When we turn to Japan, another disconcerting dynamic is occurring, as the market is becoming impatient with Abenomics. I, for one, fear the BOJ is losing control of the JGB market, while the strengthening of the yen further thwarts their efforts. The repercussions of an Abenomics failure would be broad, but investors manifest their current fears in the price action of the Nikkei. On May 23 the Nikkei declined 1,200 point (-7%), and this was followed by further declines in four out of the five sessions going into month-end. Aside from the local implications, observers worldwide have to wait, as a true failure of Abenomics would be an indictment of activist government policies more generally.
Metrics of Eurozone economics are weakening as well, with price indices disinflating, Eurozone unemployment sadly setting a new record of 12.2% and no end to misery in sight. The political implication is an orderly dissolution of the single currency area. All politics are local, and in both the periphery and core, local populations favor local interests. All would see this as better alternative than social mayhem, that is hinted at by the disproportion pain inflicted on youth through unemployment.
It is with this backdrop that in the coming meeting the FOMC will be deliberating policy trajectory. I, like everyone else, understand that an architecture is in place for a taper. However, I’m also aware that policy will be dependent on economy. I expect the economy to remain weak, or get weaker, and the Fed to remain accommodative or increase accommodation.
For Brynjolfsson full interview with Futures, go to "Brynjolfsson: The Armored Wolf in pursuit of alpha"