Mind The Equity Risk Premium

So we made it through non-farm payrolls Friday unscathed. In fact, we got a humdinger of a number that at one point during the session propelled the S&P to new record highs. The next hurdle for markets: earnings season. On the whole, y/y earnings growth for S&P 500 companies is expected to come in somewhere…

Life In A ‘Negative’ World

This morning, following a blockbuster of a June payrolls report, we flagged the disparity in how US Treasury yields should have behaved and how they actually behaved. If you truly want to understand how distorted this market has become, have a look at the following chart going back to 1998: As you can see, this…

No, The Fed Probably Won’t Hike On Huge Jobs Beat

Coming into NFP Friday, it kind of felt like stocks were going to go up either way. After all, there was virtually no chance of getting a June jobs number as bad as May’s report, a modestly underwhelming print would keep the Fed on hold thereby forestalling the tightening cycle yet again, and in the…

Big Macs and Big Buildings: The “Gates” Are Up In The UK

If you had no idea how the Brexit vote turned out, you could certainly surmise what happened just by glancing at the following chart: What do you see? That’s right, a stronger dollar, a stronger yen, and sharp declines in the Chinese yuan and British pound. Actually it’s not entirely accurate to call the pound’s…

Red Light, Green Light

Earlier this week, we explained how pretty much everything you’re seeing in terms of market swings can be at least partially explained by central bank frontrunning. Stocks up? Investors anticipate the Fed will delay its next hike thanks to the Brexit debacle. Dollar up? Investors know that even if the Fed doesn’t hike, it’s still…

Fed Minutes Reveal Pernicious Policy Paradox; Bond King Says Hang On To Gold

They needed some “additional data.” Data like a vote count from the UK, where the possibility of an imminent black swan landing sealed the deal for no FOMC hike in June. "Members generally agreed that, before assessing whether another step in removing monetary accommodation was warranted, it was prudent to wait for additional data on…

Markets Look To Fed Minutes, Jobs Report With Wary Eyes; Goldman Sees “Drawdown”

If you think it feels a bit tenuous out there you’d be right. On the heels of a rather inauspicious Tuesday session that saw the British pound hit a 31-year low while crude and gasoline futures plunged on (over)supply concerns, it was risk-off overseas, a sentiment that muddied the waters on Wall Street ahead of…

Free Fall: British Pound Hits Three Decade Low, Crude Collapses

Ok, so two things: the British pound and oil. They’re both crashing. Let’s turn first to GBP, because it’s sitting near a 31-year low (inset). “There’s a lot of nervousness in the sterling market,” Commerzbank’s Thu Lan Nguyen dryly remarked on Tuesday morning. Yes, “a lot of nervousness.” You know, it’s the whole “a 30yr…

The Tired Rally That Refuses To Die

We’ve talked a lot about the likelihood of a US recession over the past couple of days (see here and here) - probably not exactly what everyone wanted to hear over the holiday weekend. It’s not so much that we want to come across as doomsayers. Rather, the point is to assess the extent to…

Another Take On Recession Risk And One Bank’s Look At Market “Stress”

If you’re looking for signs that the US economy will steer clear of recession, don’t look at the yield spread between 2-year and 10-year Treasurys: As Bloomberg’s Tracy Alloway noted on Monday, the curve is getting “flat as a pancake,” and that’s not generally a good sign for the economy. Bloomberg was referencing the latest…