Markets In ‘Sweet Spot.’ Enjoy It While It Lasts
"Enjoy the sweet spot but also be wary of it," Deutsche Bank's Jim Reid said Tuesday.
He was referring both to the current period of relative market calm and, more broadly, to the post-September market regime which, with the notable exception of a very rough December for equities, offered some respite from nine months of grinding losses for stocks, alongside an egregious drawdown in bonds and an oppressively buoyant dollar.
For Reid, the turning point was the peak in rates vol, which coincided
H-Man, Great article. So maybe 2023 is not a doomsday year? Or at least not the entire year. The DB comments make a lot of sense and I like the data they used.
I wouldnt be surprised if we end the year at around the same level (which I understand seems to be something of a consensus call).
On one hand, the pace of rate hikes is somewhat unprecedented, which all else being equal (it never is) argues for a shorter lead time to recession. On the other hand, if we assume that a recession cannot occur without the unemployment rate going up meaningfully, the current labor market imbalance may argue for a longer lead time than average. Which of these two will prevail, only time will tell. I’m mostly holed up in 6m treasuries at the moment.