Great article! It sums up how much uncertainty and conflicting data there is at the moment. I'm decidedly less bearish than I was a few weeks ago but I'm still pretty far away from being bullish. I just don't have a clear bias right now because it feels like pure guesswork.
The key to risk rally remain: a bottom in ISM and Fed pivot. The former, despite the bad reading in Dec, has a couple of leading indicators that point to Dec being the low in the cycle. First, ERB (earnings revision balances) bottomed in Nov. Second, look at cyclical/defensive, meaningfully off lows. One might also mention a third that is your chartpack above. New Order / Inventories is not making a new low. On the Fed pivot, I still like the 1995 scenario or peak hawkishness has come and gone. That is when terminal in the forwards was above 5.25%, now backed off. I feel good about stability of risk trade, but am still wondering if it could just be a dull year, rangy, as you suggested, because am opening up to the idea that the decade long outperforance of US vs World might be ready to take a rest and who knows even reverse. In a no recession outlook wondering if credit might offer better IR than equities?
Great article! It sums up how much uncertainty and conflicting data there is at the moment. I'm decidedly less bearish than I was a few weeks ago but I'm still pretty far away from being bullish. I just don't have a clear bias right now because it feels like pure guesswork.
The key to risk rally remain: a bottom in ISM and Fed pivot. The former, despite the bad reading in Dec, has a couple of leading indicators that point to Dec being the low in the cycle. First, ERB (earnings revision balances) bottomed in Nov. Second, look at cyclical/defensive, meaningfully off lows. One might also mention a third that is your chartpack above. New Order / Inventories is not making a new low. On the Fed pivot, I still like the 1995 scenario or peak hawkishness has come and gone. That is when terminal in the forwards was above 5.25%, now backed off. I feel good about stability of risk trade, but am still wondering if it could just be a dull year, rangy, as you suggested, because am opening up to the idea that the decade long outperforance of US vs World might be ready to take a rest and who knows even reverse. In a no recession outlook wondering if credit might offer better IR than equities?
Always great Richard