A thread on why bond yields went down and equities rallied post-FOMC: https://twitter.com/macroalf/status/1537165064326852610?s=21&t=TronljSwtUy1esYjc0oYAA
In summary, JPow stated they would slow down the rate hikes above neutral, so the market expectation for continuous 50+ bp hikes was tamed.
@Kevin
This was confusing me yesterday, MacroAlf always has the answers to the tough questions.
Thanks for sharing
Yesterday Unusual Whales did a live stream while waiting for FOMC minutes. They had several guest speakers dropping really great outlook and knowledge. Overall consensus: bear markets last roughly 1 year. We’re 112 days in. They average drop 44ish % and we’re currently in the mid 20s. Most are strickly holding cash now and allotting a monthly balance into cash brokerage to make big moves at the sign over a turn around down the road. Just food for thought.
Oddly enough, a few weeks ago I did a totally unscientific comparison of the charts from 2008 and now. I came up with a date for the bottom of December 9th. Using the stats you posted, a year from the peak is roughly early December. Weird.
I thought this article was quite interesting and provides some levels on where we might potentially bottom out from a fundamental perspective over the medium term.
As always, take with a pinch of salt but looks like MS is thinking SPX at 3400 and GS as low as 3150 if we go into a recession
Thanks for sharing this, I really like the P/E approach to price targets. It seems to be the most logical. With that said, in the back of my mind I cant help but think there are some longer cycles and unique variables that may prove to be historically unusual. As we move forward this methodology will def help reference where we are at. Thanks again!
Edit: One more thing, I personally am using the feds monetary policy as a guide aswell, I dont think I can realistically think bullish until the fed starts accommodations again.
Thanks for sharing here, I love this strategy and have been thinking about doing just that. A few comments up I mentioned the “end game” strategy which is essentially what these guys are talking about. I think we will have an incredible buying opportunity, could be one of the best in our lifetimes, just may take a little time getting there. Thanks again for sharing here
Interest rate swaps and Eurodollar futures are forecasting a less-than-expected hawkish Fed? Euro dollars expecting peak rates to come by march 2023 and then rate cuts and SOFR swaps don’t even expect a 4% rate? Am I missing something?
You are not missing something, and I appreciate you bringing this up as I believe it is wildly important. Eurodollar futures indicate they are pricing in a Fed pivot, by March 2023 as of right now. This has continued to move closer all year. This is vastly different than what the fed has signaled and basically means they are betting the fed will have to reverse course and ease rates sooner than signaled due to the market needing it.
You are absolutely killing it dude, I appreciate it.
Junk Bond spreads highest in over a year:
And Bloomberg is still saying that the spreads are too narrow to justify the credit risks:
No paywall:
https://news.yahoo.com/credit-investors-hoarding-cash-biggest-145023356.html
Investment grade spreads also 5 bps off their yearly highs:
This upcoming earnings season could rise these spreads to concerning levels, especially for junk bonds.
https://twitter.com/macroalf/status/1538569937752576001?s=21&t=yOymYCHQHKfpwbsBvsOlsA
Looks like FinTwit people like Alf are looking to long bonds due to the implied peak in rates in 2023. Could be a good idea to start averaging into stuff like TLT?
10 seconds in at the 27:13 mark - “… and the market started trading stagflation.”:
Alf and Andreas had Manulife’s Global Chief Economist & Strategist Frances Donald on in the latest episode of The Macro Trading Floor.
The whole thing is worth a listen as she does a masterful job of summarizing where we are, and then laying out a few options that might be appropriate now. She sees rates starting to fall again within a year, and thinks going cash-heavy is not a bad idea.
A potential global sovereign debt crisis is on the horizon due to inflation, food prices going through the roof and US interest rate hikes. Uneducated economist was talking about this earlier too.
Port was down about 4% today. Moved some of the positions around, did a little more buying. Im anticipating this is a bear market rally that will be short lived so im okay seeing a little red for a few days with these longer strikes. Will be as usual listening to J Pow and friends tomorrow morning and making any adjustments if necessary.
Hope everyone is having a great day.
Awesome the fact you are committed not a single call on that port. Conviction seems to be key to successfully trading and your conviction has certainly paid off over last several months you were ahead of the game and stuck too it. Have no doubts many of these will work out the same. Congrats man!
Crude oil is looks to be continuing its decline this morning. If we have seen oil peak (still unconfirmed) this will undoubtedly be referred to as the start of a recession. We also get first Q2 GDP estimates today which could point to a technical recession if GDP comes in negative again.
Q2 Earnings start going full swing here in only 3-4 weeks. As mentioned throughout this thread, we are anticipating weaker financials due to lower demand for most goods and higher costs of labor and other expenses. Should be reflected in earnings as well as Q3-Q4 guidance.
UNLESS we get any indication from the fed that they will be reversing tightening, IMO there is no reason to be bullish for the foreseeable future. The circus is in town again this morning, lets see what J Pow and his friends have to say.
Update:
Treasury yields are swinging down this morning. Quick moves down like this can be an indicator of risk off trading.
Since Memorial Day weekend, it has been the most crowded in NYC commuting in (trains have been packed). Local restaurants, deli’s, etc. all have had pretty close to normal lines, if not longer somedays. I suspect a short term relief from retail this summer as more and more companies bring back to office a new “norm”-ish again. I can’t tell you how many “workers” are pumped to come back and have been scheduling their company happy hour celebrations left and right. Not enough to support an economy, just a thought on a potentially unexpected relief valve to certain businesses that could lead into some plays here as a short-term “anti”-recession play.
(Apologies if this isn’t the best thread for this post)
Well, I got my asshole ripped open today. Broke multiple “House” rules that I have spent most of the year working on. I was getting heavy signals in the morning that didn’t realize and over traded. Little disheartening knowing if I would have literally done nothing and trusted my thesis I would have ended the day close to even or even slightly green.
Risk management / Capital preservation is half the battle here, and today I most definitely lost that battle.
Im going to pinpoint the errors I made, learn from them and then move on.
