Another way recession expectations stave off recessions: the heavy buying of longer-dated bonds keeps long-term financing rates suppressed, which is stimulative to various types of real estate and other debt-dependent activity.
Interesting article and is always important to question yourself.
My perspective is that the probabilities r still firmly on a recession coming in the next 6-10 months.
The signal coming from the inversion of the 3m-10y rate takes between 6m to 18m to hit the economy, so we are still comfortably within that range. But a 6 to 18 month waiting period is not easy for the human mind that is used to live in the here and now.
Everything is posible but generally "this time in not different".
when the tantrum happens, likely bond, tech stock, cyclical stock, all would drop. Which would you be more interested in picking up for more risk adjusted upside?
1) extreme short on cyclical positioning while long on tech according to CTA data, while CFTC speculator data shows record short on equity overall. How do you interpret this? cyclical is super short now that dwarfs the long in tech such that overall is net very short?
2) For bonds, why do you use survey data instead of CTA/CFTC data for positioning understanding?
Another way recession expectations stave off