Aunque las bolsas europeas se
quedaron muy baratas a final de año…
Here are four charts that look at key
aspects of the US and Eurozone economies: swap spreads, industrial production,
equity prices, and exchange rates. By now everyone knows that the Eurozone has
its problems, especially with the UK's bumbling attempt to exit the Eurozone
trade agreement, France's violent protests, Germany's struggle to assimilate
millions of muslim immigrants, and Italy's refusal to address its fiscal
deficit. But if you think things are bad in the US, you've been reading too
much fake news.
Chart #1 compares 2-yr swap spreads—my all-time
favorite financial indicator—in the US and Eurozone. Here we see that swap
spreads have been extremely well-behaved in the US, trading within a normal
range of 10-30 bps for most of the past 5 years. This is a clear sign that the
financial fundamentals of the US economy are sound: systemic risk is low and
liquidity is abundant. The Fed has not made any move that would disturb this.
The Eurozone, in contrast, has been struggling with above-average systemic risk
and liquidity shortages for the better part of the past 3 years, even as many
Eurozone bond yields trade in negative territory; low interest rates are not
necessarily stimulative. Eurozone yields are low because growth and opportunity
are in very scarce supply.
Note in particular how Eurozone swap
spreads began to surge in the first half of 2011, some 3-6 months before a
recession hit, and how they began to decline well in advance of the end of the
Eurozone recession. This is yet more proof that swap spreads can be excellent
leading indicators of economic and financial market health. I have more
background on swap spreads here, and numerous charts on swap spreads over
the years here.
Chart #2 compares industrial production in
the Eurozone and the US. Here we see how Eurozone industrial production
declined throughout its 2011-2013 recession, whereas US industrial production
kept rising and has now moved well ahead of the Eurozone. The recent decline in
Eurozone industrial production hints strongly at a recession, but the
Eurozone's relatively stable and only moderately elevated level of swap spreads
argues against a Eurozone recession.
Chart #3 compares equity market
performance in the US and Eurozone. Note how both markets suffered a setback in
the run-up to the Eurozone's 2011-2013 recession, then proceeded to rally
throughout the course of the recession. Equity markets can indeed be leading
indicators of economic troubles, but not always. In any event, the industrial
side of the US economy has zoomed far ahead of its Eurozone counterpart over
the past decade. The US is, by this measure, the most dynamic of the advanced
economies on the planet.
Chart #4 compares the value of the
Euro/dollar exchange rate to my calculation of the Purchasing Power Parity of
the Euro. (The PPP value of one currency versus another is driven by changes in
relative inflation, and in theory it is the rate which would make prices in
both economies roughly equal. In this case, since Eurozone inflation has been
lower than US inflation since 1995, the PPP value of the Euro has been slowly
rising since 1995.) Over the past decade, as Eurozone industrial production has
lagged US industrial production (and by inference the US economy has
outperformed), the nominal value of the Euro has been falling, from a high of
1.60 to now 1.13. This supports my view that the current strength of the dollar
is largely driven not by tight money or higher interest rates, but by the fact
that the US economy is simply a much more attractive place for capital.
Abrazos,
PD1: Cuántas cosas oímos en
Misa que creemos no van con nosotros. Cuando habla Jesús a los fariseos, NUNCA
nos identificamos con ellos… Y la realidad es bien distinta. Quizás nosotros,
“católicos practicantes”, habiendo disfrutado muchas veces de la misericordia
de Dios en sus sacramentos, estamos tentados a pensar que, por eso que hacemos,
Dios nos mira bien. Corremos el peligro de convertirnos inconscientemente en el
fariseo que se cree superior. Pensar que somos mejores, por tener prácticas
religiosas, es la gran mentira de estos días.
Aunque no lo digamos en voz
alta, quizás pensemos que estamos libres de culpa ante Dios. Algunos síntomas
de que este orgullo farisaico echa raíces en nosotros son: la impaciencia ante
los defectos de los demás, o pensar que las advertencias nunca van para
nosotros.
En el evangelio del otro día,
los fariseos le pedían al Señor que hiciera un signo delante de ellos… Hoy y
ahora, la gente para convertirse sigue pidiendo lo mismo, tocar y ver, si no,
no se puede creer.
