Like Clockwork, More Easing

From South Korea to Sweden, Poland to Pakistan, Albania to Australia: everyone is easing. By my count, there have now been at least 25 Central Bank easing announcements in 2015. This amounts to roughly one announcement every other trading day this year.


Like clockwork, every time we have seen a weak data point in the U.S. (which has been often in 2015), another central bank comes out with a rate cut and global markets rejoice. The U.S. is passing the baton, we are told, and this endless global easing is a rising tide that lifts all economies.

Meanwhile, the Bloomberg Economic Surprise Index in the U.S. is now showing its most persistent string of weakness in data (relative to expectations) since March 2009. Given this backdrop, it is hard to argue that a weaker Euro and Yen is helping the U.S. economy. It is also getting harder to defend the decoupling thesis.


As I wrote recently, though, no one seems to care about this weakness because in the new paradigm of unending central bank easing, macro fundamentals do not matter; multiples simply grow to the sky. With the exception of Brazil who is battling inflation and a collapsing currency, every major central bank remains in easy money mode in an effort to lift asset prices. Now six years into the global expansion, these central banks are still behaving as if we are in the throws of the second Great Depression.


Which of course brings us to tomorrow’s FOMC announcement, and the growing expectation that the Fed will finally (after 6 years and 2 months) remove the word “patient,” signaling a potential reversal in policy  come June or July. The Futures market is currently pricing in a rate hike six months away (September), which is shortest expectation since April 2010.


Should the Fed move forward with its change in policy, we should anticipate the market dynamic to change as well. Investors are more likely to care about macro and earnings weakness and may not be willing to pay a forever higher multiple on earnings. In such an environment, volatility should increase and risk management will likely be a more important determinant of returns.

This writing is for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation regarding any securities transaction, or as an offer to provide advisory or other services by Pension Partners, LLC in any jurisdiction in which such offer, solicitation, purchase or sale would be unlawful under the securities laws of such jurisdiction. The information contained in this writing should not be construed as financial or investment advice on any subject matter. Pension Partners, LLC expressly disclaims all liability in respect to actions taken based on any or all of the information on this writing.


Edward M. Dempsey Pension Partners New York






Charlie Bilello is the Director of Research at Pension Partners, LLC, an investment advisor that manages mutual funds and separate accounts.  He is the co-author of two award-winning research papers in 2014 on Intermarket Analysis and investing. Mr. Bilello is responsible for strategy development, investment research and communicating the firm’s investment themes and portfolio positioning to clients. Prior to joining Pension Partners, he was the Managing Member of Momentum Global Advisors, an institutional investment research firm. Previously, Mr. Bilello held positions as an Equity and Hedge Fund Analyst at billion dollar alternative investment firms, giving him unique insights into portfolio construction and asset allocation.

Mr. Bilello holds a J.D. and M.B.A. in Finance and Accounting from Fordham University and a B.A. in Economics from Binghamton University. He is a Chartered Market Technician (CMT) and a Member of the Market Technicians Association. Mr. Bilello also holds the Certified Public Accountant (CPA) certificate.

You can follow Charlie on twitter here.


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