Jackson Hole
coming, but what about the rate hike…?
As the ongoing trust in Fed is close to zero, we may
eventually see a bit of nervousness before Friday. We may spot some unwinding
of the big position and abrupt moves, as the market clearly doesn’t know what
to think or expect from Yellen. All of that despite pretty hawkish comments
from Dudley and Williams last week, supported by Fisher over the weekend. This
provides a short-term strength for USD at the moment.
So what’s the bet?
Looking at 4 rate hikes? This one is off…
Dec hike, looking like…
Oct hike, Fed hurry up before US elections…
Sep hike, well, the credibility of the Fed and its officials may
increase by an inch from zero…
Questions
When we look at the history, Fed is cutting the rates
when stock market is really going down. But where it is now? Printing new
historical highs…, so it is the time to raise rates, right?
What about housing market? Peaking again…A time to raise
rates, right?
What about USD? For some reason it is still not clearly
moving higher…Why?
Economy and job market getting better, GDP growth is
accelerating and with inflation getting close to Fed targets…Hiking?
Investments to recover after US elections, the effects of
stronger USD to fade away…
Productivity slowdown? As Fisher said, we don’t know to
measure it properly…
Slowdown in China, Brexit aftermath, debt issues in
Europe, US elections risks? Worth to consider…
All of these are good questions but very likely, Yellen
will not provide us with any clear signal. Has she ever?
Our take
We see two hikes this year and the first one will likely
come already in Sep, so there will be some time for dust to settle before US
elections. For those who see the same, the long USD, underweight or short US
10yr or 30yr Treasuries, and short silver and gold, may be the right trade. The
question of regaining a bit of trust of market participants in predictability
and communication ability of Fed officials will be tested again.
The second hike in Dec will be really data dependent in
the light of results of US presidential elections of course.
Risks
Data, data and again data. Yellen at Jackson Hole will
again point to data dependency (US NFPs are on Sep 2 while FOMC on Sep 21).
From political perspective the Brexit vote shock aftermath
or US elections risks are also taken into account but at the moment, the
risks related to US elections, seem to be bit ignored by bond markets. But what
about the Fed?
All in all, the Jackson Hole speech may be again a
non-event as it was 9 times out of last 10 speeches, apart from the one in
2010, when Bernanke announced the QE2 preparation.
Good luck Champs!
Mr Hawk
DISCLAIMER: This material was created for informational
purposes only and represents the Land of Trading team’s view of the past and
current economic and capital market environment. It is not an investment advice
and should not be viewed that way at all, and the creators of this material
cannot be held liable for any potential losses resulting from trading, where
despite this disclaimer someone would consider this material as an investment
advice. All rights reserved ©2016. Contact: landoftradingATgmail.com
0 comments:
Post a Comment