Most risk-takers were caught off guard by Powell’s attempts to bring the Fed ahead of the hawkish repricing last week. Will this prove to be another incredibly ill-timed flip-flop from the Fed?
Steno Signals #176 – Will 2025 be 2007 or 2021 all over again?
Markets are back discussing inflation fears ahead of 2025, but is it really such a big thing? The outcome space for 2025 is huge and I am personally torn between the 2007 and 2021 analogy for now.
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Flash Liquidity Update: A USD liquidity PUT is now in place
A very interesting set of meeting minutes was just released, revealing that the Fed is, in effect, discussing a put for USD liquidity. The Fed is considering changes to support liquidity developments as early as December.
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Steno Signals #127 – We need a bit of bad news for liquidity to improve
Liquidity trends remain tighter than anticipated, primarily affecting government bond and repo markets. The current market frenzy actually needs a bit of bad news to provide the liquidity boost required to take the next step.
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Steno Signals #126 – Where did all the liquidity go?
The liquidity situation remains tight, and this cycle continues to defy the norm. Will activity and inflation return before Powell and his peers truly get the chance to inject liquidity again?
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Steno Signals #123 – The market is sniffing out a big liquidity increase
Several markets are already trading as if liquidity has arrived in size, but we have yet to truly see it. The good news is that the ON RRP is close to depletion, which may lead to an early end to QT.
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Steno Signals #121: Whatever It Takes—In the US, but NOT in China
While the Chinese fiscal briefing was a huge nothing burger, we are starting to see pockets of the USD-denominated asset space behaving as if a USD “whatever-it-takes” moment is just around the corner.
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Steno Signals #120 – Liquidity and rate cuts are incoming in an already OK economy
A better-than-feared jobs report, although somewhat “clouded” by a large public sector contribution. Overall, it seems like we are getting stimulus for an already stable economy, which is hard to construe as bad news.
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Steno Signals #119 – A tsunami of liquidity is upcoming in Q4
China just pulled a market stunt right before a flood of liquidity hits, and the Fed is cooking up some magic liquidity tricks to keep things lively. Buckle up for Q4.
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Steno Signals #113 – Neither Inflation, Growth, Nor Liquidity is rising right now
We track the probability of rising growth, inflation, and liquidity momentum in real-time on a daily basis, and the developments since the start of July have been notably weak. This is the kind of setup needed to prompt central banks to restart their actions.
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Steno Signals #112 – Liquidity is BOTTOMING
Liquidity is stabilizing, and there are already signs that August will be better than July. We are aware of the risks in the labor markets, but we see strong signs of a cyclical bottom here, which may soften the impact of the uptick in unemployment.
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Steno Signals #110: Run for the hills? Not so fast..
Equities are showing some signs of exhaustion, and it seems like there is still impending recession fear hidden beneath the surface. Is it time to run for the hills, or time to rethink?
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Steno Signals #109 – What if we are all wrong on liquidity, rates and commodities?
What if the Fed is wrong, we are wrong, and the consensus is wrong? Here’s a look at liquidity, rates, and commodities amidst a macro landscape with a very broad outcome space for the coming 12-18 months.
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Debt Watch: Will the US Treasury spook markets with issuance in the QRA again?
The CBO has markedly worsened the deficit outlook since the last issuance update from the US Treasury in April. Expect the Treasury to communicate a sizable increase in the issuance target, but also expect them not to follow through on it. Let’s look at why.
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Steno Signals #106 – The cycle is improving. Not weakening.
It seems like old hat to discuss the weakness in labor markets as the cyclical vibes are getting stronger out of the high-beta economies globally. Will the US cycle follow suit?
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Liquidity Watch: The $ liquidity outlook remains solid for Q3
We are not miles from the needed threshold level of USD reserves in the system and the Fed is aware of that. This is a strong reason to believe that liquidity conditions will remain benign from here on a trend basis.
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Steno Signals #104 – Get ready for a WAVE of liquidity in July!
While the rate of change is turning bearish on growth- and inflation, we may (temporarily) end up in a goldilocks scenario in July. Bonds tend to perform alongside equities in such a scenario. Buy risk and head for the summer cottage?
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Steno Signals #103: A blood-bath in metals in July!?
There is a material cluster risk in metals ahead of July deliveries and the consensus remains alarmingly upbeat in Gold, Silver and Copper. Here is why it could turn into a July bloodbath in metals.
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Something for your Espresso: Troubled waters ahead the next 2-3 weeks
The liquidity outlook is murky at best for the next 2 weeks, which is starting to take its toll on risk markets as it is paired with continued re-inflationary vibes.
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Portfolio Watch: Trading the next of the rolling melt-ups
Liquidity will improve markedly from 16th of June and onwards, while we continue to see rolling melt-ups in real world assets. We see an increasing risk of a new melt up in commodity space.
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Something for your Espresso: Crypto(pti)-mism is back!
The sudden optimism around the ETH spot ETF approval has reignited Crypto optimism. Another sign that monetary policy is probably not overly tight here and that liquidity is flowing still.
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Steno Signals #98 – The recession panic is back right as liquidity is returning!
The recession narrative has returned after a series of weak PMIs. Betting against the returning recession hysteria has been a profitable strategy since April-2020, but will it be so again this time? Hallelujah!
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Something for your Espresso: Waiting for the dust to settle..
The embedded value in risk assets is improving, but the USD wrecking ball will continue into this week. The question is whether we have imminent action ahead from the BoJ/MoF or the PBoC as a consequence.
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Something for your Espresso: USD liquidity back in the driver’s seat
Our quant PCA tool flags USD liquidity as the most important macro driver so far in April, which is interesting given the ongoing tax season. The worst is probably already behind us even if the tax season runs for another 10-12 days.
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Something for your Espresso: “A lack of further progress so far this year on returning to our 2% inflation goal.”
Powell admitted to the lack of progress on inflation in recent months, but the implicit bias is still dovish. The debate is still centered around WHEN rates will come down, not around IF rates will come down.
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Steno Signals #90 – More liquidity to the most hated rally in recent history
It feels reminiscent of early 2021 in many ways with a very hated rally that keeps getting liquidity fuel. Central banks remain biased towards easing and will allow the economy to reflate with liquidity.
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Macro Regime Indicator: MORE liquidity is coming
Just as we identified in last month’s regime – and as our asset allocation model predicted -, risk assets have indeed performed. Question is if they will continue to. As always, we present our model framework on how to structure your portfolio.
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Steno Signals #86 – Trading the relative Fed and ECB balance sheet development
With an increasingly tricky timing of the first rate cut, we look for tradable trends in balance sheets instead. Balance sheet trends are easier to predict, which makes them very tradeable. Here is why!
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Portfolio Watch: The Yellen Put
Powell had his fun in December and now Yellen is preparing her next move. Here is how we play it
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USD Liquidity Watch: Treasury selling due to bank reserves influx?
The liquidity conditions will likely worsen in US Treasury markets, and it is now a topic that is being addressed continuously by Fed members. Will the Fed opt to “suspend” the supplementary leverage ratio again?
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