More worrying for policymakers than the present inflation, is expectations of where inflation is likely to sit in the future. Both 5- and 10-year breakevens have detached from the FOMC’s 2% price aim which will concern those on the Committee. Next time we think that the "safety heaven" will reach negative yiled, on most of the curve, starting from the 5-year maturities. The next time yields have a -8-10% day equities will have a forced selloff, and probably athe "Capitualtion" on the level of 12.300 points.
Liquidity conditions are the worst that they've been since April of 2020, comparable with financial market stability risks within the same period and comparable to late 2008 as well. These are big warning signs of additional potential danger ahead in risk assets. Corporate debt continues to bleed out for the 10th week in a row, exceeding the outflows we saw during the tightening tantrum of 2018. This will eventually have a drag impact on corporate spending, may cause some companies to raise prices, and could result in layoffs/closures.
Large tech (#QQQ) to US bonds (AGG) ratio lagged by 7 months and plotted against the US Treasury 5s30s yield curve slope. Needless to say that the 5s30s have a high predictive power on the relative strength of stocks.
Liquidity conditions are the worst that they've been since April of 2020, comparable with financial market stability risks within the same period and comparable to late 2008 as well. These are big warning signs of additional potential danger ahead in risk assets. Corporate debt continues to bleed out for the 10th week in a row, exceeding the outflows we saw during the tightening tantrum of 2018. This will eventually have a drag impact on corporate spending, may cause some companies to raise prices, and could result in layoffs/closures.
Large tech (#QQQ) to US bonds (AGG) ratio lagged by 7 months and plotted against the US Treasury 5s30s yield curve slope. Needless to say that the 5s30s have a high predictive power on the relative strength of stocks.
