sellside observations and a couple eco calendars
where ZH then noted mkts reaction,
Stocks Tank & Yield Curve Inverts After Hotter-Than-Expected CPI Print
And as only ZH can do (w/little help from BBG),
I will spare you more the CPI and ECB recapathon but will NOT spare you a LINK thru to what some of Global Wall Street is saying / sellin this weekend. HERE are a few observations from the SELLSIDE where I’d highlight:
EPBMacro [Chart of Interest] The Credit Market Is Calm...Too Calm...
…A 20% drawdown in the S&P 500 may not be fully discounting the impact on corporate profitability from 7% borrowing costs.
Barclays believes a 75bps rate hike SURPRISE but I’m asking how can it be a surprise if many / most have already placed down their chips betting on this SURPRISE? This, from twitter, for example, showing,
… The probability of a 75-bps hike next week is edging to 50% while the market is pricing a 4% funds rate by summer next year.
DB gets prize for only mention (which I caught) of risk parity in a note titled,
The world’s stagflation hedge
… Second, by extension of the above, the dominant driver of the FX market is not relative central bank pricing but the “global stagflation” risk premium on the dollar. This can most clearly be seen in the high correlation between a 60/40 bond/equity "risk parity" portfolio and the USD this year (chart 3)
Hard to deny or refute the price action - 5yy smoked that 3.10% level and while I respect it, dearly, I’d be foolish not to acknowledge some other moves which ultimately represent STRESS in the system.
I’ll leave the pros to dial up moves in the MOVE and VIX for your dining and dancing pleasure. I will also trust the pros will note the moves in the EZ.
FTSE MIB down 5%?
Anyone with a terminal license reading this far along and in ‘the game’ back when a PIIGSB INDEX <GO> was discussed?
Negative administered rates are about to be thing of the past.
Our kids kids will be discussing in Econ 101 in community college as they are preparing for a career in IT as well as driving trucks with goods needing to get from here to there.
They’ll be having that extra gallon of coffee preparing to work a graveyard shift at McDs simply to afford gasoline for their dinosaur of a car with an old school gasonline powered engine as only the elites and ivory towers will be driving around in 100k TESLAs, lecturing the rest of us on our carbon footprints…this as they park and charge up at the local airports where they parked the G5 (or whatever is the latest model of the NetJets fleet at that time).
Yeah, thats right. This is as much a political rant and economic development as there ever were. Look, I’ll readily admit I was a card carrying TRANSITORIAN.
The administration and the Fed are now seemingly one and the same (hobbit?) and both rate complicit and responsible for bringing us to this moment.
Sure, Vlad has had something to do with the last buck and a at the pump. Anyone check in to see how AOCs TESLA bill is being paid?
And just for the record, i’m NOT comin’ on to you, AOC.
Happily married, 3 fantastic kids and yer a piece of work … and likely wouldn’t recognize that word WORK, which all yer constituents are doing double and triple time simply to put food on the table these days.
For them. For me. Thanks. Thanks a lot for all of your leftis green new deal efforts.
But I know, it’s all Vlad’s fault…
Am sure that narrative will go over well when explaining ITALEXIT?? Or the NEXT Greek debt default?
A final few items of interest from the CHARTS department,
…From the (self named / proclaimed ALL STAR)CHARTS,
And a (Kimble)CHART of TNX (ie the 10yy) for longer-term context fans (like me),
Kimble: 50-Year Trend Channel Has Stocks Spooked, Says Joe Friday
The rally in yields over the past two years has yields testing 2018 highs and the top of the channel at (2).
Joe Friday Just The Facts Ma’am; 50-year channel resistance is in play. If rates breakout at (2), odds increase stocks will be concerned with it!
And here’s one take on CREDIT for those of us trying to play along at home here as I now am … from McClellan Financial on
Anemic High-Yield Bond A-D Line
… This A-D Line also told us about the liquidity problems in 2018, when the Fed decided it would do some “quantitative tightening” or QT, shrinking its holdings of T-Bonds and mortgage backed securities (MBS). It showed no response when stock prices rallied in the summer of 2018, setting up the big decline in Q4 of that year.
It also told us about the big liquidity problems we are now facing, when it made a divergent top versus stock prices in late 2021. We have seen in 2022 what those liquidity problems have meant for the stock market, and thus far this A-D Line is not showing us an “all-clear” signal. There is more work yet for the market to do, to dismantle the excesses built up during QE4.
AND … for any / all interested in trying to plan your trades and trade your plans in / around FUNduhMENTALs, here are a couple economic calendars and LINKS I used when I was closer to and IN ‘the game’. First, this from the best in the strategy biz is a LINK thru TO this calendar,
Wells FARGOs version, if you prefer …
… and lets NOT forget EconOday links (among the best available and most useful IMO), GLOBALLY HERE and as far as US domestically (only) HERE …
In closing and before hittin send, getting back TO the weekend at hand (finally being taken to see Top Gun!!), and just in case YOU also missed these comments, well, there’s whatever DRUCK says, for those who may / may not see as much value in them as they do whatever Uncle Warren says ….
Druckenmiller Warns Bear Market Has "Ways To Run" Amid 2023 Recession Threats
… THAT is all for now. Back TO what is left of the weekend …