Connect with us

Business

Citigroup: The only asset investors can use as a recession hedge this year

With concerns lingering that the worst is yet to come for equities, investors are searching for the best hedge against what’s on the horizon.

Bank of America analysts predicted in a note on Thursday that equities were still set to hit fresh lows, warning that the “inflation shock ain’t over.”

Morgan Stanley also warned earlier this month that investors should buckle up for more stock market turbulence, while Deutsche Bank has forecast the S&P 500—which was trading at around 3,860 points on Friday morning—could drop as low as 3,000 points in the event of a recession.

The only sensible hedge

According to Citigroup, the U.S. dollar is the only sensible hedge against looming economic headwinds that will destroy riskier assets’ value.

In a research note on Thursday, the lender’s strategists said a “deep recession” would be needed to significantly correct spiraling inflation in the United States, which would continue to pummel equities.

They argued that the greenback’s inverse relationship with risk assets such as stocks, which have nosedived this year, made the U.S. currency the best place for investors to ride out what was likely to be a volatile remainder of the year.

“The only place to hide is in U.S. dollar cash,” Citi’s strategists said in the note.

Extraordinary run

The greenback has had an extraordinary run in 2022, with the dollar index gaining around 15% so far this year to reach 20-year highs.

According to ING, the currency is likely to remain at “lofty levels” for the rest of the year.

Despite its continuous strength, however, some top investors disagree with using the dollar as a hedge against ongoing uncertainty in stock markets.

Ray Dalio, founder of Bridgewater Associates—the world’s biggest hedge fund—told CNBC “cash is still trash” in May, citing the impact of inflation, but he noted that equities could be an even worse bet.

Meanwhile, Lisa Shalett, CIO of Morgan Stanley’s Wealth Management division, said on Monday that investors should “proceed with caution” when it comes to America’s currency, warning that its “extreme” strength could “lead to bouts of instability.”

Sign up for the Fortune Features email list so you don’t miss our biggest features, exclusive interviews, and investigations.

Source link

Continue Reading
Advertisement

Business

Ray Dalio says the U.K.’s policies ‘suggest incompetence’ and warns other governments not to make the same mistakes

Ray Dalio added his name to a growing list of critics of the U.K.’s new spending plan, unveiled last week by Prime Minister Liz Truss and Chancellor of the Exchequer Kwasi Kwarteng.

The billionaire investor—who founded what is now the world’s largest hedge fund, Bridgewater Associates, in 1975—argued the plan’s aggressive tax cuts will raise the U.K. debts to an unsustainable level and cripple the pound.

“Investors and policymakers: Heed the lesson of the UK’s fiscal blunder,” Dalio wrote in a Tuesday tweet. “The panic selling you are now seeing that is leading to the plunge of UK bonds, currency, and financial assets is due to the recognition that the big supply of debt that will have to be sold by the government is much too much for the demand.”

On Monday, in response to Truss’ new spending plan, the U.K.’s bond market experienced the largest one-day sell-off in its history, pushing the total losses in the country’s stock and bond markets since Truss’ appointment as prime minister on Sept. 5 to over $500 billion. Meanwhile, the pound sank to a record low of $1.05 against the U.S. dollar on Monday morning, and although it has since risen to $1.07, the currency remains near a 40-year low vs. the dollar. 

After the new Truss spending plan was announced, the U.K. Debt Management Office said that it will raise its debt issuance by 72.4 billion pounds for the current fiscal year to 234.1 billion pounds.

The new spending plan will also push the U.K.’s debt to GDP ratio to around 101%, the highest level of debt the U.K. has held since 1962, according to Deutsche Bank.

Deutsche Bank, UK Office of Debt Management

In Ray Dalio’s view, this rapid increase in debt, coupled with the lack of demand for the pound on the global stage, is a recipe for disaster.

“That makes people want to get out of the debt and currency. I can’t understand how those who were behind this move didn’t understand that. It suggests incompetence,” Dalio said. “Mechanistically, the U.K. government is operating like the government of an emerging country, it is producing too much debt in a currency that there is not a big world demand for.”

The investor went on to argue that this should be a teaching moment for governments around the world to not increase their debts to unsustainable levels.

“I hope, but doubt, that other policymakers who are doing similar things…will recognize that they are risking a similar outcome—and that investors will see this too,” he said.

