Macro Dragon: The Fed Loooooooooves US Credit
Summary: Macro Dragon = Cross-Asset Daily Views that could cover anything from tactical positioning, to long-term thematic investments, key events & inflection points in the markets, all with the objective of consistent wealth creation overtime.
Macro Dragon: The Fed Looooooves US Credit
Top of Mind…
- So we finally get more details on how the Fed is going to be lifting corporate bonds in the US market (outside of ETFs) & it looks like individual corporate bonds will be bought under the SMCCF [Secondary Market Corporate Credit Facility].
- As well as further details tied to SMCCF including eligibility criteria. Obviously the theme of what we’ve mention in the Dragon all the way from 18th of March - Macro Dragon: Pockets of Value Starting to Show - when we said credit had found a floor, continues as its all about front running the Fed – this is going to not just be a multi-quarter part… but multi-year party! Just look to the ECB who have been buying bonds for years.
- Again to the folks that say there is a lot of uncertainty out there, yes & no – as said multiple times, there has also never been MORE CERTAINTY… i.e. you can say with 200% probability that monetary policy is set to be accommodative from the Fed & ECB & Fiscal Policy is set to continue to be loose for both the US & EZ.
- This is a big deal, recall in a pre-C19 world, 80% of the battle is trying to figure out what is happening on FP or MP, and here we know with complete certainty… focus on the 1st principle order of effects from that… as the trends from loose FP & accommodative MP tend to overwhelm a lot of the marginal smaller counter & often bearish trends
- Don’t get too caught up in the day to day noise – we went up because of liquidity (not because of fundamentals) & we will stay up, to accelerate up because of liquidity & we will also eventually come off because of lack of liquidity – bang for buck having run its course, yet that could be years away… watch the room on the Fed’s BS as a ratio to GDP, using BoJ & Japan as a mirror.
- And yes once again – nothing is off the table, be it YCC, negative rates nor the Fed/Treasury buying US equities.
On The Radar Today
- AU: RBA Mins, Quarterly House Prices
- JP: BoJ
- UK: Claimant Count Change, Avg Erns Index, Unemployment Rate, Gilt Auctions
- EZ: GER ZEW, GER inflation
- US: Powell @ 22:00, Clarida @ 04:00, Retail Sales, Capacity Utilization, IP, Biz Inv.
- NZ: Milk Auction
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Quarterly Outlook Q2 2022
Quarterly Outlook Q2 2022: The End Game has arrived
- Shocks from covid and the war in Ukraine have forced the global financial and political world to change, but what will the end game be?
Productivity and innovation have never been more importantAs the world economy hits physical limits and central banks tighten their belts, could equities be facing a 10-15% downside?
The great EUR recovery and the difficulty of trading itIf the terrible fog of war hopefully lifts soon, the conditions are promising for the euro to reprice significantly higher.
Tight commodity markets – turbocharged by war and sanctionsWith supply already tight, commodities keep powering on. But will it last for yet another quarter?
Between a rock and a hard placeGeopolitical concerns will add upward price pressures and fears of slower growth, while volatility will remain elevated.
The Great ErosionInflation is everywhere and central banks try to combat it. But will they get it under control in time?
Australian investing: Six considerations amid triple Rs: rising rates, record inflation and likely recessionWhile global financial markets are struggling in an uncertain world, the commodity-heavy Australian ASX index is poised to keep a positive momentum.
Cybersecurity – the rush to catch up with realityWith the invasion of Ukraine, governments and private companies are rushing to reinforce their cyber defenses.