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Why Economic Data No Longer Matters

Courtesy of ZeroHedge. View original post here.

Back in mid-2009, we said that with the Fed and central banks nationalizing capital markets, macro and even micro data and newsflow will matter increasingly less and less, and the only thing that does matter is the Fed's weekly H.4.1 statement, showing the changes to the Fed's balance sheet. It also means that so-called "data dependency" is a farce (it is, and has always been "Dow dependency"), and that the impact of incremental newsflow will shrink with every passing week until virtually nobody pays attention (we have largely reached this state now).

Since then it has been entertaining to watch how one after another stoic trader and commentator has thrown in the towel on conventional market orthodoxy to adopt precisely this kind of "tinfoil" thinking, the latest example being Bloomberg's macro commentator Mark Cudmore, who in his overnight Macro View writes that "traders should should spend less time studying economic releases and listen to the clear guidance from officials instead."

The relevance of data is declining. Policymakers around the world are trying to make crystal clear that they’ll ignore that which doesn’t fit their narrative. Many financial commentators have failed to make the transition and are incorrectly transfixed by each data release.

Or, in short, data no longer matters in a world of central planning.

Here is his latest Macro View in which Cudmore explains why "It’s Time for Traders To Listen Rather Than Watch"

Data-dependency is becoming passé for global policymakers. Traders should should spend less time studying economic releases and listen to the clear guidance from officials instead. 

For years, policymakers have been emphasizing data dependency. Investors took a while to fully register the message and, as a result, often got whipsawed by throwaway comments from officials.

Market participants fully caught up with the idea in late 2016, but now policy has moved on.

The relevance of data is declining. Policymakers around the world are trying to make crystal clear that they’ll ignore that which doesn’t fit their narrative. Many financial commentators have failed to make the transition and are incorrectly transfixed by each data release.

The BOE has been hammering home the point that it wants to raise rates. When the most dovish member of the MPC confirms that message, it’s not the time to worry whether U.K. inflation is peaking.

Brexit negotiations will matter for U.K. and European assets but again, it’s about listening to the speeches, rather than trading the data prints.

U.S. inflation hasn’t hit target in years but Fed members have been consistent in saying that’s a side issue — the FOMC is focused on normalizing policy while the economy is strong enough to cope. So far in 2017 the year- on-year core PCE index fell from 1.9% to 1.4%, yet guidance remains hawkish.

Stop fretting about the marginal data print. Janet Yellen has made clear it will take a momentous and broad economic shift to alter the Fed’s path. And if that shift happens, she’ll make the new approach clear as well.

The ECB has flagged that it’s eager to taper quantitative easing. Inflation isn’t at target and the structural imbalances in the euro zone haven’t been fixed, but that doesn’t matter.

That isn’t to say that data is completely irrelevant for traders, but it does decrease the importance of individual releases. And don’t be too quick to fade asset price reactions to comments from officials.


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