Cover photo

The Future of Macro

Q4 2023

Inflation Outlook


After a very potentially threating third quarter, where Oil has charged up nearly 30%, there was significant fear that energy would be heading well over 100 USD a barrel, but as we currently look at prices we can see that Oil has begun fallen below its 200 day moving average for the first time since the beginning of the third quarter.

This is mostly dependent on the prospect of a recession in the US which I think is unlikely to occur. The price of Oil will likely fluctuate at these points for the time being waiting on a clear pivot by the Federal Reserve, an increase in consumer spending, and significant evidence against a recession in the western world.


The US Housing Market is used as collateral for many other different loans and for this reason it is a great barometer for the health of the US Economy. In the third quarter, the 10 Year & 2 Year Yield rose from 3.8% & 4.8% to 4.6% to 5.0% respectively. These Bonds are the basis of mortgage lending and for this reason, these two yields are barometers for tracking new mortgage rates.

Also, the 10 Year yield should always be greater than the 2 year yield, and if it is not a recession is in order. I believe this was the case a while ago, but the paradigm is constantly changing as the US Government continues to debase the currency. As the Federal Debt increases, so does my questioning of this metric.

However, as mortgage rates continue to decline, we can expect to see more activity in the housing market, which would in term reduce the likelihood of further price increases.

Yahoo Finance


The cost of food is heavily dependent on the cost of energy and the cost of labor. Inflation has increased the cost of labor and the cost of energy has come down. I expect to see price increases slow most aggressively here.


Federal Reserve

Jerome Powell has continued to hint at another rate hike. I do not see the need for further hikes, but I believed that rates were perfectly set at around 5.00% - 5.25% and he has seen fit to elevate it further 5.25% - 5.50%. I do not believe that it is out of his scope to raise further toward 5.50% - 5.75%. I do think further rates would be more injurious to the US Economy than helpful.


The Job Market has been the a huge success story in the function of this current economic mire. People have jobs. They may have two, or in some cases three. They may be full time or part time, but regardless there are jobs. The reported unemployment rate has continued to remain below 4%, which is a marvel. Payrolls continue to expand.

This gives the Federal Reserve the will to act if need be, although J. Powell still foresees a rise in unemployment coming at some point.

Balance Sheet

The Federal Reserve acted quickly in March & April to fill the holes in the balance sheets of an unknown amount of banks. I initially thought that the balance sheet would continue mooning but the monthly selling of Central Bank Assets continue to depress activity in the economy.

In addition to this there are fewer and fewer reliable buyers of US Bonds. The selling is now happening worldwide from Japan & China to the European Union. The Federal Reserve joining this trend further explains why yields have been so sustainably high.

How Bond Yields & Prices Work

If Demand is up, then yields go down and the prices go up. However, that is not our current case. Yields are up because demand is down, and the supply on the open market is likely high. This forces the price of bonds down dramatically.

Furthermore, the price of old bonds with much lower yields (circa 2010 - 2020) are currently valued well below their maturity if sold at the open market because the yield is much lower than could be offered by a new bond. These price fluctuations in US Bonds haven't been seen since 1788.


The near term of Inflation, which I went in depth about above, seems to be mellowing out. Personally I could see it remaining flat without any significant movement until we head into the Spring of 2024, at which point I imagine it'd begin sliding toward 1%.

Fed Funds Rate

I believe a pivot will likely come between May 2024 - August 2024. I say this because unemployment ticked up for the first time just in October and it will likely rise above 4.0% in the first quarter of 2024. This will likely be paired with an decrease in inflation likely within a range of 1.5% - 2.7%.

There are many other things in the global economy that continue to call the Federal Reserve to change policy none bigger than the following.

International Markets


The Island Nation of Japan is the third largest economy on the world. I find them utterly necessary to keep an eye on because they import a great deal of their necessities - food and energy.

Food Consumption
Energy Consumption

This means that the nation is very sensitive to the value of its currency versus the dollar. It may be sensitive against other currencies but the majority of global trade is handled in dollars so we will concern ourselves with it.

The Japanese Yen was valued at around 110 Yen per dollar during the Great Print of 2020. Since then, the currency has charged toward a 150 Yen per Dollar.

If prices remained stable in dollar price (they didn't) then the price of food and energy likely increased 36% over that period. In doing so, the Island Nation has made significant efforts to reduce the pain felt by Japanese Citizens.

On 3 October 2023, I saw market action by the Bank of Japan that I figured as a sign of the Bull Market coming simply because I knew they'd taken enough of the Federal Reserve. This came after significant selling of US Debt by Japanese Entities and Citizens.

As the Yen hit 150 Yen per dollar, you can see the Bank Intervention at the first bank below. The remainder are my own personal speculation of bank intervention. Nonetheless, the BOJ has to, effectively, print money and / or sell US Bond to accomplish this.

Europe & Israel

War is inflationary and it is likely the most inflationary event that could very well happen. Nations take their existing capital, both human and financial, and throw it at another nation. In each case, capital is destroyed. All capital, both human and financial.

The war in Ukraine has increased uncertainty in markets as one of the world's largest grain producers and the world's largest natural gas producer redirect their capital toward one another. The Western World and the Eastern World are also tossing their capital into the mix.

The war in Israel has kicked off and it is not known how much it will cost nor how long it will last. What we do know is that the uncertainty of oil exports and the condition of Suez Canal are unknown for the foreseeable future.

Furthermore, war cost money. In the olden days countries would ask their citizens to pay in the form of war bonds, but today they just print. So we know that printing must occur to sustain these events, but it cannot occur at these current interest rates.

For this reason, it is in the interests of all states to begin ratcheting down rates to reduce the long term cost of the wars. This will coincide with an increase in the money supply.


In recent years, I have continued to wonder about the miracle growth from the people of the Huang-He. Their meteoric rise over the course of the last 50 years has been, in my opinion, impossible to maintain. In recent years, Mr. Xi has pushed for an annual growth rate of 5%. With one look at a population pyramid makes me reject that premise.


The Chinese Property Market is currently the world's largest property market valued at 42.7 Trillion USD. It is also 30% of the nation's GDP. In recent years, the cracks in it has begun to show.

The giant, known as Evergrande failed to meet its debt obligations due to regulatory changes, lack of credit & cash, housing slowdowns and a loss of credibility. The remainder of the real estate market shutters in fear as they are all laden with similar issues, and face similar risks.

What does this mean? China is bleeding capital as people look for any way, both legal & illegal to push their capital into foreign markets for safety. This definitely hurts when interest rates are high globally.

How does this affect global markets? This welcomes the possibility of a rosier China as they attempt to coax foreign capital into their companies. This can be seen in the recent visit to San Francisco and the restraint toward Taiwan.

As Chinese Exports fall and dwindle, I would expect to see a different story from them.


I normally end these posts with predictions for the next quarter, but I would rather leave it with a few statements about the coming months.

There is one thing that fixes everything every year in the markets and that thing is Christmas. IF consumers are pushed away from the cashiers and jolly spirits of our Winter Solstice Celebrations, I would expect a very strong geopolitical reaction in the spring with aims to comfort consumers.

This may not mean stimulus, but simply a change in rhetoric to reduce the anxiety. If Christmas fails, we have a real problem. A real recession, or at least enough wind to fan the flames of recession fears.

Let's hope the Federal Reserve waits for holiday data before they think about raising rates. I would.

Collect this post to permanently own it.
Fiat Fudder logo
Subscribe to Fiat Fudder and never miss a post.
  • Loading comments...