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Roth MKM: September Income, Spending, Inflation & Other Observations
Roth believe the robust consumer spending numbers seen during Q3 will fade on the back of the lagged effects of tighter Fed liquidity conditions and a more restrictive “higher for longer” short rate policy.
As growth slows and the labor market softens, the incipient rise in consumer loan delinquencies is likely to intensify. Those cutting a soft-landing rug may need to take a seat soon. Click here.
Roth MKM: Money, Credit, The Curve, Rates, TIPS and More
The money and credit aggregates that surged ahead of the 2021-2022 inflation have tanked
Broad money has now fallen back below trend in real terms while liquid assets in the household sector have almost returned to trend in real terms
We have never seen a post-inversion S&P 500 rally survive a subsequent recession/bear market
The two best-performing sectors in the S&P 500 YTD now carry negative equity risk premiums. Thus, it’s better to buy a 10-year TIPS security and lock in a ~2.5% real yield, in our view. Click here.
Macro Risk Advisors: Vol and Spreads High…Liquidity Low
Liquidity is a big issue for the US Treasury market. The below chart shows how the Bloomberg liquidity index remains elevated.
MRA say that while this remains a problem, the bigger problem is the widening of the spread between US Treasuries and mortgages (the grey line) that now sits at an historical extreme. That presents even bigger issues for the real economy
In this 6 minute video, MRA also unpack this week’s GDP number, implications for Fed policy. Click here. Also click here for video.
Renaissance Macro Research: The recession that never arrived; Reviewing US GDP
RenMac’s Dutta has been out of consensus all year, with his ”no landing” call. Arguing US growth would remain solid
Reviewing this week’s GDP, he says Government spending remains strong and underpins the economy.
Indeed, the economy looks stronger than where the Fed is forecast looking into 2024. As in terms of recent tightening of financial conditions, Dutta sees this as fairly neutral for growth. Click here. Also click here for video.
Quant Insight: Equities need a regime change?
Equity bulls need the “generals” to hold in. The Magnificent 7 are responsible for 2023’s performance. Given poor breadth, if they roll over now there’s a very real risk of a deeper correction.
Aside from the idea of AI as a genuine game changer, the obvious argument for the Magnificent Seven to retain a bid is their role as a comparative safe haven.
Qi measures each of these seven stocks’ sensitivity to VIX as a way to see if there’s a regime change going on. Click here.