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2021-10-25

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Are We Heading for a Repeat of the 2018 Stocks Selloff?

Bond breakevens look to have pushed Jerome Powell to his line in the sand. Once again, the market ma

Are We Heading for a Repeat of the 2018 Stocks Selloff?

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{"i18n":{"language":"zh_CN"},"data":{"magic":2,"id":856111281,"tweetId":"856111281","gmtCreate":1635160063621,"gmtModify":1635160063780,"author":{"id":3585881140356055,"idStr":"3585881140356055","authorId":3585881140356055,"authorIdStr":"3585881140356055","name":"Rsstiget","avatar":"https://static.laohu8.com/default-avatar.jpg","vip":1,"userType":1,"introduction":"","boolIsFan":false,"boolIsHead":false,"crmLevel":6,"crmLevelSwitch":0,"individualDisplayBadges":[],"fanSize":5,"starInvestorFlag":false},"themes":[],"images":[],"coverImages":[],"extraTitle":"","html":"<html><head></head><body>Take profits soon</body></html>","htmlText":"<html><head></head><body>Take profits soon</body></html>","text":"Take profits soon","highlighted":1,"essential":1,"paper":1,"likeSize":5,"commentSize":0,"repostSize":0,"favoriteSize":0,"link":"https://laohu8.com/post/856111281","repostId":1129106781,"repostType":4,"repost":{"id":"1129106781","kind":"news","pubTimestamp":1635144072,"share":"https://www.laohu8.com/m/news/1129106781?lang=&edition=full","pubTime":"2021-10-25 14:41","market":"us","language":"en","title":"Are We Heading for a Repeat of the 2018 Stocks Selloff?","url":"https://stock-news.laohu8.com/highlight/detail?id=1129106781","media":"Bloomberg","summary":"Bond breakevens look to have pushed Jerome Powell to his line in the sand. Once again, the market ma","content":"Bond breakevens look to have pushed Jerome Powell to his line in the sand. Once again, the market may be overestimating inflation risks.\n<img src=\"https://static.tigerbbs.com/8d55902061e9e7e9d2b20373b962471e\" tg-width=\"3252\" tg-height=\"1996\" referrerpolicy=\"no-referrer\">What Jerome Powell is looking at? Photographer: kimichele/iStockphoto/Getty Images\nBreakevens&nbsp;Breakout\nInflation breakevens crossed an important line Friday. Was it also an important line for Jerome Powell and the Federal Reserve?\nFive-year breakevens show the implicit bond market forecast for average CPI inflation over the next five years. In their 20-year history, they have never topped the upper limit of the Fed’s inflation target of 3% —&nbsp;until early in Friday morning trading:\n<img src=\"https://static.tigerbbs.com/b12743307f49058028200ceb8a3e860e\" tg-width=\"1200\" tg-height=\"675\" referrerpolicy=\"no-referrer\">\nCoincidentally or otherwise,Powell appeared in a seminar&nbsp;held by the South African Reserve Bank,&nbsp;and chaired by Bloomberg’s Francine Lacqua, a few hours later. His comments can fairly be described as hawkish. He said:\n<blockquote>\n The risks are clearly now to longer and more persistent bottlenecks, and thus to higher inflation… Supply constraints and elevated inflation are likely to last longer than previously expected and well into next year, and the same is true for pressure on wages. If we were to see a risk of inflation moving persistently higher, we would certainly use our tools.\n</blockquote>\nPerhaps most significantly, he conceded those bottlenecks and energy price increases had created an&nbsp; inflation framework that the Fed's “patient”&nbsp;approach wasn't designed for.&nbsp;That is about as close to an admission of error as a central bank governor can get.\nIt also had an impact on the thinking of people trading breakevens. Coming so soon after this psychological landmark,&nbsp;it looked as though Powell had come to his line in the sand. The 3% level was touched only briefly in early trading; the Powell comments took it well below 2.9%:\n<img src=\"https://static.tigerbbs.com/6d8f219b50a000e07e149c04d87fe01e\" tg-width=\"1200\" tg-height=\"675\" referrerpolicy=\"no-referrer\">\nThe way&nbsp;breakevens took off last week is startling, and had few obvious triggers. As I’ve been documenting, it has grown ever harder to maintain that the recent rise in inflation is only “transitory,”&nbsp;for the reasons that Powell gave. There’s no clear evidence yet that we should brace for a sustained rise above the levels of the last three decades, and there was no obvious evidence of this last week. This has the look of a market belatedly catching up with reality, and overshooting as it does so.