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Macro Monitor

Dec 07 2022

Fed Funds Rate Above The CPI—Inflection Point Likely

  • Dec 7, 2022

Stock market bulls hope for an end to the tightening cycle in the not so distant future. However, the last two rounds didn’t end until the fed funds rate was raised above the prevailing rate of CPI.

Dec 07 2022

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

  • Dec 7, 2022

The market has responded quickly to global central-bank pivots, and favorable seasonality can carry the rally a bit further in the near term. However, the risk for a severe recession still looms in the medium term.

Nov 05 2022

Six Themes Around A Full Yield-Curve Inversion

  • Nov 5, 2022

The main yield curve drivers—fiscal and monetary policies—might be suggesting a steepening move is coming soon, while bank stock performance may also be hinting at a turn in the curve. However, a durable selloff in the U.S. dollar would be needed to support a steeper yield curve, so the tightening pain could last a while longer.

Nov 05 2022

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

  • Nov 5, 2022

Given depressed market sentiment and favorable seasonality, near-term prospects look better for risky assets.

Oct 07 2022

The Great British Pivot

  • Oct 7, 2022

The latest BoE and RBA pivots fueled the market’s hope that global central-bank hawkishness has possibly peaked. We believe the market is likely to be lured by the prospect of a Fed pivot in the near term, only to be disappointed as that hope fades away.

Oct 07 2022

Recession Dashboard Update—More Deterioration

  • Oct 7, 2022

The latest ISM Manufacturing numbers resulted in a downgrade to that factor from “green” to “yellow.” Unemployment claims is the lone component with a green light on the dashboard. Overall, the various measures we track suggest the risk of a “real” recession is high—better than 50%.

Oct 07 2022

Midterm Elections—Not A Typical Year

  • Oct 7, 2022

While midterm elections are not typically big market movers, there is really nothing typical about 2022.

Oct 07 2022

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

  • Oct 7, 2022

The market seems very eager to price in peak central-bank hawkishness; but only time will tell if the BoE pivot marks the beginning of a global pivot cycle. Caution is still recommended.

Sep 08 2022

Inflation Reduction Act—Corporate Tax Hike Implications

  • Sep 8, 2022

We take a look at the impact of past corporate-only tax hikes versus tax hikes of any type (personal income, corporate, capital gains). The gist is, there isn’t much difference at all.

Sep 08 2022

Fed-Pivot Watch—Pivot Pushed Further Out

  • Sep 8, 2022

Since our July report, market action felt like the pivot had already occurred. However, according to our latest update, numerous measures have moved away from levels that would support a pivot. In other words, the eagerly-awaited Fed pivot has been pushed further out.

Sep 08 2022

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

  • Sep 8, 2022

The risk of a policy error is the top concern as the Fed doubles the pace of Quantitative Tightening, even with the U.S. technically in a recession. Caution is recommended.

Aug 05 2022

Yield Curve Inversion—Count Down To A Bull Steepener

  • Aug 5, 2022

Now that the yield curve has inverted, its dynamic is apt to change from bear flattening (higher rates, flatter curves) to bull steepening (lower rates, steeper curves) fairly soon.

Aug 05 2022

Recession Dashboard Update—Real Recession More Likely Than Not

  • Aug 5, 2022

Our recession indicators have continued to deteriorate. Given the stagflation backdrop, the Fed’s tightening cycle is very likely to end in a recession.

Aug 05 2022

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

  • Aug 5, 2022

The risk of a policy error is extremely high as the Fed stays on an aggressive tightening path even with the U.S. in a “technical” recession. Caution is recommended.

Aug 05 2022

Additional Factors

  • Aug 5, 2022

The six-week rally that started mid-June featured advances from AAPL (+25%), AMZN (+30%), and TSLA (+39%), which accounted for one-fourth of the S&P 500’s gain. Despite the recent preference for Value, a spike in interest rates, and the bear market, the index’s concentration in the top-five firms is still near it’s all-time high set in August 2020.

Jul 08 2022

Bond Yields - More Room on the Downside

  • Jul 8, 2022

We have seen the high in bond yields this year and expect a volatile grind lower in rates over the summer: Bearish Treasury positions remain significant, the Copper/Gold ratio fell sharply, and the Citi Economic Surprise Index implies more downside.

Jul 08 2022

Fed Pivot Watch

  • Jul 8, 2022

The late 2018 policy error and subsequent pivot of Chairman Powell’s rookie year is probably the best case-study for today’s pivot debate. Here we evaluate the current status of key pivot triggers and compare them to the readings of late 2018. Given the political environment and backward-looking nature of the Fed, we think the bar is higher for a pivot than the market hopes.

Jul 08 2022

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

  • Jul 8, 2022

The risk of a policy error is elevated as the Fed stays on an aggressive tightening path even though growth materially slows. Caution is recommended.

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.