State of play

Happy New Year!

Well, it is a good start to the year for some of our longer running macro market themes.

First, the state of play. US 10yrs are finally looking to retake the highs of last year. The relentless prior flattening of the term spread pauses. Recall that the term spread is a good proxy for growth expectations (the long end) and monetary policy (the short end).


Commodities are still generally strong, although copper continues to plateau at these levels. Oil has recovered almost all of the Omicron related fall (which also included the “throat-clearing” threats about export bans and strategic petroleum reserve releases) as the disease has proved to be less dangerous than Delta (about 1/3rd lower hospitalisation rate, 1/6th less ICU rate, and proportionately lower death rate).

A hawkish Fed remains (the pivot back in November is a theme we’ve been writing about on a near weekly basis since), with the market less convinced it is a mistake now.

The spike in real yields is crunching tech and secular growth narratives, as we’ve long warned about, however, to be somewhat fair it is quite possibly less about modestly higher real yields and duration than it is about a simply unsustainable premium ascribed to stocks that are chuck full of expectation and exuberance.


Which is most visible in the Cathie Wood ARK Innovation fund.


We’ll keep the note short here. There’s plenty to write about, talk about, but we will (as we tend to) leave it to shorter notes, with greater frequency, that are easier to read/absorb/process.

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