Jon Turek @jturek18 Twitter profile

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Jon Turek

2 years

Some personal news: I have decided to wind down my JST Advisors business/Cheap Convexity blog and join a hedge fund. A bittersweet moment for me but very much looking forward to the next chapter on the trading side.

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Jon Turek

@jturek18

2 years

The thing that is incredible about the Russian financial collapse is that Russia spent six years building a financial fortress and it was basically gone in one weekend. - Big c/a surplus - Low gov't debt/GDP - High levels of real rates And in one weekend, none of it mattered.

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Jon Turek

@jturek18

2 years

Over the past decade, Nasdaq traded below its 100 week moving average three times. Q1 2016 growth scare, Q4 2018 sell off, and Covid meltdown. In all those cases, the market bottomed soon after breaching the 100w. We shall see if this break is different for NQs.

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Jon Turek

@jturek18

2 years

One way to explain what’s going on is, the biggest economy in the world has started its fastest monetary tightening cycle in +20 years while the second & third largest economies in the world are both either explicitly (China) or implicitly (YCC in Japan) easing monetary policy….

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Jon Turek

@jturek18

2 years

The Fed is signaling that they plan to be around +100bps above neutral for the next two years. Thats a pretty serious message.

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Jon Turek

@jturek18

2 years

Q1 could be quite interesting. Everyone is talking about no growth/recession but the two biggest economies in the world both have meaningful near-term growth tailwinds. China is now clearly reopening and the US is currently getting a real income boost from falling cost pressures.

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Jon Turek

@jturek18

2 years

Probably worth noting again that this is what the Fed *wants: - Housing slowing. - Labor market tightness softening, claims rising. - FCIs tightening but with VIX at 25-30 and credit well behaved. - Survey data weakening. - Higher inventories. - Goods consumption slowing.

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Jon Turek

@jturek18

3 years

+20bps in 2s. Hasn't happened in almost 15 years. Whats even more wild is this the third +10bp daily move in 2y yields in the past 3 weeks. The front end is completely unanchored.

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Jon Turek

@jturek18

3 years

I was wrong today, no hawkish reprieve. - Powell woulda raised his PCE dot since Dec - QT will be in background, no handoff from hikes - Powell endorsed recent FCI tightening - "A lot of room" to raise rates without hurting labor - Policy path is open Extremely hawkish to me.

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Jon Turek

@jturek18

2 years

The problem with going 75 next week is that the Fed would effectively lose forward guidance. Forward guidance may not be appropriate for this hiking cycle, but betting on 75 next week is a bet on the Fed being ok losing their ability to guide this cycle.

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Jon Turek

@jturek18

2 years

The UK has an insanely interesting set of macro variables at the moment: - Labor shortage - 10% inflation - 5% wage growth - ToT shock - Record trade deficit - Negative productivity - +4% implied terminal rate - Selling Gilts - Looming fiscal stimulus And I'm missing a few.

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Jon Turek

@jturek18

2 years

Tepper is just such a legend. Simple framing, clearly explains his market views and what is informing them. Nothing fancy. And hes made 15 billion dollars doing this so kinda knows what he's talking about.

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Jon Turek

@jturek18

3 years

Implicit theme from Powell today is, the Fed is now preemptively going to fight any further deterioration in its price stability mandate as opposed to being preemptive on growth side. In reax function terms, upside risks to prices > downside risks to employment. This is big.

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Jon Turek

@jturek18

2 years

BoJ playbook under Kuroda: When everyone is talking about it, nothing happens. When everyone isn't paying attention to it, massive things happen.

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Jon Turek

@jturek18

2 years

A lotta crazy moves tonight in markets, but seeing EURCHF below parity is really quite something.

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Jon Turek

@jturek18

3 years

This to me is one of the more important charts in macro right now. EDZ2 making new lows and backend breakevens shoot higher. Usually when reds fall as hikes get pushed fwd, it pulls from backend breaks. Not happening right now. This dynamic has lotta cross asset ramifications.

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Jon Turek

@jturek18

2 years

The most worrying part about this USD move is that it is not obvious what the circuit breaker is. In the 2010s, this level in the dollar index would alter Fed policy intentions. This time around, even at these levels in the dollar, we are still very far from that happening.

