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Blokland’s daily sketch

Blokland’s daily sketch

08-07-2020

The disconnect

  • Jeroen Blokland
    Jeroen
    Blokland
    Portfolio Manager

US economic surprises keep hitting record after record as shown in the chart by Yardeni Research. As mentioned before, flow is currently more important for markets than stock. As long as we keep heading in the right direction, markets tend to move higher. What is especially interesting about this chart, however, is the massive disconnect between the Citi US Economic Surprise Index and the US Treasury yield. Historically, these two have been significantly positively correlated. But massive Fed bond buying has broken that relationship. Bond yields have disconnected. Hence, we have to find other indicators that tell us if economic recovery is on the right track.

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As a senior portfolio manager I use charts to illustrate financial issues every day. I tweet my favorites as @jsblokland and was named 'one of the 50 most important people for investors to follow in 2018' by MarketWatch.
Previous editions of the daily sketch can be found on my personal financial markets blog. All graphics provided are collected from Bloomberg data and public websites. They do not always reflect my personal opinion and may also not necessarily reflect the opinion of Robeco. Please cite all references or quote the original source if replicating content.

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