In today’s briefing:
- Concerns About Capital Flight from China Have Not Prevented Higher Real US Treasury Yields
- Positioning Watch: Has the August Pain Weakened the Bulls?
- The Risks to the Resilient Market
- Steno Signals #62 – The recession is called off (by consensus)
Concerns About Capital Flight from China Have Not Prevented Higher Real US Treasury Yields
- The one-way bet on the yuan that prevailed before 2015 no longer exists, while reducing higher two-way exchange rate volatility will become a major objective for the PBoC.
- Concerns about economic and financial affairs in China could potentially trigger a scramble for dollars that could force the Fed to offer liquidity swaps to avoid tightening financial conditions.
- Yields on US Treasuries have risen due to higher economic growth expectations and ambitious federal government borrowing. Heavy reliance on bill issuance aims to mitigate the fallout on risky assets.
Positioning Watch: Has the August Pain Weakened the Bulls?
- Here, we’re all about diving into market positioning to uncover some exciting insights about the bigger picture.
- As always, we’ll be digging into the data, pulling out the key points, and spotting the most interesting market trends for you.
- Without further ado let’s jump right into itAs we cautioned back in July, it’s no surprise that volatility has been on the rise throughout August.
The Risks to the Resilient Market
- Ever since the NYSE Composite monthly MACD flashed a long-term buy signal, we have been monitoring the risks to the bull.
- We conclude from our risk review that the market faces a number of key macro risks which we continue to monitor, but those risks have not materialized to threaten equities.
- However, the threat of rising rates could put pressure on equity valuations and put a ceiling on any potential stock market gains.
Steno Signals #62 – The recession is called off (by consensus)
- The most pre-announced recession in human history is still yet to arrive and I don’t think it’s possible to find a period in time where the economist consensus has been continuously on the bearish side of actual outcomes, outside of the one we have just been through.
- From a soft landing to a hard landing to NO landing.
- That has been the pattern for economic projections both in Q4-2022 and Q1 to Q4-2023.
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