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Dec 8, 2025
An unprecedented Fed pass
For all the volatility in the macro environment, disagreement across the FOMC and public criticism of the central bank, the Fed in theory is still very predictable. So, with Fed fund futures discounting 23bps of easing at the December meeting it is highly unlikely that the Fed will not deliver. Looking back to 1994 at all the Fed meetings where rates were left on hold, there are no instances of market discounting such a sizeable move, in either direction. In short not delivering a cut this week ...
Nov 26, 2025
Market Signals and Shifts: An end-of-year assessment
In our January 2025 look-ahead report, we pinpointed several critical fault lines and promising updrafts for financial markets. Among the questions we sought to answer during the year were: Will United States’ exceptionalism continue to dominate market consensus, or are we on the brink of a significant shift away from the US? Where does the US dollar go from here? Will Treasuries get some traction? With less than two months remaining in 2025, we assess key developments on these topics and more, ...
Nov 24, 2025
Will UK Gilts Smile or Frown?
The UK Government is set to release the next Budget on 26 November, the day before the US Thanksgiving holiday. The run-up to the announcement is full of ‘pitch-rolls’ and odd briefings. The OBR forecasts, particularly the productivity downgrade, compelled the Labour government to find ways to create 30bn of fiscal headroom. At the same time as the Labour government is cobbling together what the FT calls is a hotchpotch plan; and there are worries about whether a leadership challenge is in the offing. ...
Nov 12, 2025
US inflation for October
PriceStats closely matched the delayed official CPI release for September, but we will not have an official number for October this week. However, PriceStats tells us that the inflation trend moderated somewhat in October. A 0.16%mom rise (nsa) is close to the average for the month over the past decade and approximates the 2024 reading. After rising consistently since June, this leaves the PriceStats annual inflation rate almost unchanged in October, albeit remaining at a two-year high. This suggests ...
Nov 5, 2025
Looking through the data fog
In a year when policy uncertainty has been a watchword, interest rate markets were always a little too confident in a third consecutive easing in December, especially given the current data fog clouding the outlook. For now, alternative data for October is pointing in a similar direction. As we detail in Not so scary heading into Halloween, the uptrend in PriceStats annual inflation rate has levelled out over the month. The downtrend in labour demand captured by Indeed job postings has continued. ...
Oct 28, 2025
Time to hedge?
One misunderstood element of the Q1 USD sell-off was the idea that this was driven by overseas investors increasing hedge ratios on their USD assets. In fact, our investor sentiment data showed that foreign investor hedge ratios on US assets have barely moved. Why foreign investor not increase hedges on their USD exposure? Simply because it is expensive to do so and USD foreign hedge ratios show a strong relationship with relative rates. This may spell further bad news for the USD. As the Fed ...
Oct 22, 2025
Look at what they do, not what they say
US Banks have kicked off a strong start of 3Q25 earnings season. They exceeded analysts’ profit forecasts with managements lauding pick-up in M&A activity and rising fee income from higher equity valuations. Despite all that, management teams warned about a potential bubble. Fortunately, their own loan departments seemingly missed the memo – lending growth has finally overtaken investments, while loan loss provisions have not increased.
Oct 13, 2025
PriceStats data shows US prices rising through the fall
US inflation remained firm in September, though not alarming. A 0.24 percent increase is notable for September, as it is typically a month of modest price gains. This rise pushed PriceStats’ annual inflation to its highest level this year. Much of the unusual seasonal inflation strength came from household equipment and furniture prices, which include a higher share of imported goods than other sectors. According to PriceStats, the annual inflation rate in this segment has now risen above five percent ...
Sep 30, 2025
Europe’s USD5trn question
US equities make up the majority of international investors’ foreign equity exposure. Furthermore, of the near USD20trn worth of US equities held by foreigners, half are held by European investors according to data from the US Treasury. This means that small moves in European based investors’ hedging of their foreign equity exposures should matter a lot to the USD. In theory a 1% move could increase USD hedging flows by as much as USD50bn. Our hedge ratio indicator (Figure 5) shows that European ...
Sep 30, 2025
RBA Preview: Steady and Gradual
The August CPI report suggests that the Reserve Bank of Australia (RBA) will likely keep rates unchanged at its 30 September policy meeting. Labour market conditions remaining relatively tight and we expect the RBA to continue a measured and incremental approach to monetary policy. Household spending remains robust, and Australia’s terms of trade are supported by rising prices for gold and critical minerals, which help offset softer Chinese demand for iron ore and LNG. Taken together, these factors ...
