sellside observations for (12/05th) the week ahead, USTs to make a comeback in 2023 (DB and Rich Bernstein) ... and cute puppy picture

Good afternoon. Catching up and missed all the fireworks yesterday, it would appear…

Stocks, Bonds, Crypto, & Commodities Soar As 'Dovish' Powell Trumps 'Hawkish' Payrolls

… Interesting enough as it may have been to get caught up in the heat of whatever your action may have been, looking at how, say 10yy settled on the day, just beneath 3.50% … with momentum staying extremely overbought,

IF we take a slightly longer-term view — say WEEKLY — you’ll ALSO note the WEEKLY close sub 3.50% seems to have some prior peak (June) relevance … beneath here is ~3.30%,

NOT a view, just a recap of PRICE ACTION and you can / will make your own calls. Getting your positions, portfolios, duration ‘statements’ ready for year-end which, best I reckon, means even LESS liquidity.

And so, on that note, HERE are a few items from Global Wall Street to check out. I’ve left UP some 2023 outlooks, added a couple others and a couple / few things which caught MY eyes and you might be funTERtained by are …

Barclays on stocks into 2023: Out of the Forest, Into the Woods (SPX tgt up to 3725)
BMOs forward entry LONG 10yy
1stBOS 10yy TO 200dMA (3.05%) or perhaps even 3.00%
DBs yld f’casts for ‘23, “…implies more normal expected returns” (approx 3.7%)
MS offers 3 reasons to FADE excessive rate CUTS (and gets short 5s vs 2s10s)

Saving the best for last,

Rich Bernstein asks, “2023’s Best Asset Class: Long-Term Treasuries?”

… long-term Treasury yields tend to peak well before the rate hiking cycle concludes. Since the Fed began targeting the Fed Funds rate in 1982, on average, 30-year Treasury yields have peaked 3 months before the Fed reaches the terminal rate (Table 1). Further, on average the Fed hikes rates 133bps more after the 30-year yield peaks. The 30-year yield also tends to peak at a time when inflation is still near cyclical highs for that period, economic growth is slowing, and earnings are about to turn negative. This sounds awfully familiar to today’s macro environment.

If the 20-year yield falls by 150bps over the next 12 months - levels we last saw in April 2022 – the total return would equal 21%. What other investment has the potential to reward investors with a 20% return against a backdrop of an earnings recession and tightening liquidity? We think we are at a place where risk/reward is compelling for long-term Treasuries

Maybe DBs suggestion of a 3.7% return on USTs not so stoopid?

Moving on then TO the week ahead AND for any / all (still)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 …

THAT is all for now. Enjoy whatever is left of YOUR weekend as I’m still recovering from holiday party season kickoff last night … continues this evening and on into next week … all the best from mine to you and yours … starting with this guy who’s wishing the rain would stop and we could get out there and enjoy some of this mild temperature…

THAT is, as they say … all for now.