The Saturday Hark Back - 02 Dec 2023
Capturing the themes of the week when there’s more time to digest them.
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The Hark Back
The key narratives that drove markets last week:
Last week we saw an acceleration of cuts priced into 2024, with odds of ECB trimming rates just about pipping the Fed (despite diverging economic performance and varying starting points). No longer is the mkt debating if the Fed will cut in 2024, it is now when will they cut and how many insurance cuts will they need.
This sets up a very interesting SEP dot plot for the Fed members on Dec 13, will they drop or roll the last hike that they had previously forecast in September, will they mark to market their dots down towards 2024 pricing or will they remain resolute with their higher for longer stance.
Bloomberg - Fed Chair Powell Pushes Back on Interest Rate-Cut Bets for First Half of 2024
Reuters - Market pushback on central banks' rates view just got louder
Bloomberg - Traders See as Much as 250 Basis Points of US Rate Cuts in 2024
Numerous drivers collided to accelerate the fixed income rally
Waller, a core member of the FOMC messaging, discussed the Taylor rule and the potential need for insurance cuts next year if inflation remains on its current path in the coming months...
Reuters - With Fed likely done hiking rates, Waller flags pivot ahead
Brent Donnelly - Friday Speedrun: December 1, 2023
It's what Powell didn't say rather than what he did say that the market has focused on. Crucially he has not pushed back against the aggressive softening in FCI in Nov, he also didn’t take the time to correct the comments from Waller ... The Fed appear to see balanced risks and are now managing the downside in the labour market in 2024 as their confidence in inflation returning to 2% target increases.
BNYM Short Thoughts - The Fed's Financial Conditions Dilemma
WSJ - Fed’s Interest Rate Hikes Are Probably Over, but Officials Are Reluctant to Say So
BoE Bank Underground - Global R*
If the Fed are set to cut, why haven't the ECB started already? There is still a large divide between the ECB's communique and the 125bps of cuts priced by Sept 2024
Econostream - They Said It - Recent Comments of ECB Governing Council Members
SEB - Price dynamics changes quickly, new communicational challenges for the ECB
ING - Eurozone inflation is on track towards 2% while sentiment remains sluggish
Econostream - ECB’s Stournaras: Don’t Expect First Rate Cut Until Mid-2024; April ‘a Bit Optimistic’
Data dependent Fed - we got a wave of soft data this week with PCE sliding in line with market forecasts, ISM disappointing, labour market showing further signs of weakness which has all culminated in the Atlanta GDPNow forecast dipping to 1.2% for Q4.
Bloomberg - Fed’s Mester Says Policy in ‘Good Place’ to Assess Incoming Data
Atlanta Fed - GDPNow - Federal Reserve Bank of Atlanta
Bloomberg - US Continued Jobless Claims Jump to Highest Since Late 2021
Bloomberg's John Authers has already written a timely piece Schizophrenia Is Coming for the Election-Year Economy
Dec is not known to be a time when trends reverse, but is the market asking for too much too soon? 125bps of cuts is delivered when something is materially wrong, 125bps is more than insurance cuts to offset falling inflation, temper elevated real rates... As Jim Bianco (@biancoresearch) points out, the market forecast is "regularly" wrong. With expectations so low for US data in 2024, a string of inline to hotter data (looking at you NFP) and a resolute Fed SEP that once again is dominated by Team Higher for Longer and the 125bps priced can unwind back to 3 cuts from 5.. quite quickly... Will we need something to break to get 5 or more cuts?
Source Jim Bianco
Elsewhere, ChatGPT celebrated its one-year birthday, which begs the question, where is AI trending? Is OpenAI a company, a charity, for the greater good or for profit?
Bloomberg - OpenAI Extends Tender Offer for Employee Shares to Jan. 5
Bloomberg Video - Sam Altman’s Firing, Rehiring and the Battle Over OpenAI’s Soul
Harvard - Teach students how to ask the ChatGPT tool questions
Pieces from our Year Ahead’ channel on Harkster.com...
Bloomberg - JPMorgan’s S&P 500 Outlook for 2024 Is Grimmest on Wall Street
Charles Schwab 2024 Preview - U.S. Outlook: One Thing Leads to Another
Bloomberg - After 2023 Miss, Wall Street Caves to Rally Few Predicted
Bloomberg's John Authers - Wall Street Outlooks for 2024 Try Something New — Humility
Top 10 Reads of the Week on Harkster.com:
The Economist - Putin seems to be winning the war in Ukraine—for now
Nordea - Macro & Markets: Fiscal headwinds to prompt early rate cuts?)
The MacroTourist - AN ATTRACTIVE OPPORTUNITY IN MBS/CREDIT LAND
NY Times - The 60/40 Portfolio Is Alive and Well
St Louis Fed - Understanding the Generational Gaps in Homeownership
Apollo Academy's Daily Spark - Fed Futures Pricing in "No Landing"
Man Institute: Views From the Floor - Can China Reclaim its EM Crown from Rising Star India?
Ashmore - The narrowing path
Steno Signals #75 - THE 2007/2008 PLAYBOOK IS USEFUL AGAIN.
Nautilus Research - Comparing Thanksgiving Set-ups
The majority of these links appear in our new "HarksterPro - Intraday Market Colour" channel. If you click on "Select Channels", you should find under "Added Recently" our latest additions to the app. @HarksterHQ will use this new channel to flag good articles/sources of content as well as headlines/market moving events.
Top 5 Podcasts of the Week:
Unchained Podcast - Why Presidential Candidate Vivek Ramaswamy Is So Pro-Crypto
Two of @harksterHQ's favourites ... The MacroTourist and The Blind Squirrel Macro… The Market Huddle Ep. 21: Kevin Catches Up With Rupert Mitchell
The Rest Is Politics - Why are the far-right on the rise?
Blind Squirrel Macro (The Pod) - Hear me out! Leveraged Finance, but no marks!
The Week Ahead
Looking forward to next week...
Nomura The Week Ahead Podcast - US NFP, ISM Surveys, ECB Inflation Expectations, China CPI, Tokyo CPI and RBA policy decision
Macro Hive Week Ahead - Data to Show Economy still Humming
Newsquawk Week Ahead Highlights - US jobs report; China CPI/trade data; RBA, BoC rate decisions
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