Before I sign off for the year, a bit of housekeeping … couple things hit my inbox which may / may not be of assistance for you as you tackle the last week of the year (including 2s, 5s and 7s) and other year ending portfolio managing and trading book clean up / positioning duties…
… What I can say, though, is that the stock market likes it a whole lot better when the M2/GDP ratio has been surging upward. That reliably leads to a big price response about a year later. After the instances when the M2/GDP ratio has gone to a more flat path, the SP500 has tended to move more sideways. So if this positive correlation holds true for this new condition that has never been seen before, with the M2/GDP ratio falling at a rapid pace, then the implication is that stock prices are going to have an awful year in 2023. But again, this is something that has never happened before, so we cannot “know” for sure what it is going to mean.
Golidlocks econ department putting together and sent out top 10 (global ECO) charts of 2022 where the obvious TOP chart was … the ‘flation due TO … tight labor mkts and…
2022 aside, looking forward TO 2023, latest from Albert Edwards,
… a return to deflation fears as headline CPI inflation drops close to, or likely below zero. Investors are already anticipating recession and have an unusually strong preference for bonds. But how low will yields fall in 2023 as headline inflation evaporates? Any decline will be purely a cyclical phenomenon rather than a full-blown return to the Ice Age theme. Investors have not yet discounted a second secular wave of inflation as we eventually exit this unfolding recession – ie the Great Melt.
… The $64,000 question is how the bond market reacts – especially as investors are fully invested in a rally. Again, the 1970s might be a template. A big rally could be in the offing; however, a higher low means that the 0.5% 2020 low is unlikely to be bettered, but a fall to around 1% is plausible.
Quite possibly some of THE most thoughtful few pages you’ll find on the intertubes …And moving right along from what MIGHT happen (in 2023) to this from TS Lombard,
• A light-hearted take on 2023, with big consensus-busting “non-forecasts” • Such as Powell takes his Volcker obsession too far; BoE needs a bailout… • …CBDCs realize the conspiracy theorists’ nightmare; Brexit, what Brexit?
In as far as the blocking and tackling goes — I’m sorry I’m going to miss the final few liquidity events of the year but for those attempting to ‘GAME’ them,
The BoJ surprised markets by tweaking YCC this week, and this happened soon after the ECB indicated to markets they intend to hike beyond market expectations. We think the dichotomy of communication versus instrument, particularly in the BoJ case, could create confusion in the New Year.
You know that moment when you have just lit the fireplace for the first time in a year, pulled out the warm blanket – the one that actually reaches your toes, decided to crank up the heat – no matter the cost, and, after seemingly an hour of negotiation, picked that Christmas movie everyone can agree on… and then “KNOCK KNOCK KNOCK”… is it the Grinch making me get up!? Or maybe it could be a Christmas Carol? Or, even, that guy from the movie Love, Actually?
Ok, then … Merry Xmas eve to all who celebrate … Saw these and thought I’d pass along for no other reason than both made me pause and gave me a much needed laugh this time of year after the year that was for those running 60/40 funds (where I’m clearly biased to those in the 40 market)
First from Charles Hugh Smith … something offered about this time last year.
You tell me that you can't afford the rent the student loan or your truck I don't care about your problems pal just do what it takes to get me the bucks …
For what may very well be one of the most epic holiday / XMAS ads ever, enjoy
I hope you are warm and safe and have a wonderful holiday and that you / we all have health, peace and prosperity on in to the new year …
