sentiment

Fiscal Dominance, Softening Employment and Manufacturing Relapse

U.S. 10-year treasury yield rose significantly (+60 bps) in October amid strong Q3/23 GDP, reaching as high as 5%, before abruptly reversing this week following favourable treasury funding plan, lower-than-expected ADP employment and non-farm payrolls, and unexpectedly weak ISM manufacturing PMI. This trifecta of good news for bonds has translated to U.S. 10-year yield fallingContinueContinue reading “Fiscal Dominance, Softening Employment and Manufacturing Relapse”

The Big Picture: Economic Cycle and Market Mean-reversion

The structural decline in long-term yields since 1980 until the covid-19 pandemic had been accompanied by investors complaining that the search of attractive investment opportunities was becoming more difficult over time. The decline in borrowing cost also has a significant ramification for global investors, including boosting stock buyback amid lack of investment opportunities, breeding ofContinueContinue reading “The Big Picture: Economic Cycle and Market Mean-reversion”

Fundamentals vs Market Pricing

The combination of declining inflation and easing labor market condition has so far been interpreted by the market as signs that the U.S. economy will be able to stage a soft landing – a softening in growth without significant pick up in unemployment – before a new cycle begins. The equity market is disregarding theContinueContinue reading “Fundamentals vs Market Pricing”

Cyclical/Defensive Stocks Are Pointing to a Bottom in Manufacturing Activities. Are We Entering a New Cycle?

In June Bank of Canada unexpectedly raise its policy rate by 25 bps, defying the expectations that Canadian policymakers are done with their rate-hiking campaign. Investors learned that after a well-telegraphed “pause” central banks could again tighten the screw. Yields across the developed world surged following the BoC’s decision. Meanwhile, in the U.S. Fed ChairmanContinueContinue reading “Cyclical/Defensive Stocks Are Pointing to a Bottom in Manufacturing Activities. Are We Entering a New Cycle?”