Analysts are also worried that the U.K.’s new spending plan, which was designed to spur economic growth and help alleviate the effects of high energy prices in the short term, could end up exacerbating inflation in the U.K. overall. And consumer prices already jumped 9.9% from a year ago in August.

“The government is trying to balance support for consumers and businesses with measures that might trigger further inflation, whilst also trying to reinvigorate a stagflationary economy,” Giles Coghlan, chief market analyst at global Forex broker HYCM, told Fortune. “Such a large fiscal package could contribute to elevated prices in the medium to long term that could inflict further damage to an economy and currency that are already on their knees.” 

The potential inflationary impact of the new spending plan has increased calls for the Bank of England (BoE) to dramatically hike interest rates, with some economists even calling for the U.K.’s base interest rate to move from 2.25% to as high as 6% next year

That’s bad news for the U.K.’s homeowners. Monthly mortgage rates will increase immediately for 2 million people on tracker or variable interest rate plans if the BoE follows through with its next rate hike. And another 1.8 million homeowners with fixed-rate deals will also be forced to pay significantly higher rates next year, according to U.K. Finance.

With the U.K. facing more interest rate hikes ahead, rising government debts, a sinking pound, and a European energy crisis, Deutsche Bank’s chief economist, David Folkerts-Landau, said he now believes the country will experience a severe recession that lasts three to four quarters.

“We’re thinking in terms of a recession that will be deep and long,” he told Bloomberg on Tuesday. “It’s the price we have to pay for financial stability and for getting on the right track.”

Sign up for the Fortune Features email list so you don’t miss our biggest features, exclusive interviews, and investigations.



Source link

Continue Reading

Business

Artificial Intelligence: A.I. is solving traffic problems to get you where you’re going safely

“I haven’t met anyone that really loves traffic,” says Karina Ricks of the Federal Transit Administration.

Except, possibly, professionals like her who are tasked with reducing it.

Ricks has made her career out of caring about traffic patterns. Before her current role as the associate administrator for research, innovation, and demonstration at the FTA, she was the director of mobility and infrastructure for the City of Pittsburgh in Pennsylvania. She has spent countless hours thinking about cars, public transit, roads, and pedestrians—and how to make it all flow more smoothly.

“When you’re in the peak times for travel, when the system is so full, it only takes a small disruption to cause really big problems,” Ricks says. “The work is to quickly flag those disruptions and rapidly retool the system to operate around them.”

What Ricks aims to optimize affects anyone moving from point A to point B, especially in cities. She explained that congestion is the number one problem when it comes to traffic, and a common occurrence in metropolitan areas. Add to that the number of variables at any given time, including human operators of vehicles and geography, and it results in a mind-boggling puzzle to even attempt to solve.

If there were an easy way to reduce traffic, it would have been actioned in the past 50 years, she said. Instead, she, government organizations, and startups in the space, such as Lyt, are all looking at an immense amount of traffic data available—from traffic sensors to ride share data and even bike and scooter data from smartphones—and using it to inform decisions on how to get people to work, home, and the grocery store safely and quickly.

That solution involves artificial intelligence and machine learning.

“There are tasks that humans just aren’t good at that machinery is, and that’s recognizing patterns,” explains Tim Menard, founder and chief executive officer of Lyt, a software technology platform providing mobility solutions for cities. “A.I. is a great technology to use, because you’re looking at all parts of the system. You can start feeding it different information, and you can put that into a system that can make operational changes.”

Menard started Lyt after studying intelligent transportation systems for more than 13 years. His company uses vehicle data to solve traffic problems, especially when it comes to the efficiency of public transit options. For Menard, the end goal is to “make more cities equitable by making public transit reliable, predictable, and faster.”

Both Ricks and Menard believe that the way to reduce traffic is to get more people onto public transportation, such as buses, subways, and light rail systems. Public transportation is the safest surface transportation mode, with fewer injuries and fatalities. It’s also a speedier way to move a larger number of people.

Ricks explained that most of congestion is caused by “low-volume vehicles,” ie. single-occupant cars. Those drivers are human; some drive faster, some slower; some change lanes often, others stop abruptly when a traffic light flashes yellow before red. Because humans behave so differently, there is a level of unpredictability in the traffic system. Much of her work aims to make mass transit more enticing for commuters.

“You’re reducing the rate of crashes that might occur when you’re reducing the number of vehicles that are there,” Ricks added.

