Morning Notes — Outlook
The sanctions enacted against Russia have already taken a massive toll on the country. Russian companies are unable to access capital, financial markets have been closed and the ruble has lost ~40% of its purchasing power.
Morning Notes — Nominal Yields Reach Support
Higher commodity prices are driving inflation breakeven yields higher, while risk-off positioning pressures nominal yields lower. The combination has taken 10-year real yields to -0.95%, which is back below the -0.89 trigger we used to signal the potential for multiple compression in expensive Tech stocks
Morning Notes — Real Yields
Recent events in Ukraine are more dramatic than what we initially assumed. The impact to financial markets comes through higher commodity prices, also reflected in today’s 8bps backup in 10-year inflation breakeven yields.
Morning Notes — What to Expect
It’s very common for equities to rebound after a sharp/sudden correction. Since 1990, the average rebound from a ~10% correction has lasted ~13 sessions before pausing, pulling back or retesting lows.
Morning Notes — Value
The Euro Stoxx 50 (SX5E) and Hong Kong’s Hang Seng (HSI) index are positively correlated with US value sector performance. The SX5E is also in bullish consolidation mode, but outperforming the S&P 500.
Morning Notes — Risk/Reward
The consensus narrative expects sustained growth would only encourage the Fed to hike more until the inevitable policy mistakes create a recession. But that narrative ignores the relatively high probability for the Fed to engineer a soft landing. Excess monetary accommodation is responsible for most
Morning Notes — Setup into Thursday’s CPI
Markets are fairly quiet today and likely to remain that way until Thursday morning’s CPI report. Higher energy prices throughout January have markets braced for another uptick in headline and core CPI.
Morning Notes — Near Term Outlook
We recently shifted our yield curve focus from the 5/30-year spread to the 2/10 spread to account for rising concerns of a potential Fed policy mistake. A ‘policy mistake’ occurs when Fed rate hikes cause a recession.
Morning Notes — Inflation, Bond Yields and the SPX Outlook
Today’s data will lead to increased weekend reports of rising inflation expectations. But since January 3, inflation expectations as measured by 10-year breakeven yields have declined from ~2.65% to ~2.39% today.
Morning Notes — Near Term Outlook
Yesterday’s disappointing FB guidance arrived as the S&P 500 closed just beneath technical resistance near 4,600 and the CBOE Volatility Index (VIX) reached short-term support just above 20.