Consumers Revolt Over High Prices

Beige Book clashes with government data, signaling weakness in three-quarters of the economy

Highlights

• Consumers push back on prices as “excess savings” run out

• A slower pace of core inflation buys the BoJ more time

• Euphoric sentiment on U.S. equities continues to be extreme

• “Excess supply” in Canada is bullish for bonds and bond proxies

Key Takeaways

Political Uncertainty in Japan Ahead of Lower House Election

• It’s a mixed bag to end the week — the jitters in Japan have intensified ahead of Sunday’s lower house election, where the ruling coalition is at risk of losing its majority.

Treasury Bonds Hold Gains Amid Market Divergence

• Bonds, for the most part, have retained their recent, if tentative, bid — the Treasury market is as oversold as the S&P 500 is overbought.

Diverging Fiscal Policies Between U.S. and Europe

• It’s very tough to be bearish on the greenback after getting through Europe GDP Likely to Fall Further Behind US in today’s FT. Not to mention the divergence in fiscal policy between budget-belt tightening in France and the U.K. and the profligacy that has come to characterize government policy in the U.S.