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

Thoughts From the Divide – Lessons Learned

BY JON WEBB
If the saying is that we’re always fighting the last war, Chair Powell and his Fed comrades appear to be shellshocked. Not so long ago, when asked about where the FOMC’s collective thinking was, Mr Powell went with the rather cumbersome formulation “not thinking about thinking about” rate hikes. This time around, when asked about the various ins and outs of potential rate cuts, Powell said point blank that “the next question… is when it will become appropriate to begin dialing back the amount of policy restraint that’s in place… that’s really the next question, and that’s what people are thinking about and talking about”. Read more →

NDR Dynamic Allocation Strategy September 2023 Update

BY BRIAN SANBORN
Dynamic Allocation Strategy, indicators, weightings update Read more →

NDR Fixed Income Allocation Strategy September 2023 Update

BY BRIAN SANBORN
The NDR Fixed Income Allocation Strategy, Positioning Update Read more →
Back to all posts →