Let’s kick off with some fundamentals via Michael Hartnett at BofA.
The Price is Right: Q1 recession fears melt into Q2 Goldilocks greed; broad NYSE index (US/global stocks + bond ETFs) annualizing 7.7% total return, IG annualizing 7.5%, S&P500 breaking out bull market bubbly (tho ex. Magnificent 7 SPX up teeny 1.2% YTD); rising rates/liquidity drain the -ve Q3 risk for longs in IG bonds, AI, US tech, EU luxury; no recession/China stimulus = +ve Q3 risk for shorts in oil, China, REITs, banks, retail.
Tale of the Tape: central banks pivoting….back to hikes; RBA & BoC join Norges in restarting rate hikes after “pause” (Australia/Canada 2-year yields @ 12 & 16-year highs – both correlated to US yields – Charts 3 & 4); low unemployment, high inflation (Table 1 & Chart 5)…Fed ain’t done with hikes…we stick with “sell the last rate hike” call; watch Canada & Aussie FX…weaker on back of rate hikes = tell renewed hiking big “policy mistake.”
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