C8 Weekly Bulletin: Don’t Fight the Fed, Don’t Believe Them Either

After last week's Bulletin, featuring an excerpt from Boutique CIO's strategy piece, we had a number of requests to see the whole document. So we are sending it out in this week's Bulletin.  It is a great overview of the current US investment environment. 
BY JON WEBB

C8 Weekly Bulletin:  Don’t Fight the Fed, Don’t Believe Them Either

09 March 2023

After last week’s Bulletin, featuring an excerpt from Boutique CIO’s strategy piece, we had a number of requests to see the whole document. So we are sending it out in this week’s Bulletin.  It is a great overview of the current US investment environment.

Please click the link directly below to view:

Summary

Inflation expectations and break-evens are converging towards Fed’s long run target

Futures indicate Fed funds rate to reach over 5% by mid-year, in sync with Fed forecasts

Post Powell’s February 1 presser, Fed has finally convinced fixed income markets of its intentions to continue raising rates

Post February 1, 1-year and 2-year rates have moved higher by 35bps and 50bps respectively

Fed futures markets are now pricing in rate hikes that exceed the Fed’s own forecasts

Fed funds rate above Core PCE for first time since inflation surge began post covid

Long bond yields priced at recessionary levels offering moderate to less than fair value

Strong recession indicator –inverted yield curve between 3s/10s -began signalling in October 2022

Quarterly earnings are negative for Q4 2022 and forecast to contract again in Q1 2023 and Q22023

Asset Class Valuations –TINA is no more with 5% Fed funds rate looming

S&P 500 likely over-priced for a soft landing, difficult risk reward versus both short and long rates

Additional Portfolio Considerations: Gold, International, Growth Value, Small Cap, Volatility

 

 

Boutique CIO (https://www.boutiquecio.com/) works closely with C8 Technologies in the US. With decades of investment management experience, Boutique CIO offers discretionary portfolio management covering equity, fixed income, long-short equity, option hedging, and thematic strategies. The firm also provides investment strategy, market research, investment committee management, and outsourced Chief Investment Officer (OCIO) solutions to advisors and planners, through the Boutique CIO ecosystem.

 

Other posts

C8 Hedge on The Full FX

BY JON WEBB
Mattias Eriksson and Jon Webb join host Colin Lambert to discuss the launch of C8 Hedge Read more →

C8’s Weekly Bulletin: US Patent Granted

BY ROBERT MINIKIN
C8, the pioneering fintech platform that offers investors the ability to use direct indexing across all liquid asset classes and investment styles, announces that the US Patent Office has issued a patent on C8’s ground-breaking end-to-end platforms, C8 Studio and C8 Wealth, for Direct Indexing. Read more →

MI2 for C8 – JPY Liftshaft Alert

BY JON WEBB
There is a window emerging for position reduction in the widely held JPY carry trade. Positions are crowded at the same time that the rationale for the extension of the current benign regime is diminishing (carry, carry-to-vol, policy divergence, etc). There is no sense of danger within analyst expectations or embedded in option pricing. While we lack an immediate catalyst, sometimes price can be its own trigger. With USDJPY around 156 and an easily defined stop loss, the risk reward of engaging with JPY strength is compelling. Escalator / liftshaft price action provides significant convexity. Crowded JPY shorts would also need to be covered in the event of a risk-off catalyst coming from other asset classes. Owning USDJPY puts can be an attractive portfolio hedge for investors concerned about general market complacency or for more active tactical FX managers and traders. Read more →
Back to all posts →