![]() The risk of a recession also rises with monetary tightening and Dell's decision to fire 5% of its workforce is not exactly a bullish omen for the economy. The collateral damage to tight money is also the price of gold and the price of Brent crude. The obvious trade now is to go long USD/JPY as the Bank of Japan will do squat until BOJ's Kuroda-san's 2nd term ends in April even as US dollar rates rise. So I would position for higher interest rate volatility, credit spread widening (will global investors buy Indian corporate dollar-bonds after the Adani disaster? It took a decade for Dalal Street to recover from the Harshad Mehta/Ketan Parekh fraud) and higher long term rates. This means investors better brace for shocks in January retail sales, industrial production, home construction and consumption data flow that could further rattle the bond market and take the yield on Uncle Sam's 10 year note to 3.80% - 4.00%. The yield on the 10 year US Treasury note is now 3.60%, up from 3.34% just before the monster January payroll number on Friday. The yield on the 2 year note has now spiked to 4.40%, clear evidence that the bond market's new consensus is for "higher for longer" interest rates despite Jay Powell's repeated disinflation musings and dovish tone and the FOMC last week. ![]() ![]() The price of money has risen alarmingly in Asia and Europe, ensuring that we will have a bloodbath in high beta tech stocks on Nasdaq tonight. ![]()
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