TMC#17! In this article, I try to cut through the daily financial news noise to provide investors with the relevant info needed to enhance the risk/return profile of their portfolio in 2022.
Congratulations for this post. It is great to have you back. Maybe I am doing something wrong, but I think the links to the flatteners at the bottom don't work.
what do you think of the "cash" that sits on consumer b/s? this coupled with high inflation /bad delivery times during summer/fall could, at least in my mind, be a tailwind for -22 spending even with fiscal drag! Thoughts?
Hello Alfonso. 2 Questions: Credit Impulse signal is indicating low level but shouldn't the Build Back Better and the Reconciliation Bill being discussed account for a spike in the Credit Impulse?. How do you see the $ behaving under such circumstances?
Amazing. Heard you on RV and it connected some dots for me. Read this and it's hard to see how it does not play out exactly as you say ... any ideas what quadrant we will be in in 2022?
a couple of points from me as well: on long term growth, we agree ondemographics,but often the other major factor, productivity, is forgotten.Yes we all agree that measuring productivity is very tough, but at least from a qualitative point of view I tend to believe that all the tech evolution and revolution, so well reflected in Nasdaq prices, must be helping productivity, and in the long run Growth potential as well.
Then, I guess the real battlefield is what terminal rate can the American economy sustain in this hiking cycle, and why the curve is flattening so aggressively even if terminal rate implied in the ED curve is only 1,75%, rather then the 2,5% of previous cycle , or even the much higher rates that some "economists" (sic) have been pointing at, for way too many years now..
Alf, this is a comment on bonds/NDQ, not flattener: I see your view on the 5s, but surely the FAANGs price off 30s? Where real yields may be sinking further - same issue for gold.
Hello Alfonso. Good to see you are back. Regarding real yields, I get the short term but I suppose long term could be more flattish. I thought stocks paid more attention to 10y than short term? If so, perhaps we can hope Nasdaq will continue upwards?
Hello Alfonso, and thank you for another great article!
I have two questions if I may:
1) The recent sharp raise in the short-end of the curve seems to have priced in, at least, 2 or 3 rates hikes in 2022 and another 3 or 4 hikes in 2023. I am not convinced that the Fed will be so aggressive in their attempt to normilize rates towards their 2% or 2.5% goal, as they'd probably be fearful to crash the markets in they get there too fast. For that reason, short term bonds seem like a good buy at this point, perhaps via SHY or similar instrument. What do you think?
2) Joe Manchin seems to be tanking Binden's BBB program, which further aligns with the overall slow credit impulse narrative. However, the Fed has initiated a tightening process: firstly slowing their asset purchases and later, so they say, raising rates progressively in 2022. Wouldnt that take use from Quad 1 to Quad 4 rather soon?
Thanks again for your amazing insights, and Merry Christmas!
Hi Alfonso,
Congratulations for this post. It is great to have you back. Maybe I am doing something wrong, but I think the links to the flatteners at the bottom don't work.
I wish a Merry Christmas.
Thank you
what do you think of the "cash" that sits on consumer b/s? this coupled with high inflation /bad delivery times during summer/fall could, at least in my mind, be a tailwind for -22 spending even with fiscal drag! Thoughts?
Hello Alfonso. 2 Questions: Credit Impulse signal is indicating low level but shouldn't the Build Back Better and the Reconciliation Bill being discussed account for a spike in the Credit Impulse?. How do you see the $ behaving under such circumstances?
Alfonso, great analysis. Curious why you use FAAMG instead of a broader index in your chart like SPX or wilshire?
Amazing. Heard you on RV and it connected some dots for me. Read this and it's hard to see how it does not play out exactly as you say ... any ideas what quadrant we will be in in 2022?
Welcome back,
a couple of points from me as well: on long term growth, we agree ondemographics,but often the other major factor, productivity, is forgotten.Yes we all agree that measuring productivity is very tough, but at least from a qualitative point of view I tend to believe that all the tech evolution and revolution, so well reflected in Nasdaq prices, must be helping productivity, and in the long run Growth potential as well.
Then, I guess the real battlefield is what terminal rate can the American economy sustain in this hiking cycle, and why the curve is flattening so aggressively even if terminal rate implied in the ED curve is only 1,75%, rather then the 2,5% of previous cycle , or even the much higher rates that some "economists" (sic) have been pointing at, for way too many years now..
Alf,
1) Please share source for Households' real income chart. I see it for all other charts.
2) It appears that China credit impulse is set to rise, what % of China contributes to your G5 credit impulse? https://twitter.com/BittelJulien/status/1468127432058322945?s=20
Welcome back Alfonso. Have you an opinion on which Quadrant from Global Credit Impulse chart we might be heading into for Q1 22 ?- Would it be Q3
Sir u speak ur heart...its awesome learning and evolving and never a question of right or wrong..
Alf, this is a comment on bonds/NDQ, not flattener: I see your view on the 5s, but surely the FAANGs price off 30s? Where real yields may be sinking further - same issue for gold.
Alf- Great substack, followed from your segment on RV earlier today. Are you from Salerno?
Greeting Alfonso,
Likewise...it's great to see you back! Thank you so much for your update!
Hello Alfonso. Good to see you are back. Regarding real yields, I get the short term but I suppose long term could be more flattish. I thought stocks paid more attention to 10y than short term? If so, perhaps we can hope Nasdaq will continue upwards?
You state that the credit creation is slowing, but that is not what the US aggregate bank credit is showing. It is growing...a lot.
Thank you for all the information. Im
New this newsletter and was wondering how would you suggest to change/use your investment strategy in our common 401(k) Roth IRAs account?
Hello Alfonso, and thank you for another great article!
I have two questions if I may:
1) The recent sharp raise in the short-end of the curve seems to have priced in, at least, 2 or 3 rates hikes in 2022 and another 3 or 4 hikes in 2023. I am not convinced that the Fed will be so aggressive in their attempt to normilize rates towards their 2% or 2.5% goal, as they'd probably be fearful to crash the markets in they get there too fast. For that reason, short term bonds seem like a good buy at this point, perhaps via SHY or similar instrument. What do you think?
2) Joe Manchin seems to be tanking Binden's BBB program, which further aligns with the overall slow credit impulse narrative. However, the Fed has initiated a tightening process: firstly slowing their asset purchases and later, so they say, raising rates progressively in 2022. Wouldnt that take use from Quad 1 to Quad 4 rather soon?
Thanks again for your amazing insights, and Merry Christmas!