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Tag: interest rates

Season 2, Episode 19: Picking Spots in Volatility, Interest Rate Markets, With Chris Nicholson

Published June 16, 2020

Hedge fund portfolio manager Chris Nicholson joins the podcast to discuss his outlook on volatility, interest rates, and other markets.

Forecasting these assets has become increasingly problematic in recent years, but there are a few things Nicholson looks to in an effort to identify opportunities for arbitrage.

Content:

  • U.S. equity prices are determined largely by two axes (3:40);
  • Inflation expectations have been, well, inflated. This speaks for the relative value of certain bonds (7:03);
  • What drives inflation anyway? (11:38);
  • Where to look in currencies (19:05);
  • Nicholson’s Number One recommendation for investors: take the cheap borrow. Where to put it is the question (21:40);
  • Sometimes being contrarian is not the smart move. This may be one of those times, at least in FX markets (23:38);
  • China and the yuan versus the Japanese yen (29:24);
  • Equity markets in the U.S. and Japan (33:06);
  • The portfolio manager’s concern about a second wave of COVID (35:40);
  • Other issues that could be catalysts in 2020 (40:39);
  • How to trade these views (46:18);

For more information on the guest:

Not intended as investment advice

MoreSeason 2, Episode 19: Picking Spots in Volatility, Interest Rate Markets, With Chris Nicholson
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Season 2, Episode 8: Assessing Economic Damage From Coronavirus Crisis and Plotting A Way Forward

Published March 17, 2020

With Political Economist Marc Chandler

Marc Chandler, a political economist and currently managing partner at Bannockburn Global Forex, joins the podcast to provide his assessment of the coronavirus impact on the global economy.

Segment time stamps:

  • This crisis is different, not brought about by the economic cycle but by an exogenous shock (3:15)
  • Assessing the fiscal and monetary response by policymakers (4:36)
  • Will there be a “V-shaped” recovery? (6:55)
  • Recovery in Q3, Q4, but growth will be limited (12:07)
  • The crisis may accelerate the move to a cashless society (13:12)
  • Background on the guest (17:43)
  • What’s something the market is missing? (27:39)
  • The Age of Surplus (34:13)
  • Greater accountability for the Federal Reserve (38:21)
  • The crisis could result in expansion to enfranchisement. To 16-year olds? (43:21)

Highlights From Our YouTube Channel

For more information on the guest:

Not intended as investment advice.

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Contrarian Calls, Revisited: Barry Knapp on Yield Curve Inversion

Published February 5, 2020

What Was Said

In this podcast’s pilot episode last April, economist Barry Knapp of Ironsides Macroeconomics discussed the economic news of the day: the 3-month/10-year yield curve inversion.

The conventional wisdom at the time was that the yield curve inversion would lead to recession in the U.S.

But there had been numerous “false positives” from the yield-curve indicator in the past, Knapp said: 1966, 1998, and 2005. “There was no evidence that the inversion of the yield curve was really having any demand side effects on the actual availability of credit,” he said at the time. “It’s not debilitating for growth.”

The U.S. consumer remained healthy as households continued to delever from the excesses of the 2008 financial crisis. “The savings rate is high, income growth is picking up,” Knapp said. While global exports were slowing, this was “not enough of a shock to drive the U.S. into a recession.”

Additionally, there were reasons to believe the inversion wouldn’t last long. The Federal Reserve was indicating that its next Treasury-buying initiatives were more likely to lead to a steepening of the curve.

Knapp was bullish on bank stocks, having upgraded his view in 2017. He also liked U.S. small caps, expecting a rally on domestic demand.

What Happened

Ten months later, there are no signs of recession for the U.S. economy. Financial stocks have done well, judging by the SPDR S&P Bank ETF (KBE), which is up more than 14% in the intervening months:

Small caps have also done well, with the iShares Core S&P Small-Cap ETF (IJR) gaining more than 11%:

The 3 month/10 year yield curve stayed inverted for a few months before steepening. It has since inverted again, though this time few economists are calling for a recession.

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