Modi Shafrir, financial markets strategist of Bank Hapoalim (photo by Ilan Bashor, pexels, Magma Images)
No one will say it outright and everyone prefers to eat and drink lest something bad happen tomorrow but you have to look at the truth “in the white of the eyes” and say what everyone already knows, whispering and some even say it openly. 2015 was a year of abundance, 2015? It will be a different year already, at least as it seems from here.
As we enter the year of the New Year, we are looking at a world that is far from stable. Russia’s invasion of Ukraine, in addition to the ills of the war, caused oil and energy prices to rise, and we are just before winter, when the consumption of energy in Europe (and the rest of the world) is increasing. A hard winter equals a higher consumption And vice versa and that means greater demand and supply? Oh well, we’ll wait and see.
More in-
TPFG will be a sign of elections not only in Israel and it does no good to anyone that the discourse is exaggerated. If we compare what is happening these days in the transaction rooms of the major banks (where the really big deals are made) and try to derive something from them about TPFG, then we will get a picture Not really pink. So hold on tight, it’s going to be a challenging year.
Modi Shafferer, Bank Hapoalim’s chief market strategist, a respected figure, veteran and know-it-all, speaks in “banking”, which is a language that not everyone speaks and not everyone masters, but the bottom line – we haven’t seen anything yet.
– Let’s try to analyze what happened last week?
“The Fed raised the interest rate by 75 basis points and it was in line with most expectations. But what did happen was that it significantly raised its forecasts for the interest rate in the coming years. The Fed now estimates that the interest rate will rise to a level of 4.4% at the end of 2022 (3.4% in the previous forecast from July ), 4.6% at the end of 2023 (3.8% in the previous forecast), 3.9% at the end of 2024 (3.4% in the previous forecast).
“An indication that, similar to what Fed Chairman Powell said recently – most Fed members also estimate that the interest rate will remain at a “restrictive level for a long period of time” (FUNDS RATE NEEDS TO STAY RESTRICTIVE FOR SOME TIME). Powell added in this context that history shows that it would be dangerous to ease the monetary policy again too quickly, and emphasized that the message in his words “is not different from the message he delivered in Jackson Hole”.
“The Fed estimates that Core PCE inflation will be around 3.1% at the end of 2023 (still above the target) – a fact that explains its estimates that (despite the growing fears of a recession in the US and Europe in 2023) – the Fed does not expect to lower interest rates in 2023.
“In the opening sentence, Powell repeated his eloquent statements from the past few months that the Fed is obligated to return inflation to the target, and added that the Fed will raise interest rates to a level that is “sufficiently restrictive” in order to lower inflation, which is mainly a burden on the weaker sections. Powell added that the Fed will continue to quickly reduce the extent of the balance sheet”.
So what should we expect now?
“Powell noted that the median of the interest rate forecasts estimates that the interest rate will rise by another 125bp in 2022 to about 4.4% (an estimate that supports an interest rate increase of 75bp in November and 50bp in December 2022), but at the same time he said that “many” members of the Fed predict that the interest rate will rise” Only” another 100bp cumulatively in the next two meetings (THERE’S FAIRLY LARGE GROUP THAT SAW 100 BPS BY YEAR END). The markets are now pricing in that interest rates will rise in the next two meetings by 70bp and 46bp, respectively.
“Powell also emphasized that the Fed is interested in reaching a positive real interest rate along the yield curve.”
If so, these are the washed-up words of Modi Shafferer, but we should look for a moment at what another senior official at one of the major banks told us when we tried to refine Shafferer’s words. “Forgo all summaries, they have no value today. We only have one estimate at the moment, and it is very similar to what Shafferer and Bank Hapoalim estimate. We are not going to lick honey in the coming year.
“When the yields on the 10-year American government bond are above the level of 3.6%, and the dollar in Israel is above NIS 3.5, it does not look good.” The senior finished.
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