What the Starr Report can Teach Investors about the Mueller Report
The Starr Report was the Mueller Report of its time: a much-awaited investigative report that revealed the sordid details of a president’s behavior and his circle. This report, released to the public on September 11, 1998, led to the impeachment trial of President Clinton. He was acquitted in 1999.
Risk-On Signals Gain Momentum
Equity markets around the world are soaring, but can it continue? The short answer is, for a variety of reasons we believe the risk on-rally is likely to continue for the intermediate term and the inter-market indicators below are important supporting information.
Groundhog Day for Markets?
If Punxsutawney Phil was a Macro Hedge Fund Manager, we believe he would be shorting risk-off and going long risk on - Groundhog day is almost here and the Shadow of December 2018 is not frightening this dice rolling rodent.
The Conundrum
The Number: The most recent jobs report of 300k was an eye-opener, as was November’s upward revision by over 50,000 jobs, to 176,000. Nevertheless, the consensus outlook for the economy has seemed inordinately tied to the mood of the stock markets, rather than economic data.
The Battle Between T-bills and the 2-year note: Fed Tightening is likely over, pause or easing cycle likely ahead
If all we know about markets was based on the relationship between T-bills and the 2-year note, we have arrived at an important junction. T-bills and the 2-year note are battling over whether or not the front end of the yield curve will be positive, or inverted.
Is the 1 Year Treasury Inverted?
Though it may be correct in literal terms to define the drop in yield between the 1 year Treasury and the 3 year Treasury an “inversion”, even a casual observer would note that the trajectory is linear, with the exception of a “bulge” propping up the yield of 1 year Treasuries. Which raises the question - why is there a meaningful kick-up in yield in that particular spot? This is not an easy question to answer.
Regime Change and Risk
In conjunction with IPI our CIO Jonathan Lewis conducted a roundtable with investors to discuss regime change and the risk-on, risk-off trade. His presentation highlighted the shift of power in the US congress, a more restrictive world trade system, governments moving from liberal democracies to nationalism, as well as all the different ways regime change is manifesting across the world.
Risk On
Fed Chairman Powell gave the green light for risk on - and risk markets have wasted no time responding. Not only did he say rates are near the neutral rate, he explained stocks are reasonably valued, and the banking system is strong – we believe this is about as strong a buy signal as a Fed chair will ever give.
Things to Worry About - Hello TIPS
In recent weeks, we have highlighted the TIPS market as an important barometer for investors to watch to gain insights as to the future path of Fed rate hikes. The TIPS market is continuing to breakdown beneath the important 2% level on the 10-year TIP (chart below). TIPS markets discount a wide range of data inputs from views about Fed policy, to commodity price action.