With that in mind, Menard started looking at the Internet of Things for his cloud platform, pulling data from smartphones, automotive sensors, public transportation logs, and delivery vehicles to understand traffic patterns at various times of the day as well as during special one-off events, such as a sports game at a local stadium. He said that the first hurdle was to operate from a place of known information rather than guessing; in the past, he explained, it took a human looking at a video screen for hours and hours to even begin to make an estimate on next steps.

He launched in San Jose, Calif., where for the past three years, he has collaborated with the city to optimize bus routes by 20%, thereby reducing fuel consumption by 14% and emissions at intersections by 12%. Using a predictive estimated time of arrival at each traffic light, his platform reduced the travel time between bus stops by optimizing bus lanes and traffic lights to ensure buses could move as effectively as possible without disrupting other traffic. He now works in other northern California cities, including additional Bay Area towns and Sacramento, as well as in the Pacific Northwest: Seattle and Portland, Ore.

Menard is also looking at bicycle and pedestrian traffic, something he says is of interest and priority to many transit authorities. He has worked to make bicycling safer by creating dedicated, curbed bike lanes with their own traffic signals synced with those of vehicle traffic to help avoid car-bicycle collisions. For pedestrians, Ricks explained that foot traffic uses sensors and adaptive controls to adjust settings in real time based on needs—a moment when the A.I. algorithm and real time data intersect.

Another benefit of A.I. technology for traffic patterns surrounds first responders. Menard employed machine learning to analyze data from emergency vehicles like ambulances and fire trucks to improve speed. He noted that in many urban environments, congestion and traffic patterns prohibit first responders from promptly arriving on scene or to a hospital with a life-or-death situation. In Sacramento, Calif., he tackled this problem.

“It was literally night and day better in under 15 minutes,” he said of taking a look at amassed data from all the relevant stakeholders in the city. There, he improved the slowest 10% of the emergency vehicles by more than 10 miles per hour, allowing them to arrive 70% faster on any response. Even the performing top 10% of vehicles saw an improvement of 6 miles per hour.

For every single-occupant car that swaps to public transit, there is one less vehicle on the road causing congestion. Menard regularly reminds people that when they are sitting in their car, stuck in traffic, they are surrounded by many other people doing the exact same thing. If they traded to a shared vehicle—a high-occupancy mode of transit—they may speed along very quickly.

But it’s always challenging to inspire commuters to change habits, so the new option needs to be compelling enough to motivate them to adjust the way they operate. “What you want in a transit system is to show up now [and] there’s a bus ready to get you in a timely fashion,” Ricks said. “We need to address traffic in order for transit to be that attractive alternative. There’s quite a bit of work to still do.”

Source link

Continue Reading

Business

Fed official says he is ‘nervous’ about speed of interest rate hikes

Even some Federal Reserve officials are getting nervous about their strategy to tame inflation.

So far, the central bank’s approach has been a series of aggressive interest rate hikes to cool the economy. Last week, it approved a 75 basis point rate hike for the third consecutive time, bringing the benchmark funds rate to its highest level in 14 years.

But many investors and bankers fear that the Fed risks cooling economic activity too quickly, and that it could lead to a “hard landing,” or recession. The central bank still believes it can avoid one—but even Fed officials are apprehensive about the pace of rising rates. 

“I am a little nervous about exactly that,” Chicago Federal Reserve President Charles Evans told CNBC’s Squawk Box Europe on Tuesday, when asked if the bank’s interest rate hikes could cause deeper damage to the economy that the bank wouldn’t pick up on immediately. 

Rate risks

Evans said that the fast pace of rate hikes is necessary to reduce inflation. “Low and stable inflation is a very important fundamental for strong growth going forward,” he said.

But while taming inflation is a priority, the speed at which interest rates have risen in the U.S. this year has been unprecedented.

“This has been a very rapid increase in our short-term policy rate,” Evans said, noting that it took the Fed seven months to raise rates this year by the same amount it did in an entire year during the 1994 financial crisis.

Some Federal Reserve officials have dissented against the rapid interest rate hikes. In July, Federal Reserve Bank of Kansas City President Esther George said that raising rates too fast “raises the prospect of oversteering,” and cautioned that the policy could end up doing more harm than good.

“There are lags in monetary policy, and we have moved expeditiously,” Evans said, conceding that the Fed was “not leaving much time” to assess the impact of each interest rate hike before moving on to the next one.