\nFor more evidence, look at industrial metals. Their prices obviously factor into inflationary calculations. A rise can be an early sign of factors, such as bottlenecks or falling supply, that can lead to broader inflation. And indeed Bloomberg’s industrial metals index rallied to a 10-year high at the beginning of last week, bringing it close to its peak from the last bull market. Since then, however, prices have fallen sharply:\n<img src=\"https://static.tigerbbs.com/c9c43c0dbcd090d26c4ed37657bbbfa4\" tg-width=\"1200\" tg-height=\"675\" referrerpolicy=\"no-referrer\">\nMetals prices have had only had six worse weeks than this in the last decade; but this followed their best week since the top of the last bull market. Again this looks like a rather strange case of speculative excess, while the rally in breakevens, even as materials prices were going into a sharp retreat, begins to look very odd:\n<img src=\"https://static.tigerbbs.com/6aa7da3e87d7e56fce769cdeec9268c1\" tg-width=\"1200\" tg-height=\"675\" referrerpolicy=\"no-referrer\">\nAs for the impact on stocks, it has been surprisingly muted. I suspect this is primarily because real yields keep supporting them. Real 10-year yields sank below -1% yet again in the early hours of Friday, naturally enough because inflation expectations rose. That helped stocks to a good start. The Powell comments sparked a rise in real yields back above -1%, and a sharp equities selloff. But from then on, stocks clawed back ground, while real yields steadily fell. Even with higher inflation expectations, bond yields aren’t rising sharply, and in real terms fixed-income markets remain easy and supportive for stocks:\n<img src=\"https://static.tigerbbs.com/f9dcfdb4e04a5c75393db345516f2819\" tg-width=\"1200\" tg-height=\"675\" referrerpolicy=\"no-referrer\">\nFor another important cross-asset-class effect, look at the link between oil prices and equities. Crude has a persistent positive relationship with longer-term inflation expectations that it shouldn’t have; a big rise in oil prices now, all things equal, means future increases will be smaller, while paying&nbsp;more for fuel will cause people to cut back consumption of other things. Moreover, the economy is far less dependent on oil than it was during the great inflation of the 1970s.\nHowever, the relationship between oil prices on the one hand,&nbsp;and stocks’ performance relative to bonds on the other, remains spectacularly close. Over the last five years, as this chart shows, they have moved in almost perfect alignment:\n<img src=\"https://static.tigerbbs.com/0d9e80c6394afb4d6714a0009fd7c6da\" tg-width=\"1200\" tg-height=\"675\" referrerpolicy=\"no-referrer\">\nThis looks like another market relationship that is far closer than it should be. If driven by rising demand, a surge in oil should indeed be a reason for stocks to beat bonds. If driven by cramped supply, as appears to be the case, then it becomes far more complicated.\nLike metals, or inflation breakevens, oil might yet prove to have reached a turning point. Once the price moves much above $80 per barrel, it becomes more profitable to build up fracking production in the U.S. —&nbsp;a development that the OPEC cartel wants to avoid. The last time oil reached this height, in October 2018, it started a steep dive that took stocks with it. The S&amp;P 500 endured a sharp selloff that culminated in the “Christmas Eve Massacre.”\nThat drop was driven in large part by hawkish rhetoric from Powell. It ended after three months, after what has come to be known as the “Powell Pivot,” when the Fed chairman decided against his previous declared policy of steadily reducing the central bank’s balance sheet. History seldom&nbsp;repeats itself directly. But once again, the market is signaling that inflation pressure is perhaps worse than it really is. And once again that has provoked the Fed into more aggressive language in favor of tightening.\nThere is now going to be a break from Fedspeak until the next Federal Open Market Committee meeting, which will come in the week after Halloween. With the exception of third-quarter GDP numbers, due this coming week, there isn’t much important data between now and then. So this could be a useful week for re-examination, both at the Fed and in the dealing rooms. After a few months of underestimating inflation risks, has the dial been turned too far in the other direction? And are we really doomed to repeat the last months of 2018?\nRisks &amp; Returns\nI discussed all of this with Kriti Gupta (standing in for Lisa Abramowicz) in the regular&nbsp;Risks &amp; Rewards livestream on Friday, which&nbsp; awkwardly went out just as Powell was speaking. I hope it makes for interesting&nbsp; viewing —&nbsp;we did our best to cover the waterfront.\n<img src=\"https://static.tigerbbs.com/d48e2b4634634a4aa7fe93da751a1c51\" tg-width=\"1023\" tg-height=\"573\" referrerpolicy=\"no-referrer\">\nCapital, Labor and the Plague\nCritical to the inflation debate is the risk of a wage-price spiral. Historical evidence, as I covered last year&nbsp;here, is that pandemics strengthen the hand of labor. This was certainly case after the Black Death. Even though Covid-19 has had no remotely comparable demographic effect on the working-age population, it appears to be having a similar impact on demand for labor, with the “Great Resignation” now in full sway. Will this lead to a self-reinforcing cycle of rising earnings?