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Global Economic Context for the US Economy The research views expressed herein are those of the author and do not necessarily represent the views of CME Group or its affiliates. All examples in this presentation are hypothetical interpretations of situations and are used for explanation purposes only. This report and the information herein should not be considered investment advice or the results of actual market experience. Blu Putnam Chief Economist, CME Group June 2014
© 2013 CME Group. All rights reserved
Risk Disclosures: Futures and Swaps Trading
Neither futures trading nor swaps trading are suitable for all investors, and each involves the risk of loss. Swaps trading should only be undertaken by investors who are Eligible Contract Participants (ECPs) within the meaning of Section 1a(18) of the Commodity Exchange Act. Futures and swaps each are leveraged investments and, because only a percentage of a contract’s value is required to trade, it is possible to lose more than the amount of money deposited for either a futures or swaps position. Therefore, traders should only use funds that they can afford to lose without affecting their lifestyles and only a portion of those funds should be devoted to any one trade because traders cannot expect to profit on every trade. All examples discussed are hypothetical situations, used for explanation purposes only, and should not be considered investment advice or the results of actual market experience.
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Additional Risk Disclosures
The Globe Logo, CME®, Chicago Mercantile Exchange®, and Globex® are trademarks of Chicago Mercantile Exchange Inc. CBOT® and the Chicago Board of Trade® are trademarks of the Board of Trade of the City of Chicago, Inc. NYMEX, New York Mercantile Exchange, and ClearPort are trademarks of New York Mercantile Exchange, Inc. COMEX is a trademark of Commodity Exchange, Inc. CME Group is a trademark of CME Group Inc. All other trademarks are the property of their respective owners.
The information within this presentation has been compiled by CME Group for general purposes only. CME Group assumes no responsibility for any errors or omissions. Although every attempt has been made to ensure the accuracy of the information within this presentation, CME Group assumes no responsibility for any errors or omissions. Additionally, all examples in this presentation are hypothetical situations, used for explanation purposes only, and should not be considered investment advice or the results of actual market experience.
All matters pertaining to rules and specifications herein are made subject to and are superseded by official CME, CBOT and NYMEX rules. Current rules should be consulted in all cases concerning contract specifications.
© 2013 CME Group. All rights reserved
Global Growth: Mature Economies
4
-2% 0% 2% 4% 6% 8%
United States
Japan
Euro-Zone
United Kingdom
Source: Estimates by CME Group Economics Team
2014 Real GDP Mature Country Projections
© 2013 CME Group. All rights reserved
Global Growth: Emerging Markets
5
-2% 0% 2% 4% 6% 8%
Brazil
Russia
India
China
Source: Estimates by CME Group Economics Team
2014 Real GDP Emerging Market Projections
© 2013 CME Group. All rights reserved
Low Inflation: Mature Industrial Countries
6
-4%
-2%
0%
2%
4%
6%
1995 1998 2001 2004 2007 2010 2013
Year
over
year
Perce
ntag
e Cha
nge
Source: Bloomberg Professional.
Inflation: US, Germany, Japan
US
Japan
Germany
© 2013 CME Group. All rights reserved
Fed Ending QE by Late 2014
7
$0
$1
$2
$3
$4
US$ T
rillio
ns
Source: Federal Reserve Bank of St. Louis FRED Database
Composition of Federal Reserve Assets
Other
MBSUST 10+ Years
US Treasuries Less Than 10-Years
© 2013 CME Group. All rights reserved
ECB Balance Sheet is Shrinking
8
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
1999 2001 2003 2005 2007 2009 2011 2013
Euro
Milli
ons
Source: European Central Bank Monthly Bulletins
European Central Bank Assets
Securities & Govt Debt
LoansOtherFX and Gold
© 2013 CME Group. All rights reserved
Bank of Japan is Still Buying Aggressively
9
0
50,000
100,000
150,000
200,000
250,000
300,000
1997 1999 2001 2003 2005 2007 2009 2011 2013
Milli
ons o
f Jap
anes
e Yen
Source: Bank of Japan (www.boj.or.jp)
Bank of Japan Assets
Japanese Government Securities
LoansOther
© 2013 CME Group. All rights reserved
Focus on United States
Budgetary Stability
Healthy Private Sector Job Growth
Job Losses from Government Sector Ending
Labor Market Dynamics in Flux
Changing Nature of US Energy Production Boom
Agricultural Risks and Drought Prospects
10
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Federal Budget Coming into Balance
11
$0
$1
$2
$3
$4
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
US$ T
rillion
s
Source: US Treasury Department,Projections by CME Economics.
