In today’s briefing:
- US Banking System Survives Treasury’s First Borrowing Binge, but Liquidity Concerns for 2024 Linger
- Positioning Watch – The market’s response to another Fed hike
- On the Verge of a Long-Term Buy Signal
US Banking System Survives Treasury’s First Borrowing Binge, but Liquidity Concerns for 2024 Linger
- US banks’ financial results for Q2 indicate limited effects from the regional banking crisis in March on credit quality and the real economy.
- Money market funds have reduced their participation in the Fed’s reverse repo programme since early-June and have bought US Treasuries without a detrimental impact on bank deposits.
- Benign quantitative tightening could continue into 2024 even if the Fed decides to lower its policy rate, thereby squeezing banking system liquidity during a period of high US Treasury borrowing.
Positioning Watch – The market’s response to another Fed hike
- Welcome back to our weekly positioning article, where we as always take you through the positioning data that we have found relevant throughout the week.
- The central bank week is over, and what a week it has been with the quite shocking decision from BoJ yesterday, moving the YCC upper band from 0.5% to 1%, increasing the flexibility of their monetary policy since they effectively now have more room to play with, and they don’t have to buy as many bonds as they do now to keep yields under control – unless yields rise to >1%.
- In the West, the Fed and ECB delivered right as expected with a 25 bps hike each, despite inflation coming down FAST both in the US and EZ – it sure looks like they want to be sure that inflation gets down to target.
On the Verge of a Long-Term Buy Signal
- A monthly MACD crossover model is on the verge of a major long-term buy signal for U.S. stocks.
- In addition, our Trend Asset Allocation Model has turned bullish, which is a signal for long-term investors to raise their equity allocations.
- However, the short-term outlook is less certain and the market can correct at any time.
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