The Federal Reserve is moving to end QT as reserves tighten and money market rates spike. A closer look at the equity outlook and other trades heading into year-end.
As always, an excellent article. I have a few questions regarding the premise that 'The Fed is likely to continue supporting markets over the next year.'
In this strong environment, would a steepener trade be a favourable strategy?
It seems plausible that interest rates will only reverse course once hard data confirms a genuine economic strengthening. Otherwise, the narrative you've presented appears to be already widely discussed, yet the 10-year Treasury yield continues to test the 4% mark. Given that tariff revenues are currently offsetting concerns about the fiscal deficit, coupled with the Fed maintaining a dovish stance, it feels unlikely that interest rates will experience a significant rebound.
Do you consider copper to be a superior choice compared to gold and silver at this juncture? Copper actually closed flat on Friday
Thank you! I have no strong opinion on steepening/flattening right now.
I think the 10y US Treasury yield mainly reflects concerns about more underlying economic weakness and a dovish Federal Reserve. If the wealth effect leads to stronger consumption in the next months, some of it might reverse. My bias on the SOFR curve remains that cuts need to be priced out - less cuts under Powell, more cuts under the next Chair.
I have no opinion on copper. I think gold & silver are vulnerable, but it’s difficult to find the right moment to get short. I am still on the sidelines.
Such a great piece overall, but I have to tell you that the plumbing section was truly amazing, thank you.
It always seemed to me to be a very complex issue, one that most pundits spend little time looking at (might make sense since probably it tends to work well), but also so systemically important that having an expert look and thoughts makes it very valuable.
As always, an excellent article. I have a few questions regarding the premise that 'The Fed is likely to continue supporting markets over the next year.'
In this strong environment, would a steepener trade be a favourable strategy?
It seems plausible that interest rates will only reverse course once hard data confirms a genuine economic strengthening. Otherwise, the narrative you've presented appears to be already widely discussed, yet the 10-year Treasury yield continues to test the 4% mark. Given that tariff revenues are currently offsetting concerns about the fiscal deficit, coupled with the Fed maintaining a dovish stance, it feels unlikely that interest rates will experience a significant rebound.
Do you consider copper to be a superior choice compared to gold and silver at this juncture? Copper actually closed flat on Friday
Thank you! I have no strong opinion on steepening/flattening right now.
I think the 10y US Treasury yield mainly reflects concerns about more underlying economic weakness and a dovish Federal Reserve. If the wealth effect leads to stronger consumption in the next months, some of it might reverse. My bias on the SOFR curve remains that cuts need to be priced out - less cuts under Powell, more cuts under the next Chair.
I have no opinion on copper. I think gold & silver are vulnerable, but it’s difficult to find the right moment to get short. I am still on the sidelines.
Dear Mr. Repo,
Such a great piece overall, but I have to tell you that the plumbing section was truly amazing, thank you.
It always seemed to me to be a very complex issue, one that most pundits spend little time looking at (might make sense since probably it tends to work well), but also so systemically important that having an expert look and thoughts makes it very valuable.
Thank you for it!
Best,
Valentino
Thank you Valentino!