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Jon Turek

@jturek18

2 years

Pretty wild seeing latest trade data out of South Korea. The economic model of, import commodities/export high value add goods to China, doesn’t work right now.

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Jon Turek

@jturek18

3 years

Pretty insane CB schedule this week: - Fed: First dots of the year. - BCB: No room for disappointment. - Norges: What are "clear signs"? - BoE: Bailey tone on spare capacity. - CBRT: First test of Gov Agbal since Nov. - BoJ: Policy review/YCC band. - CBR: Timeline to neutral.

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Jon Turek

@jturek18

2 years

Im honestly surprised that risk is not even lower. This was a complete data disaster day for the Fed. - New high in headline CPI - 5-10y Umich inflation expectations to 3.3 - New high in Cleveland Fed median CPI - ATL Fed wage tracker last night Just a bad setup for next week.

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Jon Turek

@jturek18

3 years

Feels like the stage is set for tomorrow. The market is hawked up but the front end can't sell off (higher yields) because of the selloff in stocks. And stocks can't really rally because of the front end can't rally (lower yields). Time for Powell.

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Jon Turek

@jturek18

2 years

Something John Williams just said on Bloomberg TV confirmed what was a big takeaway for me from the FOMC this week. The Fed now has a target for what "sufficiently restrictive" is, and they think it's around 160bps on the real funds rate. From my JSTA client note:

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Jon Turek

@jturek18

2 years

This is now the fourth biggest 1d down move in Cable in the last 20 years. The others, Brext, Covid, GFC. This is a pretty significant day.

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Jon Turek

@jturek18

2 years

Current intervention list: - PBOC in CNH - MoF in JPY - BoE in +20y gilts - ECB has their TPI - BoK in KRW & KTBs - RBI in INR I am probably missing a few. Pretty wild times.

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Jon Turek

@jturek18

2 years

Feels like we're really starting to feel both sides of strong USD in the data. It's one a disinflationary force via commodities but it's also a global manufacturing killer. This is being corroborated in the data with better inflation readings but really bad manufacturing data.

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Jon Turek

@jturek18

2 years

There seems to be a developing theme on the FOMC right now that seems quite focused on real yields. Fed speak since June FOMC has clearly focused on the level of real yields. Kashkari/Daly/Bullard/Bowman have all made mention of real yields not being high enough yet.

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Jon Turek

@jturek18

3 years

Who decided it was a good idea to put the Fed/BoE/ECB/Norges/SNB/banxico/BI/CBRT/BoJ all in the same 24 hour period?

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Jon Turek

@jturek18

2 years

Looking at a max drawdown study on the Russell 2k, since 1980, typically +30% stock market drawdowns happen in recessions. The two +30% drawdowns in RTY that didn't happen during a recession were 1987 & 1998, which were both financial crises. The market thinks the cycle is over.

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Jon Turek

@jturek18

2 years

To me there are four key themes right now in macro for Q1: 1) China re-open 2) The BoJ pivot 3) The Fed is in the area of where they want to be 4) ECB hawks + EGB supply What is interesting potentially about '23 is these themes don't all intersect "cleanly" across FX and rates.

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Jon Turek

@jturek18

2 years

For some good news on another big down day in spoos. I’m engaged to the greatest girl ever. Beyond blessed and thanks to everyone on fintwit who has reached out with the kind wishes, I really appreciate it. P.S. don’t direct any macro qs to Mo Schwartz.

Mo Schwartz

@moschwartz1

2 years

Big congratulations to my brother @jturek18 on his engagement to @Sarcuzz ! Wishing you guys a lifetime of happiness and love! The formal JST Advisors and Cheap Convexity announcement is forthcoming. As Jon is busy tonight, please direct all Macro inquires to me.

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Jon Turek

@jturek18

2 years

I think this market reaction (FCIs/breakevens) to the Timiraos leak will be very telling to the FOMC. The point of the September dots was to ex-ante kill a dovish pivot in market pricing terms. If the Fed feels they can't pivot without being dovish, chances are they won't pivot.

