Pro Macro: In Focus – War Of Attrition

Published on: June 14th, 2023

The overwhelming desire for immediate gratification needs to be balanced against the patience required to allow stars to align. Recent positive data surprises haven’t fitted with Julian’s bias to “take the under” on US data. Should we be concerned and how shall we prepare for battle in the current war of attrition?


  • JM
    John M.
    15 June 2023 @ 05:49
    A few observations from a FAANG worker in a tech hub: I know a surprising number of tech workers that are asking for severance packages - in most cases this is some combination of being burned out and having vested $$$$ of RSUs over the last 3+ years (and potentially having an employed significant other.). If they got a package, my guess is these people would continue spending at about the same level (or maybe more since they have more free time?) I know a few real estate agents here who are all telling me homes are starting to get 15-20 bids and go 10%+ over ask again, apparently despite monthly payments maybe ~50% higher than in 2019 and ~100% higher than in 2020. I golf, and all the courses (including $200+ ones that took their prices up ~50% this year) are almost booked out. The one I usually play just put out signs everywhere saying 'hiring for all positions including chefs, golf professionals and greenskeepers.' I don't doubt data is weakening, but I am having trouble putting this together with daily experience where it feels like inflation is reaccelerating. Curious if anyone has any thoughts on how to reconcile these or has a different experience?
    • IB
      Ivan B.
      15 June 2023 @ 07:03
      My observations are Australia based and I see similar picture. The only explanation I have is that people with savings and boomers are finally getting % on their savings (a lot of our banks increase interest as RBA increase rates unlike in the USA). This gives boost to spending in certain cohorts of population. Dining out, gold courses, shopping... I can't explain very tight property market though, we don't have long fixed rates mortgages (most of them are fixed only for 3 years) and most of the mortgage holders are paying significantly more than two years ago, yet property listings are falling and prices are still rising.
  • MG
    Miguel G.
    15 June 2023 @ 16:46
    Julian, can you add a little more color on your bigger pic view on inflation. You expect it to fall from here, but is it safe to assume around 3s-4% it becomes sticky? Its an interesting dynamic because while inflation is clearly heading in the wrong direction there's a risk that the fed sees the absolute move as encouraging, pauses hikes only to be surprised how stick it is around the 3%s and will feel the need to either add hikes or continue pausing. Just want to decipher what your big pic outlook is for inflation because I know you and Raoul differ on that view, yours being itll come down to a higher level than their 2% mandate and itll be hard to get there while Raoul think we may experience out right deflation. Thanks in advance.
    • MG
      Miguel G.
      15 June 2023 @ 16:54
      *typo inflation clearly headed in the right direction