Weekly Macro Minute

But now, since you know God, or rather have become known by God, how can you turn back again to the weak and worthless elements? Do you want to be enslaved to them all over again?

Galatians 4:9, CSB

“The Seven Deadly Vices” is not a biblical concept, but it is a distinctly Christian one. This list of the deadliest evils known to man has a long history in Christian thought, first compiled by Evagrius of Pontus in the mid-4^th century A.D. Our Christian ancestors settled on these seven vices because of their potency. These are seven root desires of the human heart gone wrong, and the other sins spring out of them. Ancient theologians also called them “vices,” not “sins.” Vices are sinful habits – rhythms of life – that shape our character, which in turn shapes our destiny.

The first deadly vice is Vainglory, not to be confused with Pride. Pride is not always sinful; Vainglory is.

Vainglorious People are glory hounds. They want to be famous and renowned – and it doesn’t matter for what. They just want the name recognition.

Our Social Media Age has provided amazingly fertile ground for this vice. The Vainglorious Person finds validation through social media, checking and rechecking their posts to see who commented and how many likes they got. But one doesn’t have to be tech-savvy to nurture this vice. Vainglorious People like to accumulate lots of cool stuff – not because they need it, but because they want to be seen with it. Vainglory drives a person to hold court with others and be the center of attention, or at least ensure you hear their input in the conversation. It pushes a person into hyper-competitiveness, justified as the “pursuit of excellence.” Vainglorious People have the amazing ability to make everything about them.

Each of the Seven Vices attempts to fulfill a deeply rooted human need, but in a way that God never intended. God created all of us with a desire to be known and valued by Him. Vainglory offers a quick and cheap way to fill this desire with the applause of others. Ultimately, people become instruments used to burnish names and reputations, openness and sincerity are avoided at all costs, and hypocrisy takes root. As a result, the Vainglorious Person misses out on being known by others in a genuine, loving way.

We talk a lot about the importance of our knowing God, but Scripture makes it clear that it’s far more important that God knows us. Because of that, Paul reminds us that the power of our old lives is broken. We don’t need the applause of others. We have God’s approval through the power of the cross. Why should we settle for something less than that?

Across the Markets

U.S. stocks posted mixed results last week after giving back gains from a sell-off on Friday that coincided with the so-called “triple witching” day – a quarterly event in which a significant number of options expire that often sends market volatility higher. But volatility remained unnaturally subdued, with some measures hitting their lowest post-COVID levels last week.

Value stocks outperformed, while big tech led declines on the week. Oil prices posted a third week of gains, with WTI closing above $90/bbl for the first time all year as markets continue to tighten on the back of production cuts from Saudi Arabia and Russia. Yields rose across most Treasury tenors thanks to robust economic data supporting higher for longer rates, with the U.S. 10-year yield closing the week at 4.33%, just one basis point shy of the year-to-date high.

European markets were up on the week, and yields were generally lower, partly due to hopeful expectations that the European Central Bank’s tenth 25-basis point hike last week might be its last. Given pronounced economic weakness and stubbornly high inflation, the ECB faces a difficult challenge. Case in point: the European Commission cut its full-year 2023 growth forecast last week to 0.8% for the region and -0.4% for Germany, its largest economy.

In Asia, Japan’s markets led developed market gains last week. This gain was a further uplift in yields in response to perceived hawkish comments by Bank of Japan Governor Ueda that the government would have enough information to determine the need for a negative rate policy by year-end. The 10-year Japanese Government Bond ended the week at 0.70%, its highest since 2013. Chinese economic data came in stronger than expected, with 4.5% gains for retail sales and industrial production for the year ending August 2023.

The Chinese economy may be showing signs of stabilization thanks to stimulative policy measures. Still, most expect further policy easing will be necessary for China to put a floor underneath its economy, which has been losing momentum since the first quarter.

In the Economy

Two of the key economic reports this week were retail sales and the Consumer Price Index (CPI). Both headline numbers were up a robust 0.6% for August, ahead of expectations. In real terms, retail sales were roughly flat, and for the first time in six months, inflation rose faster than wage gains, thus reducing real average hourly earnings.

The gains in inflation and sales were primarily due to surging energy prices, as the jump in prices at the pump accounted for over half of the CPI gains and over 70% of the retail sales gains. The core CPI report also accelerated to 0.28% in August, from 0.16% in July, with year-over-year gains at 3.7%.

While almost universally expected to keep rates steady at next week’s FOMC meeting, market conditions suggest the Fed’s message will remain hawkish and open to further rate hike(s) should conditions warrant in order to bring inflation sustainably back in line with its 2% objective. Fed futures are pricing in about 40% odds of another rate hike this year.