Regime Shift The Most Inflation In The Post-Crisis Period Forecasting the eventual rebound in inflation has become increasingly difficult, just ask the Federal Reserve. On the contrary, the error in estimating... Read More
U.S. Treasury investors have built in a hefty premium for inflation, but are seemingly refusing to continue until inflation releases make a real push toward the Fed’s target of 2.0%. March 21, 2018 The chart below shows the spread... Read More
Rotation into defensive sectors is likely to benefit healthcare, especially in emerging markets. ... Read More
Expectations for inflation in the U.S. are the highest post-crisis, but realized inflation has yet to show up. Many of these surveys have become coincidental-to-lagging indicators for prices and wages, making forecasting very difficult. Roughly 70% of the rise in U.S. 10-year note yields is attributable to hopes and dreams for inflation. But, bond investors will eventually shed their calm demeanor without expectations coming to fruition.... Read More
We fear investors and analysts are failing to acknowledge the recent slowing in economic data across the globe. The tailwinds of global concerted economic growth are fading, making defensive sectors (healthcare, utilities, and consumer staples) and stable yield generating investments like municipal bonds particularly attractive.... Read More
Financial conditions are finally tightening, however disruption has not yet been seen across U.S. high yield. We are watching the correlation between U.S. high yield and the U.S. 2-year 10-year spread, world equity drawdowns, and zombie companies to determine when credit spreads will finally widen. The Fed may be the instigator with less room than previously thought to tighten.... Read More
U.S. economic data looks poised to miss expectations after deterioration across the Eurozone, U.K., and Canada. U.S. 30-year yields should find difficulty ascending relative to other major developed economies.... Read More
Large specs remain short the 10-year Treasury note. ... Read More
The second panel of the chart below shows large speculators? net position in silver. The third panel shows the net position of money managers (i.e., CTAs) and the bottom panel shows the net position of “other” reportables. Money managers and... Read More
Interest rate-sensitive industries have dramatically underperformed during this era of tightening Federal Reserve policy. Not surprisingly, these very industries possess the greatest proportion of near-zombie companies. A return to lower U.S. Treasury yields would avoid tumult and help these industries recover some losses. However, an increasingly hawkish Federal Reserve without the tailwind of inflation and global economic growth could push some of these companies into the walking dead.... Read More
Industrial real estate continues to outperform as Amazon expands both its distribution networks and brick and mortar retail presence. ... Read More
Despite the volatility in the stock market over the past couple months, sentiment has yet to turn truly bearish.... Read More
Baa-rated debt has grown from just 25% of all U.S. investment grade corporate debt in 1989 to 48% today.... Read More
The average maturity on AAA-rated U.S. corporate debt is much higher than that of the rest of the investment grade spectrum.... Read More
A comparison of debt to GDP along with a breakdown of private and government debt... Read More
Stock total returns since crude oil bottomed on February 11, 2016... Read More
Crude oil is up 149% since bottoming in February 2016. ... Read More