Restricted - ExternalFOCUS8 January 2024Global Macro ThoughtsA reasonable resetAjay Rajadhyaksha+1 212 412 7669ajay.rajadhyaksha@barclays.comBCI, USMax Kitson +44 (0) 20 3555 2386 max.kitson@barclays.com Barclays, UK Kaanhari Singh+852 2903 2651kaanhari.singh@barclays.comBarclays Bank, Hong KongWhere noted in the source notes, the views expressed within this report are taken from previously published research. For further detail, including important disclosures and analyst certifications, please follow the links on each page and on page 8.This document is intended for institutional investors and is not subject to all of the independence and disclosure standards applicable to debt research reports prepared for retail investors under U.S. FINRA Rule 2242. Barclays trades the securities covered in this report for its own account and on a discretionary basis on behalf of certain clients. Such trading interests may be contrary to the recommendations offered in this report.PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES BEGINNING ON PAGE 9.FICC ResearchGlobal MacroRestricted - ExternalCompleted: 08-Jan-24, 11:30 GMT Released: 08-Jan-24, 11:34 GMTRestricted - ExternalThe world at a glance• Macro conditions have not changed in the last few weeks, despite markets gyrating a lot• The US economy still has momentum, and inflation in the West has dropped considerably• Financial markets over-reacted in the December risk-on, and are now resetting • Our call is unchanged – too many 2024 cuts are priced in, and we like stocks over bonds 28 January 2024Restricted - ExternalIgnore the ISM, focus on the labor market •The 7 point drop in ISM services employment makes no sense to us 1o It is inconsistent with regional surveys, initial claims and service sector employment o We believe this ISM report gives a false signal, and markets eventually agreed on Friday •On the other hand, the payroll report was more mixed than appeared at first glance 2o The rise in AHE and the drop in LFPR were decidedly hawkisho However, the work week fell, there were net downward revisions and the household survey was weak o While it is just one month of data, we think the Fed will focus most on whether labor supply is tightening •Zooming out a bit, the US jobs market is still in very good shape, even if softer than 12 months agoo The payroll proxy is rising at over 4% annualized over the last three months, while core PCE inflation has been 0.4%o In other words, real incomes are now growing strongly, and the Atlanta Fed is tracking 2.5% Q4 GDP growth •So far, the US is showing every indication of growing at or above trend for the foreseeable future 38 January 20241 US Outlook: Rock beats scissors, payrolls beat ISM (6 January 2024)2 US Economics Research: December employment: Undermining the supply-side narrative (5 January 2024)Restricted - ExternalMixed...
