Paper Alfa - Macro & More

Paper Alfa - Macro & More

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Paper Alfa - Macro & More
Paper Alfa - Macro & More
Friday Paper Charts
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Friday Paper Charts

August 11, 2023

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Paper Alfa
Aug 11, 2023
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Paper Alfa - Macro & More
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Friday Paper Charts
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Another great week is coming to an end. The much-anticipated inflation print didn’t do much to change the prevailing narrative. As outlined in an earlier post, the bond market’s weekly changes are actually showing a small move lower in yields. A week of two halves fits the narrative clearly.

With the first two macro weeks gone, I would suspect volatility to quieten down a little. All eyes are firmly on Jackson Hole later in the month as well as gauging the flavour and biases in upcoming central bank speeches.

In terms of inflation, core CPI rose 0.16% MoM again in July, similar to the increase seen in June. Most details were as expected, with a larger decline in used car prices that will likely continue in the coming months. Primary rents slowed further, but owners’ equivalent rent (OER) has remained somewhat stronger. The most notable surprise was another 8% decline in airfares, also very similar to the June decline. But even with this drop, core services prices, excluding rents and OER, rose 0.19% MoM as components such as recreation and education strengthened. I would not expect weakness in airfares to last, with rising energy prices and a more favourable seasonal leading to notable upside risks in August. For now, the “softer” July CPI should be enough for the Fed to “skip” hiking at the September meeting, but some stronger inflation prints starting next month keep should keep some probability of a further 25 bps into year-end alive.

Note that both Core CPI and PCE are priced to be well above 2% into 2024.

Source: StateStreet

Oh, and the Fed has in 40 years never cut rates when CPI was above 3% with unemployment below 4%.

Source: Bloomberg

A little reminder of how stocks (SPX) have performed around the last hike in the recent past.

Source: Bloomberg

As for the week, I have added the following posts:

  • “On Technical Analysis” drew quite a bit of interest. It’s my longest piece to date. A lot of philosophical reflection as to how to build a technical analysis framework. Equity focussed.

  • “Stories of the Institutional past #4” is a post reflecting on the useful skill of being able to present well. I don’t and probably never will.

  • “Attack the Week”, or ATW, lays out the most important charts and analyses which I use in preparing for the week ahead. I often add my Monday thoughts and some useful charts for all subscribers to read.

  • We had two Model Signal Alerts this week. These are usually short pieces, updating our paid members on any alerts the mighty model has flashed as of the close of business the previous day. The second alert went out on Thursday prior to CPI.

There is a lot of energy that goes into my writing. The funny thing about energy is that it also compounds into a positive feedback loop. I am grateful for the continuous support and love I am receiving, and I am welcoming all new members and supporters to the pack. This is the fuel that keeps this going. So, thank you.

Having received positive comments on the impact my writings have already had, I am exploring new and useful ways and tools I can offer. This is not only about giving my views on the world but also applying solid and tested mechanics for all my leaders to learn and benefit from. One such quest would be how to run a macro book. I need a good name for it, so hit me up with good suggestions in your comments.

The idea is simple; we start from scratch. Trade idea, structure, risk/sizing, portfolio construction, monitoring. A straightforward investment process, hopefully. Hope you are as excited as I am.

Now, let’s reload the charts engines and see what they spit out. We have a record of 60 charts to look at.

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