Global Macro Strategist
Instrument: Jan 2020 Fed Fund future
Price Target: 97.34
Market Price: 97.6350
Background
(UPDATE: Whilst it's probably nothing but a little consolidation, we are closing out the tactical Jan 2020 FFF at these 97.40 levels. Yes, we got to 97.345 overnight, just shy of our 97.3400 target, but at the end of the day, it's still been a magnificent trade. It was the bigger risk at 300 basis points, netting a +24bp move on the short and adding a total return to the portfolio of +2.67% Our two tactical FFF trades have now added a combined total of +3.94% to our book in a little over a week and a half. Sometimes you've just got to bank it and run, price targets be damned!)
As originally published on 30.05.2018:
This outlines a tactical short in Jan 2020 Fed Fund futures given adverse moves over the last few trading days, with the market price at 97.6350 in Asia on Wednesday morning, the market is implying +2.66x hikes between now and the end of 2019 19 months!).
The tactical thesis here is that this has been a overshoot driven by position clearing out, risks in Europe, EM and the Korean Peninsula.
Management and risk description
300bp risk with a stop at 97.900
Key risks are of course:
A lot more pain on the position clearing that we’ve been seeing in the Fed Fund futures (i.e. more noise)
Italy/Spain/Europe risks have a bigger spill over effect into markets
And of course the biggest risk of them all – the Fed does not hike on Jun 13… which would cause the mother of all expectations to be repriced…
Parameters
Entry: 97.6350
Stop: 97.90
Target: 97.34, yet as always with an option to close down the trade earlier
Time horizon: Two to three weeks (14 days to potential June 13 Fed hike)
2024: The wasted year
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
