The Macro Factors Driving the Market – Live with Mahmood Noorani

Published on
September 7th, 2020
41 minutes

The Macro Factors Driving the Market – Live with Mahmood Noorani

Live ·
Featuring Mahmood Noorani

Published on: September 7th, 2020 • Duration: 41 minutes

In this labor day live to tape edition of Real Vision Live, Mahmood Noorani of Quant Insights returns to help viewers make sense of what macro factors are driving asset prices right now. Noorani tells Real Vision’s Roger Hirst that the S&P 500 has become one trade and uses this to explain why the Robin Hood and narrative driven investments that seem so disconnected from the underlying macro fundamentals have been working so well. They also discuss how factors like inflation differentials are the key to understanding what is happening in the currency markets and break down Warren Buffett’s recent bet on Japan. Filmed on September 3, 2020.



  • AP
    Aneil P.
    8 September 2020 @ 04:35
    But QE is just showing a poker face. Doesn't create inflation! They just create reserve account right? So who cares about QE really?
    • DS
      David S.
      8 September 2020 @ 07:21
      I assume tongue in cheek. DLS
    • SW
      Scott W.
      8 September 2020 @ 16:46
      Perhaps, but it's a point hammered home on RV of late through Jeff Snider, Brent Johnson (and his guest) and the re-airing with Lacy Hunt. They don't answer critical questions raised, the answers to which are essential to proving their argument.
    • DS
      David S.
      8 September 2020 @ 21:07
      Scott W. - I think that Mr. Hirst gave the answer in his last Daily Briefing. The big banks trade the market themselves and loan money to the shadow banking and quant types to also play the market. They make money when the market goes up and when the market goes down. The Fed still believes that the banks will only loan money to longer-term projects. This belief is like house prices will only go up. When no longer-term projects are around, the funds flow to the market. DLS
    • TS
      Timothy S.
      8 September 2020 @ 22:36
      Scott W, what questions?
    • AF
      Andre F.
      9 September 2020 @ 00:43
      David S. Why would Aneil's comment be tongue in cheek? I share the same sentiment that he put forward. There is a dimension to QE that is a "so what?" dimension. It never created inflation in the real economy which is what a lot of fear mongers and others claimed it would bring; those people were misinformed bearers of a dramatic promise. No one likes it when a boy (or anyone else) cries wolf.
    • DS
      David S.
      9 September 2020 @ 02:57
      Andre F. - The reason I said "tongue in cheek" was I thought it was. If Aneil P.'s comment was not tongue in cheek, I apologize. Aneil P.'s final comment is “So who cares about QE really?" I consider world market part of the real-world economy. Markets all over the world seem to care. They hold a lot of retirement money in pensions and personal savings. Follow the money. QE ended up in the market through big banks and the shadow banking system. Investors feel richer. Look at the increase in P/Es. That is stock inflation. Gold, silver, and house prices inflated. If the money were given to the poor, the CPI would inflate as food, clothing and rents would go up. Unfortunately QE filters to the wealthy. To quote Mr. Parrilla, " What we need to understand is that inflation is 100% a monetary phenomenon.” I think Dr. Friedman would approve if you include the velocity of money too. DLS
    • SW
      Scott W.
      9 September 2020 @ 13:02
      @Timothy S. Brent Johnson and Steven Van Metre were on some days ago with the argument that QE is largely a ruse - that's it's deflationary, that the Fed is trying to trick us into thinking there will be inflation. Steven stated that banks who sell treasuries to the fed do not receive "money" (won't quibble here), but rather reserves which are untouchable and unusable. Therefore, there is no money printing. I don't dispute this per se - my question is WHY would the banks willingly exchange fungible assets (treasuries) for something that's supposedly useless? What do they gain in the process? Without that understanding I can't follow through to Steven (and Brent and Jeff Snider) s' conclusion.
    • AC
      Alex C.
      9 September 2020 @ 16:09
      @Scott W. I'm not convinced this argument that they cannot use reserves is particularly accurate. Semantically the FED may not be literally printing money, but they can control reserve requirements and incentivise/disincentivise banks to expand money supply through fractional reserve lending. Which is ultimately where most monetary inflation takes place. If the FED reduces the required reserve ratio to zero or allows pre-existing reserves to be supplanted/freed up by asset purchases, then the banks ability to lend has increased. This is commensurate with the increases in M2/M3 during the QE period i.e. monetary inflation. The question is really, why has monetary inflation/expansion not led to price inflation, which possibly boils down to the efficiency of credit markets and velocity of money. Credit both expands and contracts unevenly throughout the economy. Where one area could be expanding e.g. debt funds, PE and corporate debt, you could see contraction in other areas e.g. distressed credit, personal credit etc. as a consequence money supply can grow in some areas and contract in others. This may lead to an inconsistent inflationary impact as velocity of money slows and liquidity becomes consolidated in areas that contribute less from an aggregate demand perspective. One example of this could be argued as corporate debt fueled share buybacks, potentially the company benefits and those that own shares, but this is unevenly distributed from a velocity perspective.
