In today’s briefing:
- What the Bull Case Looks Like
- Steno Signals: The Usd Liquidity Cushion Is Alive and Well
- FOMC Preview: Party Now, Pay Later
What the Bull Case Looks Like
- While the short-term breadth and momentum indicators like the percentage of S&P 500 above their 20 and 50 dma exhibit negative divergences, the percentage above their 200 dma has resilient
- We interpret these readings as the S&P 500 may need a period of consolidation or pullback within a longer-term bull trend.
- However, the best opportunities are to be found within cyclical stocks and in non-U.S. regions.
Steno Signals: The Usd Liquidity Cushion Is Alive and Well
- When the TGA is built up due to T-bills issuance, the ON RRP usage drops
- Net/Net it meanas that USD liquidity keeps printing at more benign levels than anticipated by many
- The USD liquidity additions will continue throughout February and March
FOMC Preview: Party Now, Pay Later
- Ahead of the February FOMC meeting, our base-case scenario has changed to a cyclical and reflationary rebound in Q1 and Q2.
- The rebound is led by the prospect of China re-opening its economy and the positive liquidity effects of the U.S. Treasury’s extraordinary measures to avoid default.
- As the inflationary effects of the China re-opening become clear, the Fed will have to reconsider its rate pause and possibly raise rates by late Q2 or early Q3.
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