Skip to content

Macro Monitor

Jun 07 2022

From Tighter Lending To Margin Pressure

  • Jun 7, 2022

Intuitively, what happens in the credit market is usually echoed by lending activities. This was a key concern when the credit market joined the stock-market rout in May. Another big leg up in real interest costs, through higher rates and/or lower growth, will surely create more headwinds for profit margins.

Jun 07 2022

Recession Dashboard Update—More Warning Signs

  • Jun 7, 2022

Overall, there are now more warning signs, but it still doesn’t suggest a recession is imminent.

Jun 07 2022

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

  • Jun 7, 2022

While inflation might have peaked, a material slowdown looks more certain as the Fed stays on an aggressive tightening path. Caution is warranted.

May 06 2022

U.S. Dollar—Drivers & Impacts

  • May 6, 2022

Most U.S. dollar drivers point to a stronger dollar: attractiveness of U.S. assets; policy differentials; real interest-rate differentials; terms of trade; weaker Yuan; and capital flows/hedging activity. Speculative positioning, however, is a negative and suggests the dollar rally might at least take a pause in the near term.

May 06 2022

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

  • May 6, 2022

As long as the Fed stays on the current aggressive tightening path, caution is highly recommended.

Apr 06 2022

Yield Curve—Focus On More Reliable Themes

  • Apr 6, 2022

Predicting a recession is a very tall task, let alone using a single yield-curve indicator with long and highly variable lead time. Instead, we would rather focus on some of the more reliable themes: The macro-policy setting; U.S. dollar; and Bank stocks.

Apr 06 2022

Recession Dashboard Update—Recession Not Imminent

  • Apr 6, 2022

Currently, the dashboard shows 6 green, 3 yellow, and 2 red lights. The overall message is that, while there are areas of concern, a recession is unlikely to be imminent (within the next twelve months).

Apr 06 2022

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

  • Apr 6, 2022

With the Fed still on a tightening path, caution is still recommended. Among fixed income, we remain neutral on TIPS but have turned favorable toward EM bonds.

Mar 05 2022

Yield Curve Crossing The 50-Bps Rubicon—No Imminent Trouble

  • Mar 5, 2022

The U.S. 10/2-year curve just fell below the key threshold of 50 bps. Over the last 25 years, the yield curve proceeded to invert after this “Rubicon” was crossed. That doesn’t mean imminent trouble. The lead time of a yield-curve signal is lengthy, but it—and real yields—definitely warrant close monitoring.

Mar 05 2022

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

  • Mar 5, 2022

Despite continued weakness in equities and a higher reading in our Risk Aversion Index (RAI), it generated a “Lower-Risk” signal.

Feb 05 2022

Not All “First Hikes” Are Equal

  • Feb 5, 2022

The market has started to price in a much faster pace of the Fed’s tightening this year. We have found more similarities than differences between recent market action and the historical patterns around the first rate hike.

Feb 05 2022

Risk Aversion Index: Stayed On “Higher Risk” Signal

  • Feb 5, 2022

Lofty valuations amid shrinking liquidity conditions make all risky assets vulnerable.

Jan 07 2022

2021 Surprises & 2022 Time Cycles

  • Jan 7, 2022

Market revelations were certainly not in short supply in 2021. We believe some of those surprises will continue to have a huge impact on markets in 2022. We have updated our time-cycle composites to provide an idea of what a “typical” 2022 could look like.

Jan 07 2022

Risk Aversion Index: Stayed On “Higher Risk” Signal

  • Jan 7, 2022

The impact of Omicron is already fading and the global-tightening cycle is far more important going forward. Elevated valuations amid a broadening global-tightening cycle is our key concern.

 

Dec 07 2021

China—See The Policy Forest Through The Tree (Diagram)

  • Dec 7, 2021

There has been a torrent of new policies coming out of China recently. The goal of this report is to disentangle these seemingly random or even nonsensical policy moves and present a clearer roadmap of what China is thinking and doing.

Dec 07 2021

Risk Aversion Index: New “Higher Risk” Signal

  • Dec 7, 2021

With the market getting less sensitive to each iteration of new variant, we believe the impact of Omicron is unlikely to be as significant as the global-tightening cycle.

Nov 05 2021

Fed Taper—Not A Policy Error

  • Nov 5, 2021

We believe concerns about central-bank policy error are mostly a foreign issue, because they have moved much more aggressively than the Fed. The market has shown no indication of a Fed-policy mistake and we are still on board with the reflation trade.

Nov 05 2021

Risk Aversion Index: New “Lower Risk” Signal

  • Nov 5, 2021

With seasonality once again turning positive and inflation breakeven rates bumping above the recent range, we continue to favor the reflation trade.

Oct 07 2021

“Stagflation” Gap = Limited Impact

  • Oct 7, 2021

The Citi Economic Surprise Index fell to a negative extreme, while the Citi Inflation Surprise Index made all-time highs—a “stagflation” gap. Overall, if history repeats itself, the extreme ESI-ISI gap is apt to resolve itself, and the effect on asset markets will likely be limited. The global tightening trend will be a far more persuasive driver.

Oct 07 2021

Risk Aversion Index: Stayed On “Higher Risk” Signal

  • Oct 7, 2021

Elevated valuations and a global tightening cycle are usually not a favorable context for risky assets. Within fixed income, we remain positive toward TIPS and cautious on credit.