The Good News
Global growth remains elevated and still above trend
Liz Ann Sonders: “Global economic recovery remains quite robust with > 64% of @OECD countries producing above-trend leading indicators @DataArbor”
Price increases are showing signs of slowing down, a positive sign for those worried about inflation
The Mixed News
Retail sales remain strong, but did we pull some forward?
Lance Roberts: “The problem with #retail #sales being this far above trend is the coming #reversion as #stimulus leaves the system. We pulled forward roughly 3-5years of sales that will now drag on #consumption. #Deflation.”
The Bad News
Demand is still far exceeding supply, a sour sight for those worried about inflation
The State Of The Market
Fed issued hawkish surprise, but any major movement remains distant
The market, though, seems to have reversed course on inflation just as the Fed acknowledged the possibility of higher inflation
Danielle DiMartino Booth: “Treasury 30-year yields dropped below 2% for 1st time since February as traders continued to unwind reflation trades after Fed’s hawkish pivot. Benchmark rates declined as much as three basis points to 1.40%, lowest since early March. Short-end yields edged up.”
As the yield curve flattens, high yield falls even further negative. A very telling chart about sentiment.
Longer maturity yields are falling after a relatively short period of rising.. what does history suggest they do next?
Julien Bittel: “Have US 30Y bond yields peaked? Probably, but let’s look at some data. Only 8X since the early 1990s have US 30Y bond yields risen >1% YoY. Over the 12 months that followed, bond yields fell 100% of the time. Different this time? You decide. Just here to give you some facts.”
Stocks have been sensitive to the Fed’s balance sheet, something to keep in mind if tapering conversations ramp up
The reflation trade takes a break as inflation expectations relax
Investors are very high on equities and very low on bonds
Julien Bittle: “US retail investors are fully invested in equities and very light on bonds… Same % allocation as Q3 2000. Care to be contrarian?”
Charts Of The Week
The price-to-sales ratio is, uh, high
A lot of younger people took on debt to enter the market, especially Gen Z
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