house on a hill: the famous Fed Dot plot.
The FOMC members' forecasts live here, and they are not just any forecast. These are the forecasts par excellence, predicting where interest rates will go.
Well, what do the walls of this house tell us? They tell us that these predictions are always wrong.
The esteemed members of the Fed committee, every time they wear the robe of the Delphic oracle, they get it wrong. Still, since their forecasts are a driving force for those who come after (i.e. the market participants), it follows that the market participants' forecasts are also inevitably incorrect.
Having no intention of getting entangled with the mysterious prerogatives of the future, all I have to do now is take a step back. I'm content to look at the past and settle into the present.
The future?
There's time for that.
Dot Plots: 3 cuts in 2024. The long run estimate stays at 2.5%. The Fed is acknowledging slower growth and low inflation.
Let’s now look at what’s ahead in the coming week. It’s CPI week, which will be the main point of focus, but there are other things on our radar, too. As always, let’s have a look at some charts that should be in our thoughts as we go to work.
Let’s go!