US Federal GovernmentRevenues and Expenditures
Expenditures
Revenues
© 2013 CME Group. All rights reserved
US Private Sector Job Growth Is Healthy
12
100,000
103,000
106,000
109,000
112,000
115,000
118,000
2003 2005 2007 2009 2011 2013 2015
1000
s of P
rivate
Secto
r Job
s
Source: Federal Reserve Bank of St. Louis FRED Database (USPRIV)
US Private Sector Jobs
Private sector job growth has been about as strong as the last economic recovery -- starting from a lower base.
© 2013 CME Group. All rights reserved
Governments Stopped Reducing Their Workforces in mid-2013
13
20,500
21,000
21,500
22,000
22,500
23,000
23,500
2003 2005 2007 2009 2011 2013
1000
s of G
over
nmen
t Job
s
Source: Federal Reserve Bank of St. Louis FRED Database (USGOVT)
US Federal, State, and Local Government Jobs
Census Workers (2010)
QE was never going to help state and local governments get their budgets in order --817,000 jobs were lost between April 2009 and March 2013.
© 2013 CME Group. All rights reserved
Pace of Decline of Unemployment Rate
14
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Duration of Unemployment: Tale of Two Indicators
15
0
1000
2000
3000
4000
5000
6000
7000
8000
in Th
ousa
nds o
f Per
sons
Number of Unemployed Persons: Short Duration vs. Long Duration
Source: St. Louis Federal Reserve FRED Database (UEMP27OV and UEMPLT5).
Long Duration Unemployment (27 + weeks)
Short DurationUnemployment(less than 5 weeks)
© 2013 CME Group. All rights reserved
Part-Timers Staying Elevated due to Aging and E-Commerce
16
© 2013 CME Group. All rights reserved
Participation Rate
17
© 2013 CME Group. All rights reserved
Quit vs Layoff Rates
18
© 2013 CME Group. All rights reserved
Aging of US Labor Force
19
© 2013 CME Group. All rights reserved
Deceleration of the US Labor Force Growth
20
© 2013 CME Group. All rights reserved
Monthly Job Creation: Long-Term Perspective
21
© 2013 CME Group. All rights reserved
Natural Gas
22
0
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
30,000,000
35,000,000
1949 1957 1965 1973 1981 1989 1997 2005 2013
MM
cf
Source: US Energy Information Administration, Sourcekeys N9140US2 (Consumption) and N9010US2 (Withdrawals).
US Natural Gas Production & Consumption
Production
Consumption
© 2013 CME Group. All rights reserved
Petroleum
23
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
1920
1925
1930
1935
1940
1945
1950
1955
1960
1965
1970
1975
1980
1985
1990
1995
2000
2005
2010
2015
U.S.
Field
Prod
uctio
n of C
rude
Oil
(Thou
sand
Barre
ls)
Source: US Energy Information Administration,Sourcekey MCRFPUS1.
US Crude Oil Production
© 2013 CME Group. All rights reserved
Petroleum Exports and Imports
24
© 2013 CME Group. All rights reserved
Coal
25
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
2008 2009 2010 2011 2012 2013
Thou
sand
s of s
hort
tons
of co
al
Source: U.S. Department of Commerce, Bureau of the Census,Monthly Reports EM 545 and Monthly Report IM 145.
