Saturday, April 27, 2024

GDP, Consumer Confidence, Commodities, Stocks, Yields, the Dollar, Gold and Earnings Call Comments (video)

I somehow failed to mention the market implications of next week's treasury quarterly refunding announcement... Before you click the play button, here’s from our internal notes: 


Next week’s QRA (the treasury’s quarterly refunding announcement) is likely to be big for markets. 

If Yellen wants to concentrate go-forward issuance on the short end of the curve, that’s easy for the market to absorb and bullish for equities. 

If, on the other hand, she signals that issuance will concentrate on the long-end (far more difficult for the market to absorb (i.e., yields higher), that’s bearish. 

With regard to the TGA (treasury general account), if she sets a high target (i.e., much bond issuance proceeds get stuck in the TGA, as opposed to being spent in the economy), that’s bearish. 

If she sets a relatively low target (i.e., more juice going into the economy), that’s bullish. 

Her track record thus far – not to mention, incentives – leans heavily toward t-bill concentration and a lowish TGA target (i.e., she definitely wants to keep financial markets buoyant going forward)... Problem being, that would be economically-stimulative, which might problematically offset what would otherwise be hugely bullish (operative word their being “might”) for equities... I.e., a resilient economy means sticky inflation, and sticky inflation means no aggressive rate cutting over the next few months, which could be a real downer for equities going forward. 

Nevertheless, if we're talking relatively light issuance (less than last quarter) focused on the short-end of the curve, and, again, a lowish TGA target, stocks are likely to, at least initially, rally on the news.

Once playing, click the icon in the lower right corner for full screen. Focus should occur after a few seconds; if not, click the wheel to the left of the YouTube icon to adjust:

Attention Non-Client subscribers: Nothing in this video should be construed as investment advice. The examples expressed relate to portfolio management we perform on behalf of our clients, and, again, under no circumstances are they to be considered recommendations to the viewer.

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