Consumer search trends reflect moderately slowing spending behavior, which is not supportive for rip-roaring inflation. The Fed remains hampered by a reversal rate near 150 bps. Inflation gains are required to maintain the premiums now built into U.S. Treasury yields and the hoped pace of tightening by Powell et al.
Consumer and business sentiment is in rarefied air.
Emerging markets are susceptible to higher volatility in the event the U.S. dollar and real yields climb. But, repositioning away from the likes of emerging market debt likely has more to do with the shifting relationship between risk and safe assets. Hedging will become much more problematic going forward.
A stronger Canadian dollar and converging economic growth point to narrower Canada - U.S. cross spreads.
Today's topics include TIPS, the flattening yield curve, rising yields, inflation fears, hedge fund performance, financial market stress, revisiting the collapse of Bear Stearns, JGB volume, IPOs and passive investing.
Few major assets offer an effective hedge against rising U.S. equity volatility.
Investors are finally becoming believers in the Federal Reserve's faith inflation will rebound given full employment. Surveys are confirming these hopes, but we have yet to see realized inflation make a charge higher. Roughly 70% of the rise in U.S. 10-year note yields since September 2017 can be attributed to these surveys and Federal Reserve expectations for inflation.
Most acknowledge the gamed nature of earnings releases. This study shows companies begin guiding analysts' expectations lower roughly 90 days prior to an earnings release - at the prior quarter's earnings release.
The yen looks primed to weaken given a slowing in economic data. Conversely, the Canadian dollar should strengthen with U.S. versus Canadian data changes at extremes.
Today's topics include central bank policy, cov-lite loans, the regime shift, wage inflation and the possibility for a new 2-month T-bill.