No elk or trout, but Fed’s virtual retreat may stoke market’s ‘animal spirits’

No elk or trout, but Fed’s virtual retreat may stoke market’s ‘animal spirits’
US Federal Reserve Chair Jerome Powell. (AP)
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Updated 23 August 2020

No elk or trout, but Fed’s virtual retreat may stoke market’s ‘animal spirits’

No elk or trout, but Fed’s virtual retreat may stoke market’s ‘animal spirits’
  • “The market is telling you there is asset price inflation occurring when there is still ... underlying weakness”

NEW YORK: Investors could get a hint from Federal Reserve Chairman Jerome Powell this week about how aggressively the US central bank will try to manage the long-term recovery from the coronavirus pandemic.

Powell will discuss the Fed’s monetary policy framework review — a review it has been undertaking for nearly two years into how it conducts monetary policy — on the opening day of the Kansas City Fed’s annual symposium on Thursday.

Since the 2007-2009 financial crisis, Fed chiefs have used their keynote speaking appointment at the conference — not being held this year in the hunting and fishing resort of Jackson Hole, Wyoming, for the first time in nearly four decades because of the pandemic — to signal important shifts in monetary policy or the economic outlook.

The market backdrop this time around could hardly be less dramatic. Spurred by Fed buying of assets, stocks have recovered their entire pandemic-related losses and are trading around record highs, while bond yields have been near record lows.

“The stock market is telling you there is asset price inflation occurring when there is still a lot of underlying weakness in the economy. I think the Fed is unlikely to view that as a signal of success on policy and, therefore, decide there is nothing more to do,” said Tony Rodriguez, chief fixed income strategist at Nuveen.

A major question — particularly ahead of the Fed’s September policy meeting — is whether or not the central bank will shift its inflation targets to an average, which would allow inflation to run higher than previously expected before interest rates are raised.

“We fully expect that they are going down the path of average inflation targeting,” said Bob Miller, head of Americas Fundamental Fixed Income at BlackRock.

Investors have been increasing their bets on inflation in reaction to the roughly $9 trillion in stimulus measures from central banks worldwide. Gold, a popular hedge against inflation and a falling US dollar, is up 28 percent for the year to date and near record highs, while the dollar has fallen close to two-year lows.

Benchmark 10-year Treasury yields hit near record lows of 0.504 percent earlier this month, before backing up to 0.638 percent after a rash of Treasury supply.

Real yields for the notes, which show yield returns after adjusting for expected inflation, dropped this month to a record low of minus 1.11 percent.

The shift to looking at an average measure of inflation would be a “big deal” and help the central bank avoid the same negative interest rate policies adopted by central banks in Europe and Japan, Miller said.

The Fed is trying to spur inflation over the next several years in order to prevent a deflationary spiral, as the global economy struggles to right itself from the shock of the global coronavirus disease pandemic.

“The Fed is rightly concerned about the unstable economic recovery so far and the degree to which we still need to absorb the job losses over the last five months,” said Gene Tannuzzo, the deputy global head of fixed income at Columbia Threadneedle.

An average inflation target would allow inflation to make up for the periods in which it fell below the Fed’s target. The Fed, like most central banks, shoots for 2 percent inflation but has missed that target for most of the past decade. With interest rates near historic lows, the central bank has fewer ways to help stimulate the economy.

Minutes from the Fed’s July meeting released on Wednesday showed that one tool to keep borrowing costs low — yield curve control — was likely off the table for now, but some think that the Fed could shift some of its buying to longer-dated debt.

Investors will also likely be looking for signs that the Fed is exploring additional ways to support the global economy should a stimulus package fail in Congress, Rodriguez said.

“If we get to a point where there is no stimulus package and no additional unemployment support, then the Fed will definitely feel like they have more to do,” Rodriguez said.


Saudi Arabia’s Amkest Group signs deal with US green energy firm

Amr Khashoggi, Chairman of Amkest Group and Scott Poulter, Chief Executive of Pacific Green Technologies
Updated 05 December 2020

Saudi Arabia’s Amkest Group signs deal with US green energy firm

Saudi Arabia’s Amkest Group signs deal with US green energy firm
  • Its expansion into Saudi Arabia through this joint venture is no surprise since the Kingdom is aiming for 30 percent of its energy to come from renewable sources by 2030

RIYADH: US-based Pacific Green Technologies Inc. (PGTK) has signed a joint venture agreement with Amr Khashoggi Trading Co. Ltd. (Amkest Group) to incorporate a company in Saudi Arabia for the sale of Pacific Green environmental technologies.
Amkest Group, founded in 1983, has a history of success in the Kingdom. Its diverse business portfolio includes construction material production and supply, property development and consulting services.
Commenting on the partnership, Scott Poulter, PGTK’s CEO, said: “Saudi Arabia under its Vision 2030 strategic framework, which calls for 9.5 GW of the Kingdom’s energy to be supplied through renewables by 2030, is set to undergo rapid growth.”
Poulter added: “Pacific Green’s technologies, particularly in the solar power, desalination and battery energy storage system sectors, provide the perfect solution to the Kingdom’s growing demand, and we are excited to leverage Amkest Group’s hard-earned relationships to contribute toward the goals of Vision 2030.”
Amr Khashoggi, chairman of Amkest Group, said: “We believe the combination of our experience and knowledge of the Saudi market, coupled with Pacific Green’s portfolio of technologies, provides the foundation for an incredible partnership and the opportunity to offer multiple complementary technologies.”
Pacific Green is focused on addressing the world’s need for cleaner and more sustainable energy. Its expansion into Saudi Arabia through this joint venture is no surprise since the Kingdom is aiming for 30 percent of its energy to come from renewable sources by 2030.
The deal comes on the back of an expectation that Saudi Arabia will attract more than $20 billion in investments in renewables over the next decade. This forecast was made by the CEO of Saudi National Grid in October, according to a report by S&P Global.