Diary Week 63: It's Not Getting Any Easier

Diary Week 63: It's Not Getting Any Easier

The analogs that have served us well for most of this year (1990/2000 and in particular 2007) are still in play (particularly 2007) but we are getting to a point where the optimal scenario (price action and backdrop having similarities to the historical period) is reaching an inflection point. The 1990 dynamic (mainly with a Japan backdrop) where Japan raised rates aggressively while the US eased is now diverging somewhat. Japan is clearly "balking" at the idea of an aggressive tightening cycle while the Fed is expressing cautionary notes about the speed of easing (although 2 more 25 bp cuts this year is still my base case). Recent rhetoric on inflation from the Fed clearly shows that 25 bps is very much on the table for November.

2000 still resonates somewhat (especially if the Fed backs away) but more in terms of the equity market and the NASDAQ/SOX in particular.

But the reality is that at this point both in terms of the equity market and the bond market (in particular the 2-year yield) we are tracking much closer to the 2007 path.

You can read the full article at https://shoe-fitz.rjobrien.com/diary-week-63-its-not-getting-any-easier

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