    • DS
      David S.
      14 September 2020 @ 01:19
      Alex C. - Inflation follows the money. Inflation is seen in the P/Es of the stock market constantly increasing inflated stock. Gold and silver have inflated during the year. Bitcoin has inflated. The CPI is only one level of inflation. To get the CPI to show inflation, you would need to give a lot of money to consumers. DLS
    • AC
      Alex C.
      14 September 2020 @ 07:28
      Davis S. Understood, but when the FED targets "inflation" it is referring to the annual change in the price index of PCE, which is comparable to CPI. Both are general price measures, not specific assets.
  • tr
    tom r.
    12 September 2020 @ 01:24
    Even CNBC is more interesting. What good are all these opinions? It's like all your contacts are in disarray. I find myself looking at Real Vision only when nothing else is available. Sad! How do I end my subscription? I will not be renewing. I now see why Grant has moved on. His interviews are why I joined in the first place. I recently upgraded one level only to be extremely disappointed.
  • JR
    Jacob R.
    11 September 2020 @ 08:20
    “The fed could be overwhelmed by sheer flow”. Not technically no. If bonds are issued in a sovereign currency, the bank that issues that currency can technically buy every single bond from the private sector by expanding its balance sheet.
  • SM
    Sergio M.
    11 September 2020 @ 03:34
    Mahmoud says that inflation isn;t as big of a deal was we may think - in which context did he mean that in?
  • DT
    David T.
    8 September 2020 @ 21:56
    Roger, you lost me at the end with -" for people who can get the tickets, it would be things like the 5- year 5-year forward inflation expectations in the US and Europe?" Are you talking about 5 year bonds or some other indicator?
    • AF
      Andre F.
      9 September 2020 @ 00:34
      Yes, I didn't catch that either.
    • RH
      Roger H. | Real Vision
      9 September 2020 @ 10:59
      Hi David - I look at the five year, five year inflation swap forward, used by the ECB. On Bloomberg the ticker is FWISEU55. For the US its FWISUS55
  • TS
    Timothy S.
    8 September 2020 @ 22:32
    This guy has never hear the name Jeff Snider
  • CD
    Christopher D.
    8 September 2020 @ 21:42
    i like the collection of old penguin books.
  • BA
    Bruce A.
    8 September 2020 @ 00:50
    Very good. Thanks Roger and Mahmood!
  • MD
    Mark D.
    7 September 2020 @ 07:26
    Nice work Roger! He didn’t want to give you to much did he :)
    • DS
      David S.
      7 September 2020 @ 22:40
      If the future were even a little translucent Mr. Noorani would have been able to give more. He told us that government policy is driving the markets. That is a lot. DLS
  • DS
    David S.
    7 September 2020 @ 22:36
    Excellent interview. We are in COVID Times. The markets are mainly reacting to government policies. The freedom for any government to promulgate good economic policies is directly related to how well its citizens are handling COVID. If government policies determine the markets, citizens' actions concerning the mitigation of COVID determine the options for government policies. COVID is in the driver's seat in global markets also. It is difficult to trade with other countries when COVID policies are constantly changing. Government policies are and will be incoherent at best. Daily policies vacillate moment to moment from protecting its citizens to protecting its economy. Different levels of government react in an incoherent fashion. Market reaction to incoherent policies will be incoherent. Mr. Noorani will probably be able to react at a moments notice. Can the rest of us? DLS
  • JF
    Jess F.
    7 September 2020 @ 20:38
    Is trading a zero sum game?
    • AA
      Andrew A.
      7 September 2020 @ 20:39
      no, but profitable trading is ;)
  • GL
    G L.
    7 September 2020 @ 18:58
    An interesting and useful interview - great to have Mahmood back. I don't think it comes as any major surprise that the major driver of market pricing is the policy response. However, no mention of the fact that this has already started to roll off and therefore the regime is due to snap back pretty soon. It's also highly ironic that these type of multi-factor macro models attract a lot of attention just when correlations go to 1 and the number of statistically significant explanatory factors drops from dozens to around 1. A single factor driving the market that is about to go into reverse is a time bomb for markets.
  • JS
    Jon S.
    7 September 2020 @ 18:40
    Roger is a diamond
  • PU
    Peter U.
    7 September 2020 @ 16:01
    excellent! Thank you
  • AL
    Aaron L.
    7 September 2020 @ 12:06
    Roger holds the crown at RV for talking/explaining with his hands. 😀 11mins from the end, on 2x speed, he puts Mr Burns baseball coaching signals to shame! Whether it’s RV or Refinitiv, I always make sure to tune in, you’re a legend Roger!
    • AB
      Alastair B.
      7 September 2020 @ 14:40
      Throwin’ shapes!
  • RM
    Russell M.
    7 September 2020 @ 13:07