Thursday Macros

Interesting day yesterday with the Fed saying the economy is making significant progress, a bit hawkish, but Powell used the bully pulpit of the presser to continue to sound dovish... The idea that his Jackson Hole speech would lead to imminent tapering has now gone from about 75% chance to 25%... We still see the Fed formally announcing a tapering schedule in September, to be either implemented in December or January... Whether Powell is reappointed or not, the tapering should start before his term ends....before we get to the overnight activity, we want to talk about China.

Chinese regulators reached their level of pain threshold, with the losses of over 1.5 trillion over a few days... They called a meeting, seemed it was hastily arranged by Goldman, UBS was there along with other Chinese brokers.. They clearly raised the white flag... They will not prevent Chinese companies from going public in the US and said that their increased regulatory scrutiny was limited to just education stocks... And if you believe that, good luck... Meanwhile US investors, through ETF's, direct investment, and in mutual funds, has over 1 trillion invested in China... And the last few days has seen significant losses, not only in China , but other emerging markets as well... The PBOC added significant liquidity overnight, but that looked technical to us... Meanwhile Chinese equities did better overnight with Hang Sang up over 3% while the HK Nasdaq and China Nasdaq were up closer to 4%... All are still down over 5% in the last 5 days... Hang Sang got to bear territory this week which literally freaked out the Chinese regulators, who called the dealers together to make the retreating announcement.

Treasuries.... We have said that moves in treasuries start about 18 hours after the Fed presser... After the announcement yesterday the 10 year made a move towards recent resistance of 1.22, where it got to 1.223 at 4PM yesterday... They tried to rally it in Asia, but in London time it got hit hard as German Inflation numbers came out much higher than expectation... Imagine that, inflation.... 10 years then made a move back to just a smidge under the 200 day moving average, which comes in today at 1.275... We will see if that number holds us in between now and tomorrow.. Normally we would think that would break and we would approach the 1.30, 1.36, and could get to 1.42... But we have month end indexation and duration extensions... Along with potential re-allocations, but both equities and bonds had good months.

Inflation is real... Although Powell did try to extend the 2-3 month view of transitory to 2-3 years... Well why not make it a decade? Inflation is a big problem and it will not go away quietly..

to summarize... From the Fed statement "Since December of 2020, the economy has made progress to these goals (rationale for tapering). The economy has made progress toward the goals laid out to taper...This would suggest that "substantial progress" is within striking distance and each meeting going forward is a live meeting for tapering... We still see it as more of a September event to start before Powell's term ends.... GDP out shortly... Expectation 8.5%.... We will see if the treasury move we expect ,stalls at the 200 day moving average, or waits until August.

Make sure you have snacks and drinks. They don't have to wear a mask while eating and drinking.

PS. Get an empty cup with a straw so they can "act" like they are drinking otherwise you will spend the flight going to the bathroom with your kids.

McInnis 03 said:

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SAVA was a shakedown....back to 141 here.

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Holy crap, I got lucky there. Bought at $116 on a spike down. I may be able to go out and buy something from Starbucks today.

Get ready @alzassociation as Lindsay H. Burns PhD - Sr. VP, Neuroscience
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At #AAIC2021 #ENDALZ #SAVA $SAVA

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