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Jon Turek

@jturek18

2 years

The only thing now re Brainard is how much weight she pulls on FOMC, but her direction is clear, she wants a post Dec pause. - Effects will take time - Excess savings drawn down - No 2h rebound in GDP - Disinflation in core goods will limit core services - Margin recompression

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Jon Turek

@jturek18

2 years

The dynamic I am struggling to wrap my head around is the current duality of an inverted YC and deeply negative 10y real rates.

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Jon Turek

@jturek18

3 years

China in past 3 weeks: - Cut 1y LPR (first time since April 2020) - Cut RRR - Raised FX reserve ratio (slow RMB) - State council said fiscal support Monpol/Fiscal/FX This is not a huge China easing cycle but they're telling you that growth has gotten too low. And that matters.

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Jon Turek

@jturek18

2 years

It really doesn't matter why CPI was 0.6%, for the Fed right now it seemingly just matters that it was 0.6%. “At this point, I don’t care what the reasons are. Inflation’s too high and my job is to get it down.” - Waller

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Jon Turek

@jturek18

2 years

The whole risk asset world is just a chart of US rates.

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Jon Turek

@jturek18

2 years

This feels like a big deal.

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Jon Turek

@jturek18

2 years

Something that has been clear in Mester/Powell/Evans talks over the past week is, it's no longer about the inflation situation worsening, it's about the degree of improvement. Insufficient "improvement" is now *also a catalyst to get more aggressive. That's quite hawkish.

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Jon Turek

@jturek18

4 years

@Connor_J_Hughes Gregg williams deserves a statue outside MetLife, maybe with a Trevor Lawrence jersey on him.

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Jon Turek

@jturek18

2 years

It really is. We may get a recession but we are certainly not in one right now. In fact, the biggest endogenous risk to the economy today is that nominal demand is too strong right now.

Joe Weisenthal

@TheStalwart

2 years

"The recession talk is laughably divorced from the economic data." -- Neil Dutta of @RenMacLLC

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Jon Turek

@jturek18

3 years

These Umich readings on consumer sentiment are remarkable in the context of everything else. In fact, today's reading is lower than during March/April 2020. - Record high Quits rate - Record consumption data - Fastest nominal income growth since late 90s - ISM at 60 Yet, this

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Jon Turek

@jturek18

3 years

In the past four trading days, we've had: - U3 below 4% - Hawkish Fed speak - CPI at 7% Despite that, the front end has basically stalled. EDH3 is down 3bps since Fri and actually +2bps since post Payrolls. Market seems to be saying that the Fed is sorta priced here. For now.

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Jon Turek

@jturek18

3 years

Powell’s Jackson message seems to be: hawkish on taper, dovish on hikes.

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Jon Turek

@jturek18

2 years

Was a real thrill to have my first JST Advisors macro HF dinner cosponsored by Goldman Sachs. The one consensus from the table of PMs seemed to have been that cross asset vol is not coming down soon and mean reverting strats will stay challenged.

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Jon Turek

@jturek18

2 years

The paradox of a more dovish Powell today is that Fed "pivot" was likely delayed today not pulled forward.

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Jon Turek

@jturek18

4 years

New post: "what if the dollar is a solved problem"

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Jon Turek

@jturek18

3 years

The scenes in TRY are wild. Erdogan tried a rabbit out of the hat via effectively subsidizing the carry trade (FX losses were in excess of depo rate) + TRY settled NDFs for exporter hedging. Def got bang for his buck in terms of reaction. Certainly not out of the IMF playbook.

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Jon Turek

@jturek18

4 years

Wonder if the gold bugs know they're long the thing they told us to fear, namely policy effectiveness in responding to negative shocks. Gold is a real yields bet. And betting on lower real yields here is basically a bet on policy's continued ability to overcome negative shocks.

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Jon Turek

@jturek18

2 years

@conorsen its possible, and this is just a possibility, there is another factor in crypto layoffs other than the economy

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Jon Turek

@jturek18

3 years

So YTD, US real yields are up 50bps, SPX down 5%, HY CDX up 20bps. In this not so constructive risk backdrop, EM is ripping higher. Both ZAR and BRL +5% YTD. Beautiful macro is when correlations break.

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Jon Turek

@jturek18

2 years

This is a mess, markets still not at an equilibrium

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Jon Turek

@jturek18

2 years

Nothing really quite sums up the state of the sellside like a GS report on the 2075 global economy. I mean, we don't even know what Q1 2023 will look like.

