A wild prediction is that inflation is going to crash in 23. But the model estimates are based off commodity and energy forward curves that are prone to liquidity risks. If inflation does crash, it is not necessarily a good thing for stocks because margins will crash.
The balance sheets of the 4 major central banks keep expanding while inflation rises. This phase of monetary expansion was uniquely focused on offsetting the loss of demand, and why QE and inflation are more closely linked than pre-pandemic
@lisaabramowicz1
@tomkeene
Previous spikes in interest rates saw periodical declines following. But spikes pre-70s/80s were closer to the historical mean of 7% rather than sub-5 % in 2022...
Levered funds are still massively short of the Yen, and asset managers are substantially long of the Nasdaq. With no liquidity in August, the market stays in a forced buying and forced selling pattern
@CountyofLA
@lapublichealth
If restaurants adhere to social distancing, masks and other guidelines, why should they close. especially when they may not be the source of the spread? Instead, the majority of spreads happens at indoor, private gatherings. Set higher restrictions on those activities.
You could conclude that China tech and ARKK were in a Nasdaq 2000-style bubble. A counter-bear rally is underway and may add 10 to 15% gains (oval), after which the second leg of the bear market happens. If the 2000 story holds though, there will be a significant recovery by 2024
"Don't shoot the M2 messenger."
@carlquintanilla
Money growth running negative Y/Y, the first time in the history of money, at least since the 1980s
@CNBCOvertime
China's CDS is back at the 2020 pandemic high due to the shutdown. Yuan (CNH) has yet to revisit the same 2020 highs, and EM spreads lag the move in China's CDS. The risk remains high for more dislocation in EM
@TheStalwart
Interestingly Joe, the four sectors that "carry" the economy--Big Tech, Internet, Pharma and Healthcare--are all trading with a V-shape. Suggests a new economy at work that can recover faster and with a V-shape. Best, Ben
The yield curve is "bull steepening" because the market expects the Fed to reverse course in the future, and why the 2Y yield is down. But the curve is also "bear flattening" in 3M/10Y because right now the Fed cannot abandon the fight against inflation
@tomkeene
@lisaabramowicz1
Financial conditions are crossing the zero line where the Fed comes out with significant hawkish rhetoric. But resistance is there to be broken and the more hawkish the Fed, the more financial conditions rise above the zero resistance line
@tomkeene
@lisaabramowicz1
@FerroTV
It is true that ISM services new orders index is in recession territory. But it is also true they came from a record high in β21 never reached before because of the pandemic. Latest drop caused by real estate due to high rates caused by the pandemic. False recession dawn or real?
another extreme: the crack spread. Gasoline vs. crude shows the extent of how restrained the refinery of oil is at this moment. A major impulse to US domestic inflation
The "bad news is good news" is just a psychological narrative. Earnings have been better than expected but the "bad news" is that negative surprises are rising while positive surprises are falling. The rally is a bear market bounce
@FerroTV
@lisaabramowicz1
@kaileyleinz
The China reopening is the macro event of 2023 with implications for the flow of money and credit, potentially setting up the next phase of risk-on markets in H2 (graph courtesy of
@AndreasSteno
)
Speaking of "behind the curve." UK inflation is about to get out of control and the BOE is miles and miles behind. How can investors be thinking of a pivot with inflation at these levels?
Treasury yields are rapidly converging above the Fed's median dot for next year, while expectations of the Funds rate are above 3%. Even though it looks that yields may have overshot, they may in fact not be at a "fair level" that is higher at 3 to 3.5%.
20% of the $1.2 trillion Inflation Reduction Act has been spent so far and it is having an impact on productivity and manufacturing. Given no fiscal retrenchment for the next year, IRA can add to GDP despite strikes and shutdowns