UBS On-Air: Paul Donovan Daily Audio 'Idle speculation'
5/27/20263 min
The embarrassing lack of economic information leaves markets prey to idle speculation, rather than the pure and objective guidance that economists can offer. Yesterday’s exchange of fire between Iran and the US has not had a major market impact—it fits with Iran’s narrative on negotiations (which is what markets have priced), and keeps the optimism bias more or less intact.
Transcript preview
First 90 secondsPaul Donovan· Host0:01
Good morning. This is Paul Donovan, Chief Economist at UBS Global Wealth Management. It's seven o'clock in the morning London time on Wednesday, the twenty-seventh of May. There is an embarrassing lack of real economic information scheduled for release today, which raises the risk that the financial market traders will start depending on emotions and animal spirits rather than the pure objective analysis that economists bring to the world. Despite the fact that armchair generals have had no real luck in predicting anything that is happening in the Gulf War, there will be some speculation about the exchange of fire between Iran and the United States yesterday. The market's optimism bias and the fact that events are confirming the Iranian view of negotiations, which is what markets tend to believe and price in, has kept the benchmark Brent oil future below a hundred dollars a barrel. Of course, politically, the pressure is still on at the US administration, with US retail gasoline prices still up well over fifty percent from pre-war levels. Price memory lasts up to eighteen months. That is to say, what consumers think of as being a fair price for a high-frequency purchase will