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Macro Monitor

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.

Sep 08 2021

Rolling In Cash & Spending It In Style

  • Sep 8, 2021

We take a look at how the market rewards different uses for cash and what drives management decisions about the use of cash over time. The focus here is on the three main cash applications: investment (Capex and R&D), return of cash (via buybacks and dividends), and M&A spending.

Sep 08 2021

Risk Aversion Index: Stayed On “Higher Risk” Signal

  • Sep 8, 2021

The reflation trade stayed in a holding pattern with breakeven rates remaining range bound. Within fixed income, we are favorable toward TIPS and cautious on credit.

Aug 06 2021

Not All Inflationary Periods Are Equal

  • Aug 6, 2021

What matters is whether an inflationary period is driven more by “demand pull” or “cost push.” Demand pull inflationary periods seem far more favorable than cost push periods, which, more often than not, occur in a “stagflation” macro context.

Aug 06 2021

Risk Aversion Index: A New “Higher Risk” Signal

  • Aug 6, 2021

Our Risk Aversion Index moved higher and generated a new “Higher Risk” signal. Within fixed income, we are favorable toward TIPS and cautious on credit.

Jul 08 2021

Reflation Trade—Still Has The Benefit Of The Doubt

  • Jul 8, 2021

The Fed surprised the market with a hawkish projection of two rate hikes in 2023. Real yields did not move up as they typically do with such an episode. Overall, the damage was limited to the reflation trade, and the risk-rally is intact.

Jul 08 2021

Risk Aversion Index: Stayed On “Lower Risk” Signal

  • Jul 8, 2021

With the looming Fed taper and valuations stretched on almost all risky assets, volatility is likely to increase in the near term. Among fixed income, we are favorable toward TIPS and cautious on credit.

Jun 05 2021

Do You Know Your Stocks’ Duration?

  • Jun 5, 2021

Most people agree that growth stocks have longer duration than value, but few bother to back this up with numbers. Our implied equity-duration study says the conventional wisdom is right: Growth stocks do have longer duration. But... the devil is in the details.

Jun 05 2021

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

  • Jun 5, 2021

The talk of taper has started to resurface. In this context, higher inflation might become a negative for credit. For now, we remain favorable toward TIPS but turn cautious toward credit.

May 07 2021

To Whom This May Concern

  • May 7, 2021

Economic numbers were red hot in April but a funny thing happened when the awesome data rolled in—bond yields actually went lower. Expectations have trended upward, and “whisper” numbers have set the bars even higher.

May 07 2021

Risk Aversion Index: A New “Lower Risk” Signal

  • May 7, 2021

The reflation trade continued with higher breakeven rates and lower real yields, a favorable make-up for risky assets.

Apr 08 2021

U.S. Dollar—A 2018 Redux?

  • Apr 8, 2021

The price action in the DXY Index over the last year shows an uncanny resemblance to the 2017-18 period, both in duration and magnitude. Overall, we believe the dollar could strengthen in the near term, but the longer-term bearish trend remains intact.

Apr 08 2021

Risk Aversion Index: Stayed On “Higher Risk” Signal

  • Apr 8, 2021

The reflation theme continues to be supported by the powerful policy mix and a successful vaccine rollout. Within fixed income, we are favorable toward TIPS and short-term high-yield credit.