Evans said he remains “cautiously optimistic” that the Fed can avoid oversteering, adding that the Fed is sticking to its latest projections of ending its rate hikes after they reach 4.26% in March of next year. The federal funds rate is currently set at a target range of 3% to 3.25%

That target might be enough to avoid a hard landing for the economy, and could lead to employment “stabilizing at something that still is not a recession,” Evans said. But he also cautioned that this target depends on no surprises that could derail the Fed’s game plan, and force it to keep raising rates.

“There could be shocks, there could be other difficulties,” he said.

Sign up for the Fortune Features email list so you don’t miss our biggest features, exclusive interviews, and investigations.

Source link

Continue Reading

Facebook

Latest

Modi urges environment ministers to give maximum boost to circular economy Modi urges environment ministers to give maximum boost to circular economy
National4 days ago

Modi urges environment ministers to give maximum boost to circular economy

It was inaugurated when I became the Prime Minister. A huge amount of money was wasted due to this delay....

BJP MP Janardan Mishra cleans the school toilet with his hands, shared the video on Twitter BJP MP Janardan Mishra cleans the school toilet with his hands, shared the video on Twitter
National4 days ago

BJP MP Janardan Mishra cleans the school toilet with his hands, shared the video on Twitter

When the MP saw that the toilet of the center was very dirty, it was not cleaned, he decided to...

Pilot started lobbying for the post of CM, indicating new responsibility from high command Pilot started lobbying for the post of CM, indicating new responsibility from high command
National4 days ago

Pilot started lobbying for the post of CM, indicating new responsibility from high command

Pilot will now meet Congress interim president Sonia Gandhi. Pilot said that Sonia's decision has to be accepted by everyone....

Indian e-commerce platform Meesho is paying attention to the mental state of its employees Indian e-commerce platform Meesho is paying attention to the mental state of its employees
Business4 days ago

Indian e-commerce platform Meesho is paying attention to the mental state of its employees

The e-commerce platform has announced an 11-day companywide break from October 22 to November 1. Well, this is not the...

IPhone 14 can detect car crash, you also know what is the news IPhone 14 can detect car crash, you also know what is the news
National4 days ago

IPhone 14 can detect car crash, you also know what is the news

During the experiment, the crash detection feature was activated within 10 seconds of the accident. After detecting a crash, the...

Tata Consultancy Services (TCS) has ended the practice of work from home, you also know Tata Consultancy Services (TCS) has ended the practice of work from home, you also know
Business4 days ago

Tata Consultancy Services (TCS) has ended the practice of work from home, you also know

“Senior TCS leaders are working from TCS offices for some time and our clients are also visiting TCS offices Your...

NIA raided 93 locations of PFI, arrested 106 members, know the whole matter NIA raided 93 locations of PFI, arrested 106 members, know the whole matter
National5 days ago

NIA raided 93 locations of PFI, arrested 106 members, know the whole matter

This action of NIA and ED is going on in Uttar Pradesh, Kerala, Karnataka, Andhra Pradesh, Telangana, Tamil Nadu, Assam,...

TMC leader takes a jibe at Shubhendu Adhikari, I am a man, CBI-ED can't even touch me, know the whole matter TMC leader takes a jibe at Shubhendu Adhikari, I am a man, CBI-ED can't even touch me, know the whole matter
National5 days ago

TMC leader takes a jibe at Shubhendu Adhikari, I am a man, CBI-ED can’t even touch me, know the whole matter

TMC wrote on its Twitter account, BJP's 56 inch chest model has been busted today. After this, party MP Locket...

If Gehlot becomes the president, he will have to leave the CM's chair, know what Rahul said If Gehlot becomes the president, he will have to leave the CM's chair, know what Rahul said
National5 days ago

If Gehlot becomes the president, he will have to leave the CM’s chair, know what Rahul said

On the question of objection to the name of the pilot, Gehlot said, 'I do not discuss anyone's name and...

India will now find other options for weapons and oil, will reduce its dependence on Russia India will now find other options for weapons and oil, will reduce its dependence on Russia
Business6 days ago

India will now find other options for weapons and oil, will reduce its dependence on Russia

Let us tell you that the relations between Russia and India are old. Although, Relations between India and America have...

Trending

Copyright © 2017 Zox News Theme. Theme by MVP Themes, powered by WordPress.