An everything rally to start the week as stocks generally rose (AI > airplane stocks on the day) while yields fell 3-4bps. Elon's drug use, an oil price cut from the Saudi's, and the NY Fed Survey of Consumer Expectations were the headlines. Of those it's likely the oil and inflation expectations that mattered. The NY Fed survey showed inflation expectations continue to decline with the 1-year ahead expectations hitting the lowest level since January 2021, further fueling rate cut speculation.
Fed Governor Bowman sounded hawkish citing upside inflation risk stemming from geopolitical risk to food and energy, the easing of financial conditions and a continued strength in labor markets.
XTOD: The FTPL view of the recent disinflation: "The model's account of the end of inflation is perhaps even more important than its account of the rise. A one-time fiscal shock leads to a one-time rise in the price level, to wipe out just enough real value of nominal debt. Inflation goes away on its own once that is achieved." (1/2) @JohnHCochrane https://grumpy-economist.com/p/fiscal-narratives-for-us-inflation
John also reminds us that the "US government borrowed about $5 trillion dollars [and] monetized about $3 trillion of that issue." This helicopter drop restored the dollar size of the economy to its pre-pandemic trend path, but also caused it to rise about $2 𝒕𝒓𝒊𝒍𝒍𝒊𝒐𝒏 𝒂𝒃𝒐𝒗𝒆 𝒕𝒉𝒂𝒕 𝒕𝒓𝒆𝒏𝒅 (similar story for PCE). That above-trend surge in aggregate demand was a policy choice. One could easily imagine a world with rapid catchup growth to trend with far less overshoot of it. (2/2)
XTOD: If BofA is correct and QT is over by July what are you doing buying bonds? Just go all in on Meme stonks, crypto and Gold. Why bother with anything else. NOT ADVICE
XTOD: Kind reminder that Bank Reserves + RRP are still running at circa 15% of US GDP. Last time Fed broke markets in 19, they were closer 8%. Keep this in mind when you hear all the « Fed should do this and that or else something will break » System is still operating with a large reserves buffer in US
XTOD: One of the hot new trends in private credit is evergreen funds, that let investors put in and withdraw their capital more easily
XTOD: Nike says goodbye to Tiger Woods after a 27-year partnership.
https://x.com/DavidBeckworth/status/1744356916325708041?s=20
https://x.com/dampedspring/status/1744395769484890590?s=20
https://x.com/INArteCarloDoss/status/1744400810153238897?s=20
https://x.com/markets/status/1744319100350767226?s=20
https://x.com/FOS/status/1744396473226174539?s=20
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