\nThere are some budding signs of it in the U.S., where wages of low-skilled workers have picked up significantly, even if they remain below headline inflation. Logically, the place with the greatest risk of a wage-price spiral is Germany, which has a tradition of corporatism and strong unions, and where there has been a particularly&nbsp;nasty spike in producer prices. That isn’t happening so far, as shown in&nbsp;this fascinating piece by colleagues Jana Randow and Alexander Weber. So far, unions are accepting deals significantly worse than they had originally sought, as illustrated by this chart from the story using Goldman Sachs Group Inc. data:\n<img src=\"https://static.tigerbbs.com/46944e88d9c5adaa5680362020dbab3a\" tg-width=\"863\" tg-height=\"659\" referrerpolicy=\"no-referrer\">\nThat implies that, at least so far, unions don’t feel as empowered as history suggests they might. That’s good news if you’re worried about inflation, and not so good if you’re worried about inequality.\nAlso, regular reader Matt Dubuque points out that there is historical precedent for clamping down ruthlessly on post-pandemic wage demands. Following the Black Death, England’s Edward III saw that laborers were using the sudden drop in the labor supply to demand&nbsp; higher wages. His response was the&nbsp;Statute of Laborers. It’s not a liberal document. Here is a chunk:\n<blockquote>\n we have seen fit to ordain: that every man and woman of our kingdom of England, of whatever condition, whether bond or free, who is able bodied and below the age of sixty years, not living from trade nor carrying on a fixed craft, nor having of his own the means of living, or land of his own with regard to the cultivation of which he might occupy himself, and not serving another, if he, considering his station, be sought after to serve in a suitable service, he shall be bound to serve him who has seen fit so to seek after him; and he shall take only the wages liveries, meed or salary which, in the places where he sought to serve, were accustomed to be paid in the twentieth year of our reign of England, or the five or six common years next preceding.\n</blockquote>\nThe penalty was prison. An incomes policy&nbsp;this strict isn’t politically possible these days. On balance, history still suggests that workers are in a position to demand more money. Keep an eye on Germany to get an idea whether it’s going to happen.\nFooled by Randomness, Baseball Edition\nReversion to the mean is one of the constants of life, in baseball as in markets. Baseball is a game that can be analyzed deeply with statistics, that runs on money, and which inspires great passions —&nbsp;just like markets. The season finale is about to happen, with the Houston Astros meeting the Atlanta Braves in the World Series. The season is over for my own Boston Red Sox, who succumbed 4-2 to the Astros in six games. Should we be surprised, or disappointed?\nNo. The Red Sox were maddeningly inconsistent all season, with long winning stretches interspersed with periods when they appeared incapable of anything. At the outset, they looked like the fourth-best team in the&nbsp;division. That’s roughly what they were, even though they survived longer than any of their divisional rivals. The Red Sox put together a nine-game winning streak and, in the penultimate week, a seven-win stretch. They did the latter wearing novelty yellow uniforms, which prompted the crowd to start dressing as bananas. But the&nbsp;seven-game streak was followed by losing three in a row at home to the New York Yankees, and then dropping two of three to the terrible Baltimore Orioles.\nSomehow they earned a home game against New York for a wild card to the play-offs, which they won easily. The narrative changed. Against Tampa Bay, who won nine games more than the Red Sox during the regular season, Boston reeled off three games in a row, thanks to a brilliant offense. Then in the first 27 innings of their series against the Astros, the Red Sox scored 27 times. Over the remaining 26 innings, they scored once. Both of these streaks in their own right seemed implausible; the overall series performance was about what you’d expect.\nYou can try to attach narratives to this, but that would be unwise. The Red Sox had a good but erratic offense, meaning that over a full season they would do well but not superlatively. They might just beat a superior team in the post-season (as against Tampa), but&nbsp;as time went by, the odds increased that a better team would beat them. They reverted to the mean.&nbsp;Along the way, the clumps of good results to be expected in a random distribution&nbsp;gave me and many others lots of pleasure.