The Three Reasons for Lack of New Information
Peter Tchir of Academy Securities explains that there are three main reasons why he doesn't have a lot of new things to say. Firstly, he wants to highlight the views and actions taken in the past weeks without them getting lost in the shuffle. Secondly, with the risk of escalation in the Middle East and the start of the earnings season, he believes that the script might need to be ripped up any day now. Lastly, he admits that it has been a long week, starting with a Bloomberg TV segment early on Friday, a successful Geopolitical/Credit Roundtable in New York City on Thursday, and a weekend of college football.
The Chinese Stimulus
The Chinese stimulus, officially unveiled on Saturday, was vague and at the smaller end of expectations. Tchir believes this to be an iterative process, with the Chinese government adding and tweaking to achieve their goals, primarily to drive domestic consumption of domestic brands. He suggests that the predictable sell-off on Tuesday after the Chinese market ended a weeklong holiday offered a buying opportunity for Chinese stocks.
Inflation and the Neutral Rate
The focus of the last weekend's T-Report was on war, inflation, and the neutral rate. Tchir has been trying to draw attention back to inflation. With the 10-year rate at 4.1% and rate cut expectations hammered down to levels where he can almost get on board, he believes it's getting more difficult to remain bearish on rates. He also notes the increasing discussion about the neutral rate, or terminal rate, as the Fed's policy discussion shifts from starting to cut to how many cuts.
The Upcoming Election
With the election less than a month away, Tchir finds it difficult to ignore. However, he believes that the markets are looking for gridlock, which still seems to be the base case. As more data from polls and betting markets become available, he thinks it will be possible to realistically assess which policies are pure campaign fantasy versus those that have a chance of being implemented.
Bottom Line
Tchir finds it very difficult to remain bearish on Treasuries. He believes that inflation and the neutral rate could put pressure on bonds. He also finds it peculiar that the markets did not reverse course after the auctions of 10s and 30s. He suggests that the debt ceiling and the election could weigh on Treasury yields. He remains extremely comfortable with credit and suggests being heavily overweight credit versus Treasuries/T-Bills. He also likes energy, China, and is considering small caps and value. He concludes by thanking his readers for their time and support and suggests that it would be time well spent reviewing the three reports highlighted in his report.
What do you think about this article? Share it with your friends and sign up for the Daily Briefing, which is every day at 6pm.
The Three Reasons for Lack of New Information
Peter Tchir of Academy Securities explains that there are three main reasons why he doesn't have a lot of new things to say. Firstly, he wants to highlight the views and actions taken in the past weeks without them getting lost in the shuffle. Secondly, with the risk of escalation in the Middle East and the start of the earnings season, he believes that the script might need to be ripped up any day now. Lastly, he admits that it has been a long week, starting with a Bloomberg TV segment early on Friday, a successful Geopolitical/Credit Roundtable in New York City on Thursday, and a weekend of college football.
The Chinese Stimulus
The Chinese stimulus, officially unveiled on Saturday, was vague and at the smaller end of expectations. Tchir believes this to be an iterative process, with the Chinese government adding and tweaking to achieve their goals, primarily to drive domestic consumption of domestic brands. He suggests that the predictable sell-off on Tuesday after the Chinese market ended a weeklong holiday offered a buying opportunity for Chinese stocks.
Inflation and the Neutral Rate
The focus of the last weekend's T-Report was on war, inflation, and the neutral rate. Tchir has been trying to draw attention back to inflation. With the 10-year rate at 4.1% and rate cut expectations hammered down to levels where he can almost get on board, he believes it's getting more difficult to remain bearish on rates. He also notes the increasing discussion about the neutral rate, or terminal rate, as the Fed's policy discussion shifts from starting to cut to how many cuts.
The Upcoming Election
With the election less than a month away, Tchir finds it difficult to ignore. However, he believes that the markets are looking for gridlock, which still seems to be the base case. As more data from polls and betting markets become available, he thinks it will be possible to realistically assess which policies are pure campaign fantasy versus those that have a chance of being implemented.
Bottom Line
Tchir finds it very difficult to remain bearish on Treasuries. He believes that inflation and the neutral rate could put pressure on bonds. He also finds it peculiar that the markets did not reverse course after the auctions of 10s and 30s. He suggests that the debt ceiling and the election could weigh on Treasury yields. He remains extremely comfortable with credit and suggests being heavily overweight credit versus Treasuries/T-Bills. He also likes energy, China, and is considering small caps and value. He concludes by thanking his readers for their time and support and suggests that it would be time well spent reviewing the three reports highlighted in his report.
What do you think about this article? Share it with your friends and sign up for the Daily Briefing, which is every day at 6pm.