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Jon Turek

@jturek18

2 years

Powell's Brookings speech today was expected by many to be some form of Jackson Hole or Nov FOMC presser. It was neither. There were fears of micromanaging FCIs, it didn't happen. The Fed seems to implicitly be saying this is not July/August, this FCI easing is being "earned."

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Jon Turek

@jturek18

2 years

Its possible that pre-committing to 150bps of hikes in 3 months isn't that dovish

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Jon Turek

@jturek18

2 years

We’re in a global growth scare, commodity prices have come down a lot and yields are well off their highs. In this backdrop not only has JPY not rallied but USDJPY is making a new high. Pretty interesting.

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Jon Turek

@jturek18

2 years

Something that is almost certainly not a coincidence is that 5y breakevens in the US peaked when the PBOC decided that it was time for some FX weakness. 5y US breaks v CFETS basket (CNH)

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Jon Turek

@jturek18

2 years

Pretty much the whole game at the moment

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Jon Turek

@jturek18

2 years

There was one dissent at todays BoJ, Kataoka, who wanted more easing.....

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Jon Turek

@jturek18

2 years

A Brainard speech that begins with a Volcker quote. Feels like there is a big message in that.

Speech by Governor Brainard on variation in the inflation experiences of households

It is a pleasure to join you to discuss differences in how households at different income levels experience inflation. 1 I look forward to hearing from th

www.federalreserve.gov

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Jon Turek

@jturek18

2 years

Not really a take on todays ECB but I found this chart really interesting. For the first time in over a decade, 10y breakeven rates in Germany are higher than 10y breakeven rates in the US. Quite something.

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Jon Turek

@jturek18

3 years

The fixed income trade is turning into two parts. 1) markets coming to terms with how strong growth will be, term premium etc. 2) the Fed will blink faster than they are currently saying and this new reaction function won’t have staying power. I’d bet on 1 but not 2.

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Jon Turek

@jturek18

2 years

The whole market is doing a rates vol relief trade, from FX, credit to equities. The cross asset question now is two fold, has rate vol peaked for this cycle and what is its new range?

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Jon Turek

@jturek18

11 months

An hour ago a rocket hit a building a block over from me. Been back and forth to the bomb shelter all night. A truly awful day. Am yisrael chai.

*Walter Bloomberg

@DeItaone

11 months

🇮🇱 ROCKET BARRAGE FROM THE GAZA STRIP ONCE AGAIN TOWARDS CENTRAL ISRAEL AND THE CITY OF TEL AVIV

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Jon Turek

@jturek18

2 years

The market knows the Fed won't do 75s forever, that's in the price. So why does the Fed seem so eager to remind us of that in a way that can muddle their reaction function?

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Jon Turek

@jturek18

2 years

This could be the best data point the Fed has seen this year

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Jon Turek

@jturek18

3 years

Another example over w/e why China been hesitant to add stimulus. Lack of Chinese credit impulse not having the same -ve multiplier it had last cycle cuz agg demand is being “replaced.” China continues to import the agg demand it is missing from credit. New high for trade surplus

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Jon Turek

@jturek18

3 years

For risk assets, it's really the composition of the rates selloff that matters more than any levels. Until today, the market had been bear steepening, not bear flattening. The latter is a problem for risk and is inconsistent with the Fed’s reaction function.

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Jon Turek

@jturek18

4 years

People focused on EM dollar debt, @BIS_org went over real issue today. We are in "original sin redux"(Carstens & Shin). EM borrows in local ccy from foreigners, mismatch moves to lenders balance sheet. Massive pro-cyclicality to flows as EMFX serves as "juice" to underlying moves

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Jon Turek

@jturek18

2 years

Really blown away by all the feedback and well wishes. Very grateful. Fintwit is great and I hope the community continues to grow. Sharing ideas on here is how my whole macro journey started. So for people looking for an "in", start by sharing, you never know who might read it.

Jon Turek

@jturek18

2 years

Some personal news: I have decided to wind down my JST Advisors business/Cheap Convexity blog and join a hedge fund. A bittersweet moment for me but very much looking forward to the next chapter on the trading side.