\nWhat relevance does this have for markets? There are momentum effects,&nbsp;but the longer the season lasts, the more you can assume quality will out. If you want to bet on how things will go in the short run, you will have a lot of fun, but you are taking a much greater risk. Don’t be fooled by the market equivalent of banana-yellow uniforms. Stick with the fundamentals for the long term, be patient, and you’ll probably win.\nSurvival Tips\nThis weekend began with&nbsp;World Wombat Day.Wombats&nbsp;are wonderful, some of my&nbsp;favorite marsupials. Everyone should should appreciate them.Wombat Stew&nbsp;was one of my kids’ favorite songs when they were younger; it’s a&nbsp;great book to read aloud&nbsp;to pre-schoolers. And there’s even a&nbsp;decent band&nbsp;called&nbsp;the Wombats, who sing about&nbsp;moving to New York&nbsp;and many other things. You could&nbsp;give them a try.\nHave a good week, everyone.","source":"lsy1584095487587","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Are We Heading for a Repeat of the 2018 Stocks Selloff?</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nAre We Heading for a Repeat of the 2018 Stocks Selloff?\n</h2>\n\n<h4 class=\"meta\">\n\n\n2021-10-25 14:41 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://www.bloomberg.com/opinion/articles/2021-10-25/powell-s-hawkish-tilt-evokes-memories-of-2018-market-selloff?srnd=premium-asia>Bloomberg</a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\nBond breakevens look to have pushed Jerome Powell to his line in the sand. Once again, the market may be overestimating inflation risks.\nWhat Jerome Powell is looking at? Photographer: kimichele/...\n\n<a href=\"https://www.bloomberg.com/opinion/articles/2021-10-25/powell-s-hawkish-tilt-evokes-memories-of-2018-market-selloff?srnd=premium-asia\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{".SPX":"S&P 500 Index",".IXIC":"NASDAQ Composite",".DJI":"道琼斯"},"source_url":"https://www.bloomberg.com/opinion/articles/2021-10-25/powell-s-hawkish-tilt-evokes-memories-of-2018-market-selloff?srnd=premium-asia","is_english":true,"share_image_url":"https://static.laohu8.com/e9f99090a1c2ed51c021029395664489","article_id":"1129106781","content_text":"Bond breakevens look to have pushed Jerome Powell to his line in the sand. Once again, the market may be overestimating inflation risks.\nWhat Jerome Powell is looking at? Photographer: kimichele/iStockphoto/Getty Images\nBreakevens Breakout\nInflation breakevens crossed an important line Friday. Was it also an important line for Jerome Powell and the Federal Reserve?\nFive-year breakevens show the implicit bond market forecast for average CPI inflation over the next five years. In their 20-year history, they have never topped the upper limit of the Fed’s inflation target of 3% — until early in Friday morning trading:\n\nCoincidentally or otherwise,Powell appeared in a seminar held by the South African Reserve Bank, and chaired by Bloomberg’s Francine Lacqua, a few hours later. His comments can fairly be described as hawkish. He said:\n\n The risks are clearly now to longer and more persistent bottlenecks, and thus to higher inflation… Supply constraints and elevated inflation are likely to last longer than previously expected and well into next year, and the same is true for pressure on wages. If we were to see a risk of inflation moving persistently higher, we would certainly use our tools.\n\nPerhaps most significantly, he conceded those bottlenecks and energy price increases had created an  inflation framework that the Fed's “patient” approach wasn't designed for. That is about as close to an admission of error as a central bank governor can get.\nIt also had an impact on the thinking of people trading breakevens. Coming so soon after this psychological landmark, it looked as though Powell had come to his line in the sand. The 3% level was touched only briefly in early trading; the Powell comments took it well below 2.9%:\n\nThe way breakevens took off last week is startling, and had few obvious triggers. As I’ve been documenting, it has grown ever harder to maintain that the recent rise in inflation is only “transitory,” for the reasons that Powell gave. There’s no clear evidence yet that we should brace for a sustained rise above the levels of the last three decades, and there was no obvious evidence of this last week. This has the look of a market belatedly catching up with reality, and overshooting as it does so.