Greetings, United States: The Federal Reserve announced a new set of policy measures designed to stabilize the credit markets and cushion the economic contraction. The scope of some of these actions is unprecedented, going beyond what we saw in 2008. • Unlimited QE: Purchases of “Treasury securities and agency mortgage-backed securities in the amounts needed to …
The Daily Shot Brief – March 23rd, 2020
Greetings, United States: How big of a GDP decline should we expect in the second quarter? Projections vary. Below is the distribution of forecasts tracked by Bloomberg (some haven’t been updated yet). Here is JP Morgan’s forecast. And then there is Morgan Stanley. Eurozone: Germany seems to be following Italy’s coronavirus trajectory. …
The Daily Shot Brief – March 20th, 2020
Greetings, United States: Government stimulus should cushion the blow to the economy, with federal programs generating a substantial multiplier effect. United Kingdom: The Bank of England cut rates and launched a QE program. The second chart below shows the total stimulus represented as a rate cut (equivalent to 300 basis points). China: …
The Daily Shot Brief – March 19th, 2020
Greetings, Rates: Investors are flooding into Treasury bills, rapidly shrinking their portfolio durations. T-Bill yields have turned negative.. Credit: Credit markets are under severe pressure. Here are high-yield bond spreads: And investment-grade bond spreads: Commodities: Precious metals continue to struggle as investors give up on safe-haven assets. Emerging Markets: EM outflows …
The Daily Shot Brief – March 18th, 2020
Greetings, United States: Online search activity related to filing for unemployment has soared in recent days. Asia-Pacific: Japan’s recession is deepening. Energy: US crude oil dipped below $27/bbl while Brent is below $29. We are now near the 2016 lows. Separately, Germany has been slowing its investment in wind turbines. …
The Daily Shot Brief – March 17th, 2020
Greetings, Equities: The spread between the S&P 500 dividend yield and the 10yr Treasury reached a new high. The market expects companies to start cutting dividends. Credit: Will firms have trouble rolling their maturing debt? Which sectors are most exposed? China: Economic activity is gradually recovering. The housing market has …
The Daily Shot Brief – March 16th, 2020
Greetings, United States: Goldman Sachs is predicting deep contraction in growth. Here is the attribution. United Kingdom: It was a rough week for the British pound. Eurozone:The coronavirus trajectories in Spain and Italy are outpacing China (for this phase in the epidemic). Energy: The Brent futures curve is deep in contango. …
The Daily Shot Brief – March 13th, 2020
Greetings, Equities: The S&P 500 plummeted almost 10% on Thursday, the worst one-day drop since 1987. VIX is near the 2008 highs. Credit: There was more pain in credit markets on Thursday. Here are High-yield (HY) and investment-grade (IG) CDX spreads: Rates: The spread between the 30yr mortgage rate and the 10yr …
The Daily Shot Brief – March 12th, 2020
Greetings, Credit: As we mentioned a few days ago (#5 here), the muni market looked frothy. High-yield muni bonds seemed particularly vulnerable. Well, the market finally cracked. Here is the ratio of AAA muni yields to the 10yr Treasury. Equities: The share of S&P 500 stocks trading above their 200-day moving average dipped …
The Daily Shot Brief – March 11th, 2020
Greetings, United States: Online search activity suggests that consumers are getting nervous as the number of new US coronavirus cases climbs (second chart). Eurozone: Can Italy contain the coronavirus? Unlike China, it has no ability to deploy an aggressive police state. For example, Italy’s decision to quarantine the whole country would …
