For the past few months the eurodollar futures market has steadily priced in the FOMC’s abandonment of “transitory” in its assessment of inflation. More often than not the Fed follows the market. The typical absence of public comments that precedes FOMC meetings was extended while Biden contemplated renewing Powell’s term.
To understand the importance of data, and how to express that importance in terms of investments, let's start with something that is simultaneously simpler and more complex: A map. This is just not any old map, however. The image below shows the plumbing of the modern economy – the underseas cables that create the digital environment that allow you, dear reader, to consume this content wherever in the world you are sitting.
To understand the importance of data, and how to express that importance in terms of investments, let's start with something that is simultaneously simpler and more complex: A map. This is just not any old map, however. The image below shows the plumbing of the modern economy – the underseas cables that create the digital environment that allow you, dear reader, to consume this content wherever in the world you are sitting.
Last year around this time, fertilizer prices were approaching their lowest levels in a decade. Fast forward 12 months, and fertilizer prices are now at decade highs, increasing to levels last seen in the wake of the 2008 financial crisis.
Last year around this time, fertilizer prices were approaching their lowest levels in a decade. Fast forward 12 months, and fertilizer prices are now at decade highs, increasing to levels last seen in the wake of the 2008 financial crisis.
Following last week’s 6.2% inflation print, eurodollar futures fully priced in 0.75% of tightening by the end of next year. The approximate rate path envisages tapering by the summer, and rate hikes commencing around the same time. Beyond December ‘23 the curve is so flat that in effect the market expects the tightening cycle to be more or less completed, eighteen months after it began.
Pipeline earnings last week provided further support for the bull market in energy. Cheniere is +67% so far this year. The strong global market for Liquified Natural Gas (LNG) caused them to increase their 2021 EBITDA guidance to a midpoint of $4.8BN, up $0.1BN.
A significant interest rate move has taken place in recent days that has received scant coverage from mainstream financial media. The market has priced in a more aggressive pace of Fed tightening over the next couple of years, while simultaneously moderating the outlook beyond that. This flattening of the yield curve has been reflected in the spread between two and five year treasury securities, which reversed a steepening trend.
Remember, our investment in stocks is a De facto vote of confidence on the economies in which we invest. Earnings, revenue, margins, free cash flow, and the growth of these important metrics is what drives stocks up or down over time.
The discretionary sector struggled as did all growth and quality-oriented areas of the market in 2022. That was a classic re-set and a raging opportunity to add exposure.
The Institute for Supply Management’s monthly survey of purchasing managers came in below expectations for August, while the Bureau of Labor Statistics jobs report indicated that nonfarm payrolls expanded by only 142,000 jobs during the month (against expectations of 161,000 jobs).
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