\nFor more evidence, look at industrial metals. Their prices obviously factor into inflationary calculations. A rise can be an early sign of factors, such as bottlenecks or falling supply, that can lead to broader inflation. And indeed Bloomberg’s industrial metals index rallied to a 10-year high at the beginning of last week, bringing it close to its peak from the last bull market. Since then, however, prices have fallen sharply:\n\nMetals prices have had only had six worse weeks than this in the last decade; but this followed their best week since the top of the last bull market. Again this looks like a rather strange case of speculative excess, while the rally in breakevens, even as materials prices were going into a sharp retreat, begins to look very odd:\n\nAs for the impact on stocks, it has been surprisingly muted. I suspect this is primarily because real yields keep supporting them. Real 10-year yields sank below -1% yet again in the early hours of Friday, naturally enough because inflation expectations rose. That helped stocks to a good start. The Powell comments sparked a rise in real yields back above -1%, and a sharp equities selloff. But from then on, stocks clawed back ground, while real yields steadily fell. Even with higher inflation expectations, bond yields aren’t rising sharply, and in real terms fixed-income markets remain easy and supportive for stocks:\n\nFor another important cross-asset-class effect, look at the link between oil prices and equities. Crude has a persistent positive relationship with longer-term inflation expectations that it shouldn’t have; a big rise in oil prices now, all things equal, means future increases will be smaller, while paying more for fuel will cause people to cut back consumption of other things. Moreover, the economy is far less dependent on oil than it was during the great inflation of the 1970s.\nHowever, the relationship between oil prices on the one hand, and stocks’ performance relative to bonds on the other, remains spectacularly close. Over the last five years, as this chart shows, they have moved in almost perfect alignment:\n\nThis looks like another market relationship that is far closer than it should be. If driven by rising demand, a surge in oil should indeed be a reason for stocks to beat bonds. If driven by cramped supply, as appears to be the case, then it becomes far more complicated.\nLike metals, or inflation breakevens, oil might yet prove to have reached a turning point. Once the price moves much above $80 per barrel, it becomes more profitable to build up fracking production in the U.S. — a development that the OPEC cartel wants to avoid. The last time oil reached this height, in October 2018, it started a steep dive that took stocks with it. The S&P 500 endured a sharp selloff that culminated in the “Christmas Eve Massacre.”\nThat drop was driven in large part by hawkish rhetoric from Powell. It ended after three months, after what has come to be known as the “Powell Pivot,” when the Fed chairman decided against his previous declared policy of steadily reducing the central bank’s balance sheet. History seldom repeats itself directly. But once again, the market is signaling that inflation pressure is perhaps worse than it really is. And once again that has provoked the Fed into more aggressive language in favor of tightening.\nThere is now going to be a break from Fedspeak until the next Federal Open Market Committee meeting, which will come in the week after Halloween. With the exception of third-quarter GDP numbers, due this coming week, there isn’t much important data between now and then. So this could be a useful week for re-examination, both at the Fed and in the dealing rooms. After a few months of underestimating inflation risks, has the dial been turned too far in the other direction? And are we really doomed to repeat the last months of 2018?\nRisks & Returns\nI discussed all of this with Kriti Gupta (standing in for Lisa Abramowicz) in the regular Risks & Rewards livestream on Friday, which  awkwardly went out just as Powell was speaking. I hope it makes for interesting  viewing — we did our best to cover the waterfront.\n\nCapital, Labor and the Plague\nCritical to the inflation debate is the risk of a wage-price spiral. Historical evidence, as I covered last year here, is that pandemics strengthen the hand of labor. This was certainly case after the Black Death. Even though Covid-19 has had no remotely comparable demographic effect on the working-age population, it appears to be having a similar impact on demand for labor, with the “Great Resignation” now in full sway. Will this lead to a self-reinforcing cycle of rising earnings?\nThere are some budding signs of it in the U.S., where wages of low-skilled workers have picked up significantly, even if they remain below headline inflation. Logically, the place with the greatest risk of a wage-price spiral is Germany, which has a tradition of corporatism and strong unions, and where there has been a particularly nasty spike in producer prices. That isn’t happening so far, as shown in this fascinating piece by colleagues Jana Randow and Alexander Weber. So far, unions are accepting deals significantly worse than they had originally sought, as illustrated by this chart from the story using Goldman Sachs Group Inc. data:\n\nThat implies that, at least so far, unions don’t feel as empowered as history suggests they might. That’s good news if you’re worried about inflation, and not so good if you’re worried about inequality.