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Jon Turek

@jturek18

2 years

A theme I was talking about in my post Jan FOMC client note was this idea of the Fed "trading" market vol for econ vol. I.e. to smooth out econ vol, they needed higher market vol. Which means, these current levels of elevated cross asset vol are not a bug but actually a feature.

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Jon Turek

@jturek18

2 years

We’re getting to a point, or maybe at the point, where stocks are right or bonds are right, but it can’t be both. Feels like 4k ES and 97 EDZ3 is a combination that doesn’t work but guess we’ll find out.

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Jon Turek

@jturek18

2 years

Decomposing global fixed income and why every part of the curve is so weak: - Fed in the front end - ECB in the belly - BoJ in the backend The Fed is in a rush, the ECB is undoing NIRP and the BoJ is towards the end of YCC. Put it all together and its an epic FI sell off.

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Jon Turek

@jturek18

2 years

Equities are interesting here. On the one hand, things have improved a lot re soft landing odds etc. On the other hand, big rallies (like today) seem to come on days where oil/USD/yields are all down together and that's a trifecta that is unlikely to trend.

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Jon Turek

@jturek18

3 years

It’s possible we say this every year but this really feels like a great market for global macro.

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Jon Turek

@jturek18

3 years

Feels like OPEC is playing with fire a bit here. Sure they want some backwardation, especially as they've been burned before on supply increases. But 1y spreads now trade almost 14% backwardated. Market needs barrels.

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Jon Turek

@jturek18

2 years

There is a lotta ex-post stuff going re stocks ripping post Powell. Feels like a lot of today was +ve Ukraine headlines, State Council coming into to support Chinese markets and a vol event (Fed) cleared. Im not sure spoos are signaling much about the Fed's policy posture here.

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Jon Turek

@jturek18

3 years

Feels like there is a bit of a subtle shift going on in markets right now. Despite fears of a hawkish Fed and delta, cyclical stuff is starting to trade pretty well. Breakevens up, copper ripping, dollar off its March highs and EM ex China trades pretty well.

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Jon Turek

@jturek18

2 years

Something that has been very evident today, but has been going on really since September, is that US equities have begun to underperform other major global equity markets. In non Asia terms (Europe/Latam), this is not just a one day thing. Pretty interesting. EZU vs. SPY ratio

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Jon Turek

@jturek18

2 years

With Kuroda’s term ending I think it is finally time for new Twitter profile pic

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Jon Turek

@jturek18

3 years

Feels like a huge move in front end European fixed income because it is. Biggest one day move in 2y schatz yields in over a year.

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Jon Turek

@jturek18

10 months

I want to thank everyone who has reached out, the support has been incredible. I’m safe in Tel Aviv and despite many bomb shelter runs am ok. My heart is completely broken. If you are looking for ways to help, dm me as I know people on the ground doing amazing things. עם ישראל חי

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Jon Turek

@jturek18

3 years

While today's minutes were first hint of a hint of taper, a couple things to keep in mind: 1) it's conditioned on "continued rapid progress" how does April payrolls fit into that? 2) upcoming meetings (plural) just to "begin discussing a plan." Nothing happening at June FOMC.

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Jon Turek

@jturek18

3 years

Had an awesome pre Sept FOMC meeting with @TimDuy . He sets a high bar for us Fed watchers.

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Jon Turek

@jturek18

2 years

Another day where the US front end was a down a lot (EDZ2 -9bps) and USD was flat to down. A big theme for me right now is that FX is not activating tighter FCIs as it did last cycle (BoE 2014 & Fed 2018). Which means the rates channel stays dominant and CBs have to do more.

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Jon Turek

@jturek18

3 years

Price action in the front end was super interesting today. Mester and Bostic both poured cold water on the 50bps idea (at least for now) and EDZ2 still sold off. Think that's very telling.

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Jon Turek

@jturek18

3 years

Since stocks reclaimed the 100 day moving average post March 2020 lows, there have been 3 episodes of the S&P 500 closing below 100dma. None of those episodes lasted longer than 5 days. 100dma area has been a huge support level. Will be interesting to see if this time is diff.

