The U.S. credit markets have seen some relief over the past two days, even as equity market performance soured. We see stronger signs of lasting relief for investment grade, lingering reasons for concern on high yield.
The highly idiosyncratic high yield bond market has been consumed by index trading. This represents a risk as the bonds that make up these indices are too different to assume they can trade as one. When stresses rise enough, these bonds could go their separate ways, making index level strategies ineffective.
The U.S. Treasury yield curve inversion has begun to flash warning lights about a slowdown in U.S. economic growth. But, a recession is still better timed by realized economic data.
We continue to believe the effects of trade and tariffs on the markets are overstated. Markets are reacting to inverted yield curves, monetary policy, and slowing global growth more so than tweets from "tariff man."
Amazon's latest move to control more of its distribution strikes the shipping industry at an awkward time. Concerns over the rising competition will compound worries about slowing growth and margins.
Today's topics include strained U.S./Chinese relations, consumer expectations, corporate spreads, rising uncertainty, algo trading, crude oil's breakeven and Peter Boockvar on the stock market.
Today's topics include the yield curve inversion, the stock/bond relationship, Fed President Williams speaks, bank stocks, pain across every asset class, Italian yields, Qatar and the first book ever written about the stock market.
Typically a flattening yield curve is a market signal that the Fed has misread inflation and is tightening too much. While the the 3-month/10yr curve is the measure most economists prefer to watch, the 2yr/5yr and 3yr/5yr curves are now inverted. Historically, every time the 2yr/5yr curve has inverted, the entire curve has inverted before the cycle was over.
U.S. inflation has lost momentum on the heels of slowing global growth, dampening the Fed's hawkish bias. Bond investors refuse to become concerned a rash of inflation or tightening can occur as evidenced by low U.S. Treasury volatility.
A sharp two-day rally in the Chinese yuan has risk markets captivated, but the Chinese industrial economy is the real question. With correlations between industrial metals and risk markets still at multi-year highs, search trends in Australia paint a bullish picture.
Today's topics include the Fed's view on neutral rates, 2019 outlook, cash yields climb, Qatar leaves OPEC, the yuan jumps, dow vigilantes are back, leveraged loans and Trump vs Yellen.