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Macro Monitor

May 07 2024

$Yen No Mountain High Enough?

  • May 7, 2024

One casualty of the U.S. market’s hawkish turn is the Japanese Yen. It certainly grabbed its share of headlines, yet, when viewing the selloff in historical perspective, this year’s uptick looks entirely inconsequential. Additionally, when considering the Yen through the lens of other Asian currencies, its outsized weakness versus the dollar essentially disappears. Dollar strength is the real driver and it has pummeled Asian currencies across the board.

May 07 2024

Risk Aversion Index: Stayed On “Lower-Risk” Signal

  • May 7, 2024

The repricing of Fed cuts has largely run its course, removing one big negative from the market.

Apr 04 2024

First BoJ Rate Hike In 17 Years—Not So Virtuous After All

  • Apr 4, 2024

To gauge how much faith we should have in this “virtuous” cycle, we examine the macro context in terms of the business cycle, the Yen, interest rates, and inflation. Ultimately, inflation holds the key to bond yields, as the main difference between pre- and post-1990 rate hikes boils down to inflation—which is also the key determinant of how far the BoJ can go in this tightening cycle.

Apr 04 2024

Risk Aversion Index: Stayed On “Lower-Risk” Signal

  • Apr 4, 2024

The U.S. economy is likely to benefit from all the election-year policy measures yet to come.

Mar 07 2024

Bank Lending & Wealth Effect Support U.S. Economic Resilience

  • Mar 7, 2024

Improvement in bank lending trends should be a tailwind for economic activity, while steeper yield curves also imply a looser lending environment lies ahead. Another area supporting U.S. economic resilience is the wealth effect: The surging wealth effect is boosting consumer confidence which, in turn, leads to higher consumption.

Mar 07 2024

Risk Aversion Index: Stayed On “Lower-Risk” Signal

  • Mar 7, 2024

Our Risk Aversion Index edged down again in February and stayed on the “Lower-Risk” signal generated at the end of January.

Feb 07 2024

Three Key Themes To Watch—Recession, Inflation & The Dollar

  • Feb 7, 2024

The probability of a soft landing has materially increased, while stronger than expected growth is likely to put a floor on inflation, which challenges the consensus disinflation view. A refresh of our Dollar Monitor suggests a weaker dollar going forward.

Feb 07 2024

Risk Aversion Index: A New “Lower-Risk” Signal

  • Feb 7, 2024

Positive economic momentum is apt to carry on for a while longer. Within fixed income, we are turning favorable toward credit, especially high quality investment-grade corporate bonds.

Jan 06 2024

2023—A Year Of Round Trips

  • Jan 6, 2024

The S&P 500 index painted a picture of a runaway market in 2023, but for a lot of non-equity markets, 2023 was a year of round trips.

Jan 06 2024

2024 Time Cycles—Watch Politics & Geopolitics

  • Jan 6, 2024

Given how many potential political and geopolitical hotspots there are at present, it might be a bit presumptuous to think 2024 will be a typical year. Politics and geopolitics are the most underpriced risk for 2024.

Dec 06 2023

Treasuries’ Short Squeeze—More Room To Run

  • Dec 6, 2023

The massive short squeeze in Treasuries had a perfect setup and a powerful catalyst.

Dec 06 2023

End Of Tightening—A Tunnel Before The Light

  • Dec 6, 2023

With the market penciling in four rate cuts in 2024, the consensus appears to have accepted the idea that the last rate hike of the series was in July. We look at various market indicators around the end of previous hiking cycles and compare the historical pattern with today’s episode.

Dec 06 2023

Risk Aversion Index: Stayed On “Higher-Risk” Signal

  • Dec 6, 2023

While recession risk remains high, financial conditions have eased considerably with the recent retracement in bond yields and the dollar. We are in a favorable seasonality window and not being too bearish makes sense at this point.

Nov 06 2023

A Major Yield-Curve Steepening Cycle Has Started

  • Nov 6, 2023

The 10Y-2Y yield curve broke above the key level of -0.4% and that means a double-bottom pattern is in play. While we are confident that a major steepening cycle is here, we have to acknowledge that the nascent move could fail. A steepening move is also the market’s way of signaling easier conditions ahead.

Nov 06 2023

Risk Aversion Index: A New “Higher-Risk” Signal

  • Nov 6, 2023

Our Risk Aversion Index moved higher in October and triggered a new “Higher-Risk” signal.

Oct 05 2023

Equity Duration Risk—Going The Wrong Way For The Magnificent Seven

  • Oct 5, 2023

Typically, duration contracts when rates go up, all else equal. The Magnificent Seven, however, saw their duration going the wrong way: They seem to be the only cohort to see duration lengthening and are now more risky than a year ago.

Oct 05 2023

Risk Aversion Index: Stayed On “Lower-Risk” Signal

  • Oct 5, 2023

Despite the “Lower-Risk” signal, the surge in bond yields and a higher U.S. dollar have materially tightened financial conditions: Caution is strongly recommended.

Sep 08 2023

New Cycle High In U.S. 10-Year Yield

  • Sep 8, 2023

The 10-year yield made a new cycle high just before the Jackson Hole meeting. That is significant, as it not only broke the lower-high-lower-low pattern since last October, but also rejected the hypothesis, “we have seen the cycle high in interest rates,” which was the consensus at the start of 2023.

Sep 08 2023

Risk Aversion Index: Stayed On “Lower-Risk” Signal

  • Sep 8, 2023

The Risk Aversion Index ticked up in August, but its “Lower-Risk” message is unchanged. Within fixed income, we remain constructive on shorter maturity and higher-quality credit.

Aug 05 2023

U.S. Dollar—Still The Cleanest Dirty Shirt

  • Aug 5, 2023

The U.S. dollar broke below its recent support; its weakness has been a dominant driver of risky assets and its direction will be an important determinant of the current rally.