\nAlso, regular reader Matt Dubuque points out that there is historical precedent for clamping down ruthlessly on post-pandemic wage demands. Following the Black Death, England’s Edward III saw that laborers were using the sudden drop in the labor supply to demand  higher wages. His response was the Statute of Laborers. It’s not a liberal document. Here is a chunk:\n\nwe have seen fit to ordain: that every man and woman of our kingdom of England, of whatever condition, whether bond or free, who is able bodied and below the age of sixty years, not living from trade nor carrying on a fixed craft, nor having of his own the means of living, or land of his own with regard to the cultivation of which he might occupy himself, and not serving another, if he, considering his station, be sought after to serve in a suitable service, he shall be bound to serve him who has seen fit so to seek after him; and he shall take only the wages liveries, meed or salary which, in the places where he sought to serve, were accustomed to be paid in the twentieth year of our reign of England, or the five or six common years next preceding.\n\nThe penalty was prison. An incomes policy this strict isn’t politically possible these days. On balance, history still suggests that workers are in a position to demand more money. Keep an eye on Germany to get an idea whether it’s going to happen.\nFooled by Randomness, Baseball Edition\nReversion to the mean is one of the constants of life, in baseball as in markets. Baseball is a game that can be analyzed deeply with statistics, that runs on money, and which inspires great passions — just like markets. The season finale is about to happen, with the Houston Astros meeting the Atlanta Braves in the World Series. The season is over for my own Boston Red Sox, who succumbed 4-2 to the Astros in six games. Should we be surprised, or disappointed?\nNo. The Red Sox were maddeningly inconsistent all season, with long winning stretches interspersed with periods when they appeared incapable of anything. At the outset, they looked like the fourth-best team in the division. That’s roughly what they were, even though they survived longer than any of their divisional rivals. The Red Sox put together a nine-game winning streak and, in the penultimate week, a seven-win stretch. They did the latter wearing novelty yellow uniforms, which prompted the crowd to start dressing as bananas. But the seven-game streak was followed by losing three in a row at home to the New York Yankees, and then dropping two of three to the terrible Baltimore Orioles.\nSomehow they earned a home game against New York for a wild card to the play-offs, which they won easily. The narrative changed. Against Tampa Bay, who won nine games more than the Red Sox during the regular season, Boston reeled off three games in a row, thanks to a brilliant offense. Then in the first 27 innings of their series against the Astros, the Red Sox scored 27 times. Over the remaining 26 innings, they scored once. Both of these streaks in their own right seemed implausible; the overall series performance was about what you’d expect.\nYou can try to attach narratives to this, but that would be unwise. The Red Sox had a good but erratic offense, meaning that over a full season they would do well but not superlatively. They might just beat a superior team in the post-season (as against Tampa), but as time went by, the odds increased that a better team would beat them. They reverted to the mean. Along the way, the clumps of good results to be expected in a random distribution gave me and many others lots of pleasure.\nWhat relevance does this have for markets? There are momentum effects, but the longer the season lasts, the more you can assume quality will out. If you want to bet on how things will go in the short run, you will have a lot of fun, but you are taking a much greater risk. Don’t be fooled by the market equivalent of banana-yellow uniforms. Stick with the fundamentals for the long term, be patient, and you’ll probably win.\nSurvival Tips\nThis weekend began with World Wombat Day.Wombats are wonderful, some of my favorite marsupials. Everyone should should appreciate them.Wombat Stew was one of my kids’ favorite songs when they were younger; it’s a great book to read aloud to pre-schoolers. And there’s even a decent band called the Wombats, who sing about moving to New York and many other things. You could give them a try.\nHave a good week, everyone.","news_type":1},"isVote":1,"tweetType":1,"viewCount":411,"commentLimit":10,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"symbols":[],"verified":2,"subType":0,"readableState":1,"langContent":"CN","currentLanguage":"CN","warmUpFlag":false,"orderFlag":false,"shareable":true,"causeOfNotShareable":"","featuresForAnalytics":[],"commentAndTweetFlag":false,"andRepostAutoSelectedFlag":false,"upFlag":false,"length":15,"xxTargetLangEnum":"ZH_CN"},"commentList":[],"hasMoreComment":false,"orderType":2}