Morning Notes — Energy
We continue to view Energy as a secular opportunity that will play over several years.
Morning Notes — Yield Curve and Economic Outlook
The US economy seems to be in unchartered waters, with certain elements (tight labor markets/unusual inflation pressures) associated with late cycle dynamics, while other elements (private sector balance sheets/spending levels) are typically witnessed early in an economic recovery.
Morning Notes — SPX and Energy
Opinions are mostly formed by past experience, with elevated inflation on sharply high oil prices causing some investors to dust off their 1970’s investment template.
Morning Notes — Outlook
We keep our value sector bias when adding equity exposure with Energy outperformance in early innings. OPEC+ has been under-producing for the past 3 quarters with seemingly structural production outages due to underinvestment.
Morning Notes — Core CPI
Our call for a better-than-feared March CPI was based on extreme expectations and leading indicators pointing to an imminent near-term peak. CPI is just one inflation measure that happens to lag others.
Morning Notes — NDX Headwind
Given already high expectations, we don’t expect tomorrow’s US CPI release to become a major inflection event for markets. Consensus expectations and extreme negative sentiment on the topic of inflation have equity risk/reward skewed to the upside on tomorrow’s print.
Morning Notes — Value
Our preference to add exposure in value sectors began last July. Since then, the S&P 500 Value Index (SVX) has outperformed the S&P 500 by ~310bps and the NASDAQ 100 (NDX) by ~880bps.
Morning Notes — Real Yields
The challenge for any central bank is that inflation and employment adjust with a ~12 month lag. A lot of time has been spent on recession signaling from the recent 2/10 yield curve inversion. A yield curve inversion has greater statistical significance with a recession
Morning Notes — Outlook
The past few weeks of NDX outperformance looked like lazy, low conviction buying as a 70’s-style stagflation narrative emerged while crude oil prices advanced into the $120s.
Morning Notes — Fed Comments Ahead of FOMC Minutes
Past early stages of Fed tightening have not been negative for equities, which tend to make new highs after initial volatility. Realized volatility is a subdued, but unsettled headwind with the VIX decelerating from 36 to 21 today.