US Coal Exports and Imports
Exports
Imports
© 2013 CME Group. All rights reserved
Corn
26
Source: United States Department of Agriculture
http://www.nass.usda.gov/Charts_and_Maps/Field_Crops/cornac.asp
© 2013 CME Group. All rights reserved
California and Texas/Oklahoma Droughts
Source: University of Nebraska (May 27, 2014)
http://droughtmonitor.unl.edu/data/jpg/20140527/20140527_conus_trd.jpg
27
© 2013 CME Group. All rights reserved
Ocean Surface Temperature Anomalies
Source: UNYSIS for 31 May 2014 -- http://weather.unisys.com/surface/sfc_daily.php?plot=ssa&inv=0&t=cur
28
© 2013 CME Group. All rights reserved
Geo-Political Risks (Source of Black Swans ?) Scottish Independence Vote (Sept 2014)
Repercussions from EU Parliament Election (May 2014)
Brazil Presidential Election (Oct 2014)
India’s New Prime Minister (May 2014)
Russia’s Post-Crimean Annexation Ambitions (2014)
Russia-China Natural Gas Agreement (In progress)
US Congressional Elections (Nov 2014)
US Keystone Pipeline Decision (? Late 2014)
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Global Economic Context for the US Economy The research views expressed herein are those of the author and do not necessarily represent the views of CME Group or its affiliates. All examples in this presentation are hypothetical interpretations of situations and are used for explanation purposes only. This report and the information herein should not be considered investment advice or the results of actual market experience. Blu Putnam Chief Economist, CME Group June 2014
Global Economic Outlook for the Remainder of 2014
Blu Putnam, Chief Economist, CME Group June 11th, 2014
© 2014 CME Group. All rights reserved.
Disclaimer
32
Futures trading is not suitable for all investors, and involves the risk of loss. Futures are a leveraged investment, and because only a percentage of a contract’s value is required to trade, it is possible to lose more than the amount of money deposited for a futures position. Therefore, traders should only use funds that they can afford to lose without affecting their lifestyles. And only a portion of those funds should be devoted to any one trade because they cannot expect to profit on every trade. All references to options refer to options on futures.
Swaps trading is not suitable for all investors, involves the risk of loss and should only be undertaken by investors who are ECPs within the meaning of section 1(a)12 of the Commodity Exchange Act. Swaps are a leveraged investment, and because only a percentage of a contract’s value is required to trade, it is possible to lose more than the amount of money deposited for a swaps position. Therefore, traders should only use funds that they can afford to lose without affecting their lifestyles. And only a portion of those funds should be devoted to any one trade because they cannot expect to profit on every trade.
Any research views expressed are those of the individual author and do not necessarily represent the views of the CME Group or its affiliates.
CME Group is a trademark of CME Group Inc. The Globe Logo, CME, Globex and Chicago Mercantile Exchange are trademarks of Chicago Mercantile Exchange Inc. CBOT and the Chicago Board of Trade are trademarks of the Board of Trade of the City of Chicago, Inc. NYMEX, New York Mercantile Exchange and ClearPort are registered trademarks of New York Mercantile Exchange, Inc. COMEX is a trademark of Commodity Exchange, Inc. All other trademarks are the property of their respective owners.
The information within this presentation has been compiled by CME Group for general purposes only. CME Group assumes no responsibility for any errors or omissions. Additionally, all examples in this presentation are hypothetical situations, used for explanation purposes only, and should not be considered investment advice or the results of actual market experience.
All matters pertaining to rules and specifications herein are made subject to and are superseded by official Exchange rules. Current rules should be consulted in all cases concerning contract specifications.
Copyright © 2014 CME Group. All rights reserved.
© 2014 CME Group. All rights reserved.
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Bluford Putnam
Bluford (Blu) Putnam has served as Managing Director and Chief Economist of CME Group since May 2011. He is responsible for leading economic analysis on global financial markets by identifying emerging trends, evaluating economic factors and forecasting their impact on CME Group and the company's business strategy. He also serves as CME Group's spokesperson on global economic conditions and manages external research initiatives
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