YOUR QUIVER | February 17, 2023
Today's Rundown
CIO | Nadine Terman @SolsteinCapital details what she's seeing in global financial markets.
Tough Talk
Hawkish commentary by both US and EZ central bank leaders have increased rate-hike bets in the past few days, with messaging around investors’ lack of appreciation for the strength of inflation that will drive rates higher for longer. The USD is up (pretty much erasing losses for YTD), equities are down in both locales, and bonds fell too on higher rate expectations. 2-yr and 10-yr yields are near 2023 highs, and we’re seeing great short-term yields as well for clients’ portfolios.
Planes Must Land
They can’t keep flying forever. The economy will eventually have a landing too, so calls about “no landing” from large banks, in our view, are reflecting very short-term thinking. Yah, that plane may not be landing today….but it will have to land, so get some big kid pants on and make a call, unless the call is for the end of economic cycles.
Miscalculation
According to BBG, Russia’s economy will lose $190bn of GDP by 2026, versus its prewar path. In 4Q22, Russia looks to have declined by -4.6% y/y.
Ghosted
Another corporate leader is missing in China. This time it’s a top tech banker, Bao Fan. Shares of his firm, China Renaissance, dropped by -28%.
Letting Out the Gas
Don't be nasty. EZ nat gas futures fell below €50 for the 1st time in about a year and a half. GS lowered its forecast for US nat gas px again due to warmer weather.
"Meets Some"
That’s the mark thousands of employees got if they were in the bottom 10% in Meta’s latest employee review. If enough folks don’t read those tea leaves, then there is expected to be another round of layoffs. With Meta’s employee base almost doubling from 2019-2022, per BBG, and with half of its employee base never having a typical review cycle, investors can imagine that employees getting this “actionable feedback” aren’t enjoying it too much. It reminds me of former ibanking days after periods of strength, when the herd was thinned—it certainly left a lot of folks unfocused versus focused.
Lemme Check That Bag
Custom officials in Argentina are looking at social media posts and drawing up risk profiles, per BBG. They are trying to prevent illegal imports that take advantage of the dollar shortage. The gov has to use FX to make debt payments and import essentials, so non-essential goods are under controls, and they don’t want further devaluation of their currency. 4 out of 10 people stopped have an infraction.
Gold vs Dollar
GS is out with a prediction that central banks will be buying a ton of gold in 2023, to diversify away from the USD. US sanctions on Russian energy has spooked some countries to try to find other ways to pay. China has been showing increases in gold reserves for the 1st time in 3 years. Higher yields have kept regular investors from piling into gold, but eventually that could change—and a stronger economy in China may see greater purchases there.
Tractor Traction
Deere is up, based on strong guidance ahead of consensus. Farmers are buying tractors because they have cash due to sustained higher crop prices. They’ve been replacing older fleets, and looking ahead—China’s reopening and a drought in Argentina could keep the tractor party going for another year. Also, they did not have too much inventory. That said, costs for farmers are up, so it’s been a balancing act for them, and we’d caution that eventually higher costs and moderating prices and tractors already purchased = lower sales.
