Attack the Week (ATW)
Sunday Thoughts
On my recent US travels, I had the chance to see one of the bands that I hadn’t seen perform live yet, and I got tickets. We are talking about Green Day, one of the most influential bands in punk rock, known for blending punk’s rebellious energy with catchy pop melodies. I am especially in awe of their lead singer, Billy Joe Armstrong, who, despite his relatively small height, brings energy to a place and stadiums like nobody else. Not bad for a 52-year-old. His charisma beams strongly; it even caught me offside when I saw him in our hotel lobby but decided not to ask him for an autograph or photo. Damn, I regret that decision now. Needless to say, their gig absolutely rocked. Watching mid-50-year-olds inspire a stadium for 2.5 hours with non-stop, fast-paced tunes gives me hope as I age.
I love many of their songs, and I guess many of their old classics can be translated into our current macro crossings as we await the Fed’s decision this coming Wednesday.
Let’s scan a few of my favourites and how we can translate this into the current framework.
"Wake Me Up When September Ends"
"As my memory rests / But never forgets what I lost."
Does the Fed 25/50 bps dilemma really even matter? This month’s volatility and risk asset bounce has taken many by surprise. Maybe we should just wait for the die to be be cast before engaging in proper risk-taking again.
"Boulevard of Broken Dreams"
"I walk a lonely road / The only one that I have ever known."
Many FOMC meetings will break some portfolios and visions. This time around, given the tight pricing, it will most likely be more volatile than usual. But the rate cut itself might ironically not be of the most importance. Signalling further out might be more important, but some of the justifications as to where they see things headed as far as some macro variables are concerned should also be contrasted with follow-through market reaction.
"When I Come Around"
"You can't go forcing something if it's just not right."
Positioning in bonds is rather stretched. I will show further below that we have some reversal patterns appearing, which would fit in very timely with Wednesday’s meeting. What if they want to be dovish, but their justifications leave markets with mixed feelings? I think there are many possible scenarios. As always, I preach my “stay nimble” mantra.
Good Riddance is my favourite song, which puts so many good things into perspective. While it’s often perceived as a sentimental farewell, the song’s meaning is rooted in a more bittersweet reflection on life’s unpredictability and the importance of cherishing memories, even when they are laced with sadness.
"It's something unpredictable, but in the end is right / I hope you had the time of your life."
Whatever comes, we stand ready. And I hope it’s going to be a Green Day and Week for all of us. My view remains the same: I think they will go 25 bps, but I can totally see them (as whispered by late last week’s articles) opting for 50 bps, in which case, I will be very curious to hear as to why they decided to do so.
Let’s now hear from my friend Macro D and his latest musings while we scan the rest of the weekly macro calendar and check out the most important 10 charts to consider set-ups and risk-reward as we attack the week ahead furiously.
Let’s go!