Macro Dragon WK # 27: Noisy Week Ahead with Month/Quarter/1st Half-end plus NFP Friday!
Macro Dragon = Cross-Asset Quasi-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 WK # 27: Noisy Week Ahead with Month / Quarter / 1st Half-end plus NFP Friday!
Top of Mind…
- TGIM & welcome to WK #27…
- We did a “Love It” piece on Brazil last wk: Macro Dragon Reflections: Brazil, Commodity Rich, +210M pop, +$1.4T GDP, Hawkish BCB, 2022 Political Elections & Consistently Punching Below its Weight. Love it!
- Where we highlighted the vast underperformance of Brazilian equities vs. their EM counterparts, as well as the Brazilian Real – both of which seem set to be breaking out to big levels of appreciation.
- Its going to be a Noise > Signal week on a cross-asset basis, just given the significance of potential month/quarter/1Half flows, that also ends with the US NFP number on Fri (700K e 559K p).
- The NFP could be interesting from a variety of different factors, the risk should be to the upside & yet we still have not seen a significant beat in a while.
- A +1M number is likely to see knee-jerk USD higher, as well as US yields, with a likely headwind for commodities & 50/50 effect on US equities.
- An in-line number 600-800K likely will be a snoozie.
- A big miss, is actually really probably where the real tail-risk is… as it would be that much more unexpected given that federal subsidies expired across half the states in Jun. So if we print sub 400K, we should get USD & US yields lower, CMDs higher, plus decent pop up in equities.
- Natural interpretations here are – hastening, slowing down or no effect on Fed skew towards normalization. How we are going to get from tapering $120B a month, to zero & hiking by E-2022 is a mystery to KVP. If there were two things we learned from the GFC when it comes to monetary policy: One – there are no ‘temporary measures’ & Two – there is no increase in the CPI, there is only rampant asset class inflation.
- So this is all a game within the Meta Game of an ever increasing MMT campaign from both the MP & FP side…
- +15% is what everyone needs to remember. +15% is the CAGR of the G4 Central Bank balance sheet expansion since 2008. In other words, the supply of fiat from just the G4, is increasing by +15% a year – that is your hurdle to just break-even.
- So next time you’re looking at a stock & talking valuation, or asking for funding for your start up… keep in mind that capital is the commodity. $1M in funding in 2007, is +$7M in 2021… Unicorns are not what they used to be.
- The allocation of capital to talent & compelling unique investment opportunities is really the juice & asset.
Rest of the Week & Other Reflections
- Econ Data: Whilst we got final PMIs across the board & even an ISM Mfg. number, its really all about the NFP data out of the US on Fri. 700K is the expectation from a previous print of 559K, so far we’ve not seen any beats that can match the -634K miss from the release in May.
- We know that over half the states had their federal subsidies expiring over this month of Jun, with most of the other half set to expire in Sep 6. So again, far from a clear picture in regards to the jobs coming back – yet intuitively one has to think it should be chunky, rather than a linear uptrend.
- CB: No major central bank scheduled rate decisions. Worth appreciating the step-up in hikes from Russia +50bp, Brazil +75bp, Mexico +25bp (surprise), etc. The monetary divergence theme is going to create some interesting investment pockets.
- Worth also noting that since the Fed pivot towards making some moves in tapering on 15 Jun, only two major EM FXs (BRL & RUB) are outperforming vs. the USD.
- Fed speak: Quite a few Fed speakers including Barkin, Quarles, Bostic.
- ECB|EUR: Lagarde speaking twice on Tue & Thu.
- RBNZ|NZD: Orr set to speak on Statement of Intent on Tue. Here is the link from the last one from Jul 2020.
- Hols: Italy out on Tue, Cad out on Thu.
- Dragon Interviews U-Tube Channel for easier play-ability… Check out our recent Crypto Interview with The Spartan’s Group Casper B. Johansen & yes, the increased volume for regulation coming out of the US is actually a massively positive structural aspect for the space. Translation: Regulation of Crypto = Acceptance of Crypto.
Start<>End = Gratitude + Integrity + Vision + Tenacity | Process > Outcome | Sizing > Position.
This is The Way
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