Sep 26, 2025
What to watch test
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Aug 28, 2025
Exceptions to US exceptionalism
Entering 2025, we pinpointed several critical fault lines and promising updrafts for financial markets. The year has been a rollercoaster, and it's no surprise that both challenges and opportunities have emerged, leaving us with an outlook that's equally optimistic and cautious. The key questions we posed at the start of the year remain as relevant as ever. And just as we did in our mid-April update, we revisit those questions here, leveraging the latest readings of State Street’s investor behavior ...
Aug 26, 2025
US import prices neither shocking nor one-offs
As our regular updates on PriceStats this year have demonstrated, the pass-through of tariffs into consumer prices has, like the tariff implementation itself, been complicated. Alberto Cavallo’s more granular look at a subset of PriceStats data where country of origin is available shows that just as inflation on goods coming from China appeared to fade in August, the price of goods coming from Mexican and Canada has re-accelerated once again. So, while overall pass-through so far has been modest ...
Aug 1, 2025
The Great US Macro Vol Collapse
A measure of US macro growth volatility is constructed for U3 unemployment rate and ISM. It is based on 3m rolling averages and the 3y range of those averages. A Z-score for each is constructed. The result shows a remarkable level of stability. Quite worryingly, you must go back to Q4 2007 to find an example of where the average of these two series was so low. Of course, that was just ahead of the NBER recession that began in Dec-2007. Other examples include late 1999, 1979 and 1970. Recessions ...
Jul 25, 2025
July NFP data fog
There are two months of the year in which the deviation between Nonfarm Payrolls (NFP) seasonally adjusted and the non-seasonally adjusted numbers are quite large. Those are January and July. The chart shows the recent years where the seasonal adjustment has averaged 1,040,000 jobs. If the seasonally adjusted NFP beats or misses, some will want to blame the seasonal adjustment. It is not an easy job and is one of those dark arts from statisticians.
Jul 17, 2025
Powell and Fed tone changes
Fed funds may remain on hold, but the media tone of commentary on the Fed remains dovish. Ironically given speculation on his tenure, the tone of media articles on Chair Powell are on average still more dovish than the Fed as a whole. At key pivot points in September 2021 and again mid-2024, the tone of Powell’s commentary appeared to move before the rest of the committee. But so far in 2025 Powell’s more dovish tone is yet to influence the rest of the committee, who remain more cautious.
Jul 11, 2025
Australia: RBA stays pat on Policy Settings
In a surprise decision to consensus forecasts, the Reserve Bank of Australia (RBA) left the cash rate unchanged at 3.85% against widespread expectations of another 25bps ease. The accompanying statement highlighted the strong labour market and a more balanced view on inflation, but the 6-3 decision stemmed largely from continued uncertainty on the outlook for demand and supply – particularly a pick-up in the former – and the medium-term trend for inflation towards target.
Jul 10, 2025
Risk? What Risk?
The first half of the year was nothing but high drama for financial markets (indeed we are all looking forward to quiet summer days). However, institutional investors have taken this palaver in their stride and kept adding risk to their portfolios. Indeed, their allocation to stocks has now gone above the level at the start of the year.
Jul 8, 2025
2025 Foundations of Investing Seminar Series
It is now our annual custom to share insights on the ever-evolving fundamentals of finance and investing. Please join us for our 5th annual State Street Foundations of Investing Seminar Series, where we feature back-to-basics presentations from our renowned academic partners and the deep expertise of our research team in State Street Markets. Connecting theory to practice, our presenters will cover topics ranging from macro policy and investment strategy design to risk management and beyond. You ...
Jul 3, 2025
FX market liquidity sees no ill effects from geopolitics
In keeping with a more subdued tone to volatility and more buoyant risk conditions, FX market liquidity continues to improve. This chart plots a rolling weekly measure of the size of order books for aggregates of the most liquid G10 and EM currency pairs. Despite significant uncertainty and geopolitical risk, the depth of book in EM is at the strongest levels of the last year, with each individual pair also reading above its median.
