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First Word

  • First Word
September 26

Investors appear to have given up all hope for any soft landing post the Sept FOMC (9/21). Looking at market reactions, post-FOMC:Fed Funds futures now pricing 4.75% Fed Funds rate by June 2023Inflation breakevens 1-year forward have dropped to 1.97%Fed Funds implied June 2023 +38bpInflation...

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  • First Word
September 23

While investors know Fed wants inflation "deader than dead", metric is not entirely clear. While not singular, Volcker finally ended "war" when 3M annualized CPI fell to 2.5%

After many conversations with clients since the Sept FOMC (9/21), our overarching takeaways are the following:Fed sole focus is quashing inflation andIn a way to make sure inflation is "deader than dead"How this is measured is not entirely clearInvestors have lost faith in economists' models/projections on inflationFed similarly has little...

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September 21

As investors brace for a "hawkish"-leaning Sept FOMC, notwithstanding August CPI, progress seen on inflation since June FOMC

The September FOMC decision comes Wed at 2pm ET. Since Jackson Hole (8/26), markets have been on edge and investors have been bracing for more "hawkish" Fed commentary. This is best evidenced by the surge in yields (2Y and 10Y) and creeping higher of Fed peak expectations. In short, investors...

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September 19

Sept FOMC... markets expect +75bp and "hawkish" surprise less likely given last 4 weeks. Market's reaction to August CPI one of 10 worst since 1970.

The Fed's September FOMC meets this week and a rate decision will be made on 9/21. Last week, equities suffered the largest weekly loss in 2H2022 so far, falling 4.8% (4th worst week of 2022) on the heels of the August CPI.consensus is looking for +75bpfutures markets pricing in roughly...

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September 16

Nasdaq went "no bid" on 9/13 with zero stocks advancing. 13 of 13 times, Nasdaq 100 higher median 12M gain 21%. When already >25% drawdown, median gain +64%

In 2H2022, there have been two separate days where markets saw massive declines:post-Jackson Hole on 8/26post-August CPI on 9/13 In both instances, equites were reacting to re-calibration of Fed expectations. That is, when investors see risk of tighter Fed, stocks have fallen in a broad retreat. The negative reaction to...

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September 14

Inflation "past peak" thesis challenged with August CPI, but our view remains inflation set to fall

The upside August CPI report (higher inflation) roiled markets Tuesday, as economists and investors calibrated their expectations around the path of Fed policy into 2023:CPI (mom) +0.12% for August vs median forecast -0.1%, prior -0.02%Core CPI (mom) +0.57% for August vs. median forecast +0.3%, prior +0.31%the negative "shock" for markets...

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September 12

5 thoughts ahead of August CPI (9/13) = inflation cooling, potentially falling like a rock

The most important event this week, in our view, will be August CPI (9/13). Hopefully (we expect) this will show that inflation in the US indeed peaked in June 2022:consensus looking for -0.1% MoM (or -1.2% annualized) and core +0.3% (+3.6% annualized)the unknown remains the pace at which inflation will...

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September 9

Despite negative September seasonals, roadmap shows positive catalysts in next few weeks + peaking USD + peaking yields = supportive equities

Equities were left a flaming wreck after Jackson Hole (see chart below), with S&P 500 falling ~7% in the ensuing two weeks. But have since managed to stage a bounce in the last few days. [Flaming Elmo GIFs | Tenor]Source: GIF. com Fortunately, the technical damage could be limited, if...

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September 7

Nasdaq down 7 days in a row, actually a constructive signal. Since 1970, stocks higher 74% of time 1M, 3M, 6M later.

Equities have sold off seemingly continuously since Jackson Hole (8/26), as the strong message from the Fed and uncertainty around Russia, China and economy have pushed equities to become "no bid" -- in fact, as many noted, the Nasdaq is down 7 consecutive days. Since 1970, this is pretty uncommon,...

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September 2

ISM prices decline points to future steep fall in PPI (like a rock). Remote-work creating same job posting in multiple cities (overstating tightness?) 2H rally thesis strained but still intact

We publish on a 3-day a week schedule: _– SKIP MONDAY _due to Labor Day holiday – SKIP TUESDAY – Wednesday – SKIP THURSDAY – Friday There is a lot trepidation about markets in September. The seasonals worry investors (one of the toughest months), coupled with midterm election uncertainties (not resolved...

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August 31

10 thoughts to suggest inflation could fall more "like a rock" than a "feather." 42% of CPI components deflating off "peak" = inflation could fall faster than consensus expects.

We publish on a 3-day a week schedule: _– SKIP MONDAY _due to Labor Day holiday _– SKIP TUESDAY_ _– Wednesday_ _– SKIP THURSDAY – Friday_ It was surely not a great sign that stocks:sold off big Fridaydid not manage to bounce Mondaydid not manage to bounce on turnaround TuesdayThursday is...