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Jon Turek

@jturek18

3 years

Something that still amazes me is how well EM has started the year, especially given the current risk backdrop. SPX down 6% 2y US yields up 75bps 10y reals up 70bps HY CDX up 60bps And this is what EWZ (Brazil) has done. Up 20% YTD.

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Jon Turek

@jturek18

4 years

New post: What if covid was the top in the risk premium bull market? 1) Fed will lean into "opportunistic reflation." 2) 2010s were a bull market in risk premium, what if covid and the policy response since was a turning point in distributional terms?

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Jon Turek

@jturek18

2 years

I'm in the camp that this was more of a setback than a reset, but in terms of the ED strip distro, this is a big reset. I think the pricing assumption now has to be, 75,75,50,25. Which is massive shift from the potential of 75,50,25,pause. Market now has to bear that adjustment.

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Jon Turek

@jturek18

3 years

Something that feels a bit under-discussed is that part of the supply issues we're having now are because we had a decade of insufficient demand.

Jon Turek

@jturek18

3 years

New post: "The U.S. Economy is on Fire, but it’s kind of a Mess Right Now" This is may be a new era for aggregate demand in the U.S., and for now, the supply side is still coming to grips with it.

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Jon Turek

@jturek18

2 years

Pretty surreal. Grateful to my co-authors from the @NYFedResearch

NY Fed Research

@NYFedResearch

2 years

In Staff Reports: The Dollar’s Imperial Circle By Ozge Akinci, Gianluca Benigno, Serra Pelin, and Jon Turek >>>

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Jon Turek

@jturek18

2 years

Something that's starting to appear in Fed Speak is a differentiation b/w "recession" & "strong labor market." Powell noted this today in his interview. That nuance makes total sense. The idea of a "hard ish landing"/"soft recession" in JSTA client notes. This is from March.

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Jon Turek

@jturek18

2 years

To me the biggest CB story this week was not the Fed/RBA/BCB/CNB/NBP or even BoE (although they are close). It was the ECB. Villeroy's speech today and Schabel's interview two days ago. The ECB is moving and if you are waiting for Lane or Panetta to confirm it, you might miss it.

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Jon Turek

@jturek18

2 years

Pretty cool to see our paper presented at the IMF research conference

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Jon Turek

@jturek18

3 years

Fed communication is all over the place at the moment. A key issue is taper, as the market is front running "substantial progress." Fed should just say there will be no taper in '21. This would anchor the rate path via sequencing and define "some time" as at least many quarters.

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Jon Turek

@jturek18

2 years

Pretty incredible moves in markets today, most notably in FX. Rumors of China dropping covid zero has led to the biggest one day rise in AUDUSD in 10 years.

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Jon Turek

@jturek18

4 years

The Fed just said, via the dots and forward guidance, that the conditions that caused policy “normalization” in ‘17-18, u3 below NAIRU and expected PCE at 2, would not even warrant one rate hike off the ELB. The Fed means business, the question now is does fiscal.

Jon Turek

@jturek18

4 years

Fed really wanted to reinforce new reaction function and SEP dots did that. New 2023 forecast has a median estimate for 4.0 U3 while NAIRU is 4.1 and PCE is at 2%. That forecast is paired with rates at the ELB and unchanged through the forecast period. It's very dovish.

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Jon Turek

@jturek18

3 years

A key spot is going to be b/w CPI and Jan minutes. If CPI takes March implieds from 34bps to 40, Fed is going to have to say if they don't want 50. If we go into March with 40 priced and they go 25, thats an FCI ease which Fed wants to avoid. If they don't pushback = px is right.

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Jon Turek

@jturek18

3 years

Wonder how much reflexivity is at play in backend USTs right now with FX hedged USTs for JPY so attractive. April is new fiscal year so clean balance sheets/FX hedged yields should mean lots of GPIF interest. Mkt front runs that, stabilizes FI, which in turn brings in more JPY $.

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Jon Turek

@jturek18

2 years

Seems like today was more evidence of this dynamic. The "easy" stuff is softening: supply chains are healing, used cars deflating, gas prices have fallen and the bullwhip effect on inventories. But the stickier stuff still seems like a big challenge in this wage growth backdrop.

Jon Turek

@jturek18

2 years

New Post: Thinking about inflation over the next 6-12 months

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