Friday Paper Charts
September 22, 2023
Quite a week, and it would seem that I have timed my little break very well for once. An action-packed second half of the week has finally woken up markets again. The price action alone is unsurprising, given we knew where the momentum was. I am more astonished at how sentiment and the fintwit chatter have flared up as we broke recent yield ranges. Doom and gloom about higher rates are quite dominant, which is maybe a good omen as the reversal model is opening up a possibility for a relief rally in bonds soon. Handy to keep the headline below in my archive forever.
There are obviously losers and winners as rates go higher. I couldn’t help but be irritated by the one-sided nature of how rate rises are being portrayed in the media. The BBC, for example, was yapping on about how poor buy-to-let mortgage holders now have to rent out their places on Airbnb in order to finance their mortgage. This is their risk; people usually know what they are getting into. What about people like my parents-in-law who worked hard for their entire lives and have a few quid in savings, which are now finally reaping some rewards? There is always another side to the story.
The SPX is on course for the worst week since SVB, and we are sitting at a very tight stop with a likely break possibly targeting another 3% lower from current levels. Data is continuing to surprise; heck, even European data is slowly recovering. Super Thursday delivered a surprise pause by both the SNB and BoE, with the latter possibly setting themselves up for a small policy blunder while core inflation and wage pressures are still very much elevated.
Today’s BoJ Ueda comments were somewhat dovish, with the focus focus on policy exit policies. However, we did not receive much beyond stating that the distance to removing NIRP has not changed much. The phrasing today dampens speculation of a near-term shift in policy and highlights a continued dovish stance from the BoJ.
Stock/Bond correlations hit a new high for this year this week, as real yields are especially impacting growth stocks. Meanwhile, the USD is on a 9-week winning street, the longest since 2014.
Stagflation, while not overly mentioned, is still implicitly expected if you look at GDP and CPI expectations by country into 2024.
This week has seen the launch of PAMB (Paper Alfa Macro Book). The first article was published as we started the engines. I expanded on the important aspects of idea generation and some unconventional sources, which I hope you found useful.
I have a few more words upon reflecting on what this week’s FOMC delivered. After that, let’s explore the record 83 cross-asset charts for what the latest setups present to us. There are many reversals in play or due to be triggered.