YOUR QUIVER | December 15, 2022 Today's RundownCIO | Nadine Terman @SolsteinCapital details what she's seeing in global financial markets. Connect The DotsThe median Fed “Dot Plot” for 2023 increased 50 bps to 5.125%, versus an expected 25bps move upward. The Fed Fund Futures curve didn’t translate the dots in the same fashion. The expected terminal rate if 4.75-5.00%. Investors just don’t buy the Fedspeak when growth is slowing, and inflation seems to be easing. Slowing DownCentral banks appear to be slowing the pace of rate hikes, while maintaining hawkish target rate stances. Powell seemed to leave the door open for 25bpa in Feb versus 50bps. In Europe, the deposit rate is roughly at a neutral level, which creates a natural point to slow hikes to evaluate monetary policy impacts. The ECB had to thread a similar needle as Powell and not let expectations get ahead of reality, so while it noted “considerable uncertainties,” it said it would “respond forcefully” if inflation is more persistent. The energy supply crisis is much worse across the pond, with inflation arguably a bigger problem to tackle for our Eurozone friends, but their growth slowdown is also worse—so it’s a balancing act. Overnight ActionAsia traded lower in sympathy with US markets post-Powell: Hang Seng index -1.4%, Shanghai Composite -0.3%, Nikkei -0.4%, and Kospi -1.6%. Eurozone was down too: Stoxx, DAX and CAC down over -1.0%, and FTSE -0.4%. In terms of data, China’s retail sales fell short of expectations, down -5.9% in Nov y/y. Industrial Production also missed forecasts (+2.2% vs. +3.6%) in Nov. Jobless rate at 5.7%. The PBOC injected a net 150bn yuan (over $22bn) via the MLF, and new home prices in 70 cities slid last month. BoldnessGS out with a bold call, expecting Brent will hit $105 next year, copper will >$10k per ton, and raw materials overall with returns at 43%. Lonely Toy SoldierRBC rightly points out that there is one Fed official who expects funds of 3.125% in 2024. (By assuming that official is the low dot for next year (4.875%), then that person is expecting cuts at almost every meeting in ’24). In the 1Q SEP, someone is probably going to be itching for a cut in 2023. Winter Arrived EarlyIn addition to the snow across the US and UK, winter arrived early in cryptoland. GS is out with a note suggesting that until bitcoin adoption has more real use cases (a while), its price may not be on an upward trajectory, during an expected period of tighter financial conditions, so investors should consider gold to be a better diversifier. NoSo talking about a decline in the 7-day ave of open interest for Bitcoin perpetual futures, an indicator for trader sentiment on Binance, suggesting growing concern. The one person who escaped the winter is John Ray, the new FTX CEO with an hourly rate of $1,300 + expenses. This compares to Amber Group, one of Asia’s largest crypto platforms, which cancelled 2022 staff bonuses. Presents Arrived EarlyFor ADR holders of about 200 Chinese/Hong Kong names. The US Public Company Accounting Oversight Board has been able to review audit docs sufficiently so that the companies won’t be booted off US stock exchanges. Finding ValueThe MSCI World Value Index has clocked 19% over its Growth Index counterpart, the greatest outperformance since the 2000 Dot Com Bust. SocGen is calling for this to continue. Cathie Wood is buying Tesla shares. We’ll see who wins this battle. FreebieThe gov will send you 4 free Covid tests again. With testing requirements for re-entering school/events, it’s a nice freebie. |