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Macro Monitor

Jan 08 2021

2021 Time Cycle — A Year Of Two Halves

  • Jan 8, 2021

We’ve updated our time-cycle composite for 2021 and it looks like it will be a year of “two halves,” with a low-vol bull-market extension in the first half of the year, followed by a much more volatile second half. This also appears to extend outside the U.S.

Jan 08 2021

Risk Aversion Index: Stayed On “Lower Risk” Signal

  • Jan 8, 2021

We remain favorable toward credit and recommend both investment grade and high yield corporates.

Dec 05 2020

Risk Aversion Index: A New “Lower Risk” Signal

  • Dec 5, 2020

With election risk largely in the rear-view mirror, volatility has come down across most asset classes, contributing to the drop in the RAI.

Dec 05 2020

Popular Trades — No “No-Brainers”

  • Dec 5, 2020

We studied several “popular trades” and there are good reasons to be on board with most of them, but none can be viewed as a no-brainer.

Nov 06 2020

Weight Watcher—Another Look At Sector Valuation

  • Nov 6, 2020

There are numerous ways to measure sector valuation, but we found the simplest one: sector weights. Overall, using simple sector weights, we arrive at the same conclusions about sector valuation as one would using conventional valuation metrics.

Nov 06 2020

Risk Aversion Index: Stayed On “Higher Risk” Signal

  • Nov 6, 2020

We are cautious near term and recommend playing defense through duration reduction within corporate credit (including both investment grade and high yield).

Oct 07 2020

Markets & Election—Any Clear Result Will Do

  • Oct 7, 2020

We believe the worst outcome would be a drawn-out, contested presidential election that ends up in the Supreme Court. We review historical market patterns under several election-result scenarios.

Oct 07 2020

Risk Aversion Index: New “Higher Risk” Signal

  • Oct 7, 2020

Treasuries’ ability to provide downside protection has weakened; a better way to play defense is probably through duration reduction within corporate credit (including both investment grade and high yield).

Sep 05 2020

A New Proposal To The Fed: Buy Bank Stocks!

  • Sep 5, 2020

While most economic numbers have been positive, the fly-in-the-ointment was the latest Senior Loan Officers’ Survey. Banks have tightened their lending standards across the board.

Sep 05 2020

Risk Aversion Index: Stayed On “Lower Risk” Signal

  • Sep 5, 2020

The breakeven rates capture the spirit of the overall risk rally and continue to provide support. The change in the Fed’s policy goals means it will remain accommodative for even longer.

Aug 07 2020

Textual Analysis Of Fed Statements—Always Artificial, Sometimes Intelligent

  • Aug 7, 2020

We geek it up a notch and use some of the popular text-processing techniques to quantify the hawkish/dovish sentiment of the latest Fed statement. Some human “coaching” is needed in every step of the process (hence the “artificial” part). But when these tools are used properly for carefully chosen tasks, they can be quite intelligent.

Aug 07 2020

Risk Aversion Index: Stayed On “Lower Risk” Signal

  • Aug 7, 2020

With “reopening” taking a pause, we expect global policies to remain accommodative even longer. Among fixed income, we like corporate credit, which includes both investment grade and high yield bonds.

Jul 08 2020

No Yield Curve Control? The Fed Spoke Too Soon

  • Jul 8, 2020

There has been chatter about the Fed implementing the so-called Yield Curve Control (YCC). Although the latest FOMC minutes suggest that YCC is not on the agenda for now, we believe the chance of YCC is probably much higher than the market currently anticipates.

Jul 08 2020

Risk Aversion Index: Stayed On “Lower Risk” Signal

  • Jul 8, 2020

While the market seems to have priced in a quick recovery, recent economic data has materially exceeded market expectations and provided support to the rally. Within fixed income, we maintain a favorable view toward investment-grade corporate bonds and we still recommend staying within range of the Fed’s fire power.

Jun 05 2020

The State Of The Stock/Bond Relationship

  • Jun 5, 2020

The latest action in rates is not what would be expected during a strong stock-market rally off a bear market low, but the constantly changing nature of the stock/bond relationship should not come as a big surprise. We propose a more refined four-state definition of the stock/bond relationship.

Jun 05 2020

Risk Aversion Index: New “Lower Risk” Signal

  • Jun 5, 2020

Our Risk Aversion Index fell sharply in May and generated a new “Lower Risk” signal. Within fixed income, we are turning more constructive on credit, overall, and maintain our favorable view toward investment-grade corporate bonds.

May 07 2020

Why Value Failed—Top-Down & Bottom-Up Views

  • May 7, 2020

From a top-down view, since 2003, Value’s performance has been much more closely tied to various asset markets and macro drivers. From a bottom-up perspective, we believe the change in Value’s migration behavior might be the key to its failure. We believe macro tailwinds and positive surprises are both necessary for a true Value revival.

May 07 2020

Risk Aversion Index: Stayed On “Higher Risk” Signal

  • May 7, 2020

While macro data has turned from “bad” to “less bad,” a lot of hope for a quick recovery in economic activity has been priced in. We recommend staying within range of the Fed’s fire power for the time being.

Apr 07 2020

A Cross-Asset Dash For Cash

  • Apr 7, 2020

March’s mad dash for cash didn’t stop with rates/credit/FX markets. Among equities, there was also a strong preference for cash liquidity. The market rewarded companies that had strong cash positions and punished those without—which explains why traditionally defensive styles actually underperformed.

Mar 06 2020

Double-Digit Yield & Double-Dipping Curves

  • Mar 6, 2020

As the coronavirus materially increases the odds of a recession, some important parts of the U.S. yield curve (10Y-3M; 5Y-2Y) double-dipped into inversion. The two prior episodes occurred in late 1989 and mid-2006 and, in both cases, a recession followed within 18 months.