As highlighted in a tweet by HolgerZ, the S&P 500 is running in tandem with the Fed net liquidity
So it's not so much the peak or pause in rate hikes that matters, but rather what happens to the Fed balance sheet & reverse repo operations. Source: HolgerZ, Bloomberg
Consumer balance sheets are getting stretched
Accumulating debt during a low interest rates environment is one thing. But in light of the continuous surge of the price of money, the US consumer is probably starting to feel the pain Source: Crescat Capital, Bloomberg
World trade volumes fell at their fastest annual pace for almost three years in July
Closely watched figures signal rising interest rates are beginning to impact global demand for goods. Trade volumes were down 3.2 per cent in July compared with the same month last year, the steepest drop since the early months of the coronavirus pandemic in August 2020. The latest World Trade Monitor figure, published by the Netherlands Bureau for Economic Policy Analysis, or CPB, followed a 2.4 per cent contraction in June and added to evidence that global growth was slowing. After booming during the pandemic, demand for global goods exports has weakened on the back of higher inflation, bumper rate rises by the world’s central banks in 2022, and more spending on domestic services as economies reopened following lockdowns. The about-turn in export volumes was broad based, with most of the world reporting falling trade volumes in July. China, the world’s largest goods exporter, posted a 1.5 per cent annual fall, the eurozone a 2.5 per cent contraction, and the US a 0.6 per cent decrease. Source: FT
Private equity firms are redirecting their focus from mega buyouts to businesses such as private credit as higher interest rates disrupt their strategies
Over the past year, buyouts have been halted due to the impact of higher rates, resulting in private equity firms being burdened with portfolio companies acquired at high prices. In response to this challenging environment, some of the industry’s largest firms are venturing into new areas, including lending to companies, which has become more lucrative as central banks raise interest rates to combat inflation. Top executives from Apollo and Blackstone recently highlighted the potential of private credit and infrastructure investing at the annual IPEM industry conference in Paris. https://lnkd.in/exw5bqWp. Source: https://lnkd.in/eSMS2Q-k
SNB unexpectedly leaves policy rate unchanged at 1.75%.
The Swiss national bank unexpectedly leaves its policy rate unchanged at 1.75%. Market was estimating the probability of a 25bps hike at more than 70% yesterday.
USDCHF broke the 200 daily moving average of 0.9036 and now trading higher over 0.9060.
EURCHF also trading higher at 0.9650.
This chart tells the story:
The rate priced in for the Fed’s December 2024 meeting hit a new high for this cycle at 4.7%, meaning investors have sharply trimmed their hopes of interest rate cuts in 2024. Source: HolgerZ, Bloomberg
BREAKING: A HAWKISH PAUSE BY THE FED
FOMC KEEPS RATES UNCHANGED AS EXPECTED BUT MAKES CLEAR THAT HIGHER RATES ARE THE NEW NORMAL...US 2y yields hit highest since 2006 after somewhat hawkish Fed. Bottom-line: #Fed futures now no longer show rate CUTS beginning until September 2024. To put this in perspective, three months ago futures were expecting 4 rate CUTS in 2023. Now, interest rates are expected to PAUSE for at least 1 year... One remark: Fed estimates that r* (the real short-term interest rate expected to prevail when an economy is at full strength and inflation is stable) remains at 0.5%, and yet rates in 2026, when US debt may hit $50 trillion will be 3%. This means that blended interest on US debt will be ~$2 trillion, double where it is now. Source: Bloomberg, The Kobeissi Letter, HolgerZ, www.zerohedge.com
FED leaves rates unchanged, signals one more hike this year
The Federal Reserve left its benchmark interest rate unchanged while signaling one more hike this year. FOMC repeated language saying officials will determine the “extent of additional policy firming that may be appropriate.” The FOMC held its target range for the federal funds rate at 5.25% to 5.5%, while projections showed 12 of 19 officials favored another rate hike in 2023.
