While 99% of market pundits have been busy for the past months laying odds and making bets as to precisely when and how much the Fed will raise interest rates, a small universe of Fed Watchers have picked up on a surprising nuance that few seasoned market experts have even calculated into their outlooks. Its not about Janet Yellen’s body language, its more about the water in San Francisco and what the real Fed thought-leaders are signalling. Tony Bennett might have to update his iconic song..we’ll let the marketplace decide that one!
MarketsMuse Global Macro curators offer a hint into what those having Sight Beyond Sight are now modeling into their own calculations. As proffered via a special CNBC appearance by Neil Azous, the founder of global macro think tank Rareview Macro, LLC, the “lower for longer” theme could prove to be an even lower interest rate regime and lead to prospects for yet another QE, all driven by the clouds on the horizon that some believe are spelling out “global recession..” Listen carefully to the following thesis….and in tribute to Tony Bennett, scroll down and sit back to the second video clip on this post
Messing With Data aka When “Art” Smashes into “Science” in Wall Street’s Version of the Hadron Collider
MarketsMuse Fixed Income update comes consequent to the Fed’s June 5 release of Employment Data, and below is courtesy of extracted comments delivered to institutional clients of Mischler Financial Group under the banner “Quigley’s Corner” and authored by Managing Director Ron Quigley, Head of Fixed Income Syndicate for the securities industry’s oldest and largest minority firm owned and operated by Service-Disabled Veterans. Mischler has been awarded “Best Research-BrokerDealer” for the past two years by The Wall Street Letter.
The large Hadron Collider in Geneva’s CERN Institute or the European Organization for Nuclear Research took ten years to build. It’s the largest single machine on our planet. 10,000 scientists worked on it from 100 countries. Talk about diversity and inclusion! It rests as deep as 825 feet underground and its circumference is 17 miles. It was created, in essence to help find answers to questions that have bugged mankind like “where do we come from?” or “How was the universe started” among many others. CERN hires roughly 90% of the world’s particle physicists otherwise known as the smartest people on earth. My late father-in-law was its director and worked there for over 40 years. They are exacting people, detail oriented and with no room for error. Which leads us into today’s Op-ed concerning U.S. economic data and its vast differences but equally important impact in today’s inextricably global-linked world economy. Like the circular Hadron collider – what goes around comes around. So, what happens with rates, the EU, Greece, China and Ukraine, terrorism and/or Nationalism can all have an explosive domino effect. Given that our current rate situation seems tenuous with equally profound global ramifications, I thought the analogy appropriate. Continue reading →
Marketsmuse.com blog update courtesy of extract from a.m. edition of Rareview Macro LLC’s “Sight Beyond Sight”, the global macro trading investment newsletter favored by the industry’s leading hedge funds, investment managers and the world’s most savvy self-directed investors.
-FOMC Meeting: Best Wishes
-Swiss National Bank (SNB) Meeting
-Singapore: The First Derivative of China and Crude Oil
Firstly, FINalternatives was kind enough to publish our thoughts on what we believe are the main forces driving the economic cycle in Europe right now, the supply/demand conundrum in European bond markets, and why Bund yields could rise even while the Euro exchange rate falls. This is not a trading piece or a recap of recent events but an analysis to show how a mix of history and the implementation of monetary policy will combine to generate accelerating growth in Europe. It is basically the culmination of the views that we have been outlining to you since mid-January. If you’d like to read it, you can find it here: A Euro-Surprise Is On The Way And It Is Not What You Think It Is.Continue reading →
MarketsMuse.com update courtesy of extract from Feb 16 CNBC reporting by Alex Rosenberg
There’s a major debate brewing in the financial markets, and it concerns the most important potential event of the year for stocks and bonds alike: the timing of a Federal Reserve rate hike.
In one corner are the economists. Many of those looking primarily at the state of the recovery say that the Fed will likely raise its key federal funds rate in June.
On the other side are traders, who say that current market dynamics—and prior experience with the central bank—tell them that a rate hike isn’t coming in 2015.
What the Fed actually chooses to do, of course, will have a profound impact on financial market, and perhaps on the economy as well. The federal funds rate, a critical short-term rate at which banks can lend to one other, has been kept ultra-low by the Fed since the financial crisis days of December 2008.
Now, many economists expect that the Fed is finally set to shift from ultra-low levels, given the strong state of the labor market.
With the unemployment rate declining and payrolls data showing some 250,000 payroll gains a month, “the U.S. labor market is screaming for policy normalization,” as Societe Generale economist Aneta Markowska put it in a recent note.
If the economists are right, a hint at a June rate hike could come as soon as Wednesday, when the Fed will release the minutes of their last policy meeting. If the minutes find them gushing about growth and unbothered by economic and geopolitical problems overseas, it could serve as a reminder for investors that a June hike is still on the table. So, too, could the congressional testimony of Fed Chair Janet Yellen in the following week.
The Fed is “much closer to hiking then putting it off,” said Neil Azous of Rareview Macro, a firm that advises large investors. After all, “it is hard to argue from an economist’s perspective that they shouldn’t at least start the process. Their models are telling them to, regardless of the problems abroad in Europe and Asia.”
Strong job creation, especially if February’s payrolls top expectations, could also hint at a tightening. “If the job market holds anywhere close to what it’s been running at, then yeah, we’ll get a hike,” agreed Deutsche Bank economist Joseph LaVorgna. “I don’t see why the Fed wouldn’t go in June.”
Still, that sentiment is clearly not reflected in the market. Fed funds futures are implying just a 20 percent chance of a rate hike in June, according to CME Group’s FedWatch tool.
Indeed, if Yellen does give a hint in the weeks ahead that a June rate hike is possible, “the fixed income market would re-price swiftly and painfully against the consensus long position,” Azous said.
In other words, rates (which move inversely to bond price) could rise dramatically. And that, in turn, could have a profoundly negative impact on stock prices. Continue reading →