Jun 27, 2025
Summer inflation focus heats up
Chair Powell’s comment that the Fed expects tariffs to feed through to inflation in June/July will focus even more market attention on incoming inflation. Having correctly anticipated softer inflation prints in the past two-months, the pressure in import sensitive sectors alongside the spike in gas prices has seen the price level jump in the first twenty-three days of June, especially in the past week. It is still too early to call what this means for core CPI, but the headline inflation trend ...
Jun 20, 2025
The curious absence of asset manager demand for the USD
The forward sales of the USD by asset managers in Q1 were understandable. Investors began 2025 with a significant USD overweight and were reducing risk in the face of uncertainty. In Q2, after sustained USD sales, both domestic and foreign investors are now underweight, but the appetite to sell the USD appears undiminished. Even in the face of rising geopolitical uncertainty and the outperformance of US stocks, we have observed only one day of USD buying in the past six weeks. The appetite to ...
Jun 19, 2025
Test article for state street markets research
Test article for state street markets research
Jun 12, 2025
HIBOR breaks away from SOFR
The Hong Kong interbank rate (HIBOR) should trade close to the US SOFR rate under normal circumstances due to HKD’s peg to the USD. But since the steep appreciation of TWD in May, HIBOR has decoupled from SOFR. The yield differential with the US is already quite substantial and the interest rate arbitrage of buying higher-yielding USD funded by lower-yielding HKD has not been able to close the interest rate gap for more than a month now, perhaps reflecting the very strong desire to sell the dollar ...
Jun 6, 2025
Complacently Crowded or Suddenly Safe?
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Jun 5, 2025
Global Tail Risk Score
The Global Tail Risk score uses the Pythagorean theorem to convert State Street’s Systemic Risk Index and Turbulence Index into a single metric. President Donald Trump’s chaotic rollout of tariffs caused a spike in this metric, which has only partially corrected. Movements tend to be echoed in the annual change of the MSCI World equity index. What is interesting to observe is the current disconnect. The Global Tail Risk score is still an elevated 68% even as the MSCI World y/y% shows a 12% gain. ...
May 30, 2025
Agree to disagree
May’s FOMC minutes emphasized the “unusually elevated uncertainty” surrounding policymakers’ economic outlooks. Such uncertainty is also reflected in voter disagreement as measured by the dispersion in individual Fed members’ media tone, which has been consistently on the rise since the start of the year. Indeed, while volatility in market Fed pricing has ebbed since the more immediate aftermath of April’s tariff announcements, voter disagreement continues to edge higher as the Fed grapples with ...
May 28, 2025
2025 Summer Sessions
It is now our annual custom to take time in the summer months to share insights on the ever-evolving fundamentals of finance and investing. Please join us for our 5th annual State Street Summer Sessions, where we feature back-to-basics presentations from our renowned academic partners and the deep expertise of our research team in State Street Markets. Connecting theory to practice, our presenters will cover topics ranging from macro policy and investment strategy design to risk management and ...
May 23, 2025
US inflation, first third is normal
We are now more than a third of the way through 2025 and so far, the trend in the US price level remains surprisingly normal. More granular data shows the prices of imported goods from China are already up more than 2% since March. But the aggregate price level as of mid-May remains on a fairly average, if a little bumpy, track. With expectations for core inflation in the high threes this could simply reflect the variable and uncertain lags that complicate most economic variables, but at this ...
May 9, 2025
US inflation: A first look
So far so good. As we note here PriceStats shows that US prices did rise in April as tariffs began to be implemented. But the rise was within recent ranges and lower than the same month last year, so the annual inflation rate is unlikely to accelerate. While there are signs of much stronger inflation in import sensitive sectors, as Albert Cavallo will discuss at our upcoming research events (register here), the overall message is that aggregate inflation remains contained for now.
1. Peter L. Bernstein Award for Best Article in an Institutional Investor Journal in 2013; Bernstein-Fabozzi/Jacobs-Levy Award for Outstanding Article in the Journal of Portfolio Management in 2006, 2009, 2011, 2013 (2), 2014, 2015, 2016, 2021; Graham & Dodd Scroll Award for article in the Financial Analysts Journal in 2002 and 2010. Roger F. Murray First Prize for Research Presented at the Q Group Conference in 2012, 2021, 2023. Harry M. Markowitz Award for Best Paper in the Journal of Investment Management in 2022, 2023. Doriot Award for Best Private Equity Research Paper in 2022.