Following are some quick bullets and a visual from CSFB which lays out a path forward over the coming 3mo.
Global Market Outlook Q1 2022: Rising Yields - The Key Market Driver
Top-Level Summary
Rising Bond & Real Yields are likely to dominate cross-asset price action in Q1 after the completion of major yield bases, in line with the growing urgency to normalize monetary policy.
US and developed equity markets in general are expected to see further but still corrective weakness in the early part of Q1 as yields re-price higher…
…with US Tech expected to underperform the broader US market further.
US Small caps need to be watched closely in Q1, with a major top here still seen as a real risk.
Banks in general though are expected to benefit from rising yields. We stay bullish the USD.
GBP is showing signs of potentially meaningful strengthening in its own right.
Emerging equities are expected to extend their absolute and relative weakness as yields rise and the USD strengthens further.
A top for the Baltic Dry Index suggests the worse of the supply chain crisis may be behind us.
Rising Real Yields and a stronger USD leave Precious Metals at risk of forming significant tops.
Top level summary followed by couple bullets on 10s (nominals and REALZ), and these are EVERYONE — even stock jockeys — CORE THEMES and keys, so,
10yr US Bond Yields have surged higher to finally confirm the much flagged multi-year base. We expect this to provide the platform for a quick move up to 1.965/2.00% during Q1. Going into the rest of 2022, our core objective is 2.16/18%, with upside risks.
10yr US Real Yields have been the key driver of rising nominal yields and have also confirmed a large “wedge” base, which is similarly expected to lead to a deeper move higher during Q1, up to -.54%, then -.335/305% later in the year. Meanwhile, we reiterate our rangebound outlook for US Breakeven Inflation Expectations and still believe a major peak is in place here.
I do NOT wanna be any sorta kiljoy BUT as goes REALZ so goes <insert whichever disasterous outcome you’ve seen predicted here, now> …
In all, it’s a very good, healthy cross - market look and technical path forward. As always, these goal posts are great markers and trends are your friends (until it is they bend).
Speaking of trend bending and shifting focus further IN the curve, this from another outfit, on EDH3 (and more),
Chart Of The Day: EDH3 and more.
EDH3: has reached the target of the 55200-week MA setup finding support just below the 200-week moving average at 98.54. If seen, a weekly close below this level could suggest a test of support at 98.2 and suggest richer pricing on liftoff in March 2022 in the near term.
ES1: is trading lower around 4642 after trading to a low of 4572 yesterday. We will watch support at 4664.28 the 55-day moving average to see if price action closes below this level, which if seen, opens the door to test 4492-4520 horizontal support range.
US10YR: continues to meet resistance at 1.77-1.79 range trading lower on the day. We will watch for a weekly close above these levels could open the suggestion that price action tests the 1.94%-2.01% resistance range.
More (or less) at some point later on …