Thread by @CantillonCH

Since the recent event with arguably the largest echo was the #FOMC decision, it's called - what else- "The Pause That Refreshes"
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#FRB
#FederalReserve

The first thing to notice is that goods prices have broadly stabilised and volumes are fairly flat - in other words, #NGDP has ceased its torrid pace of increase. Service prices are still elevated but #payroll cost increase is slowing.
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The #ISM #PMI showed an uptick but is still below 50 which implies that revenue growth is NOT about to accelerate again. Again, slower #inflation & flatline volume = an end to the boom, but not yet a bust.
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Now, about those #banks.
For all the undeniable stress suffered by individual institutions, deposits are still only ~5% below trend - a lesser shortfall than pre-lockdown months. Admittedly the swing from surplus to deficit has been a doozy, but it's not yet Grapes of Wrath.

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Broadly, #deposits are off ~$900bln since mid-Dec: ~1/3 of that has been *borrowed* back from the market, 1/3 from the #Fed & the rest accommodated by security sales -dumping ~1/3 of the vast hoard built up over C19. Meanwhile, money-market fund assets have jumped #$600bln
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Where things do potentially get icky is the DC, where the #Treasury Secretary -further sullying her reputation as an actual economist- is #Yellen an' screamin' (!) that she wants MOAR blank cheques, NOW!

'Crowding' out or renewed inflation the only altetrnatives.

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Institutional investors may have been picking up the slack left by the banks, but retail certainly seems less than enthused here, with long-term fund flows essentially flat for months.
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As a result, the median stock has pretty much gone nowhere for a year (and has made no lasting new ground for since late 2017). Which way will #equities move when they leave this pattern?
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#Bonds, too, have stalled out as everyone who is buying mega-caps because there will *be* no hard landing is cognitively dissonant enough to believe the #Fed pause turns to cut by the late summer & rates continue on down below 3%, 2 years hence.
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FYI, there's an awful lot riding on just which direction we break out of this neat little wedge formation. Look at the #COT numbers, if you will:-

#UST #TLT
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6 short months ago, the #dollar was going to grind the politically hapless Brits & the suicidally #nuclear-phobic European #FX into the dust. All of a sudden, #Russia & #China are going to persuade everyone to eschew its use (face palm).
Upshot? Mean reversion.
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As @steve_sedgwick & I discussed, no #oil analyst in the world seems to accept that the damn stuff is getting cheaper, not the converse (look at #TTF #natgas, too: 1/10 of last year's panic highs).
If anything, this looks like $60/bbl, however hard to credit.
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But if the #energy crowd sounds more like a bunch of frustrated #gold bugs, *that* actual crew had their cheers die once more in their throats as the Pet Rock again bashed its head on $2075/oz.
A bit more banking angst & another #USD slide needed to get it out & up to $2400.
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NOT investment advice -blah, blah, blah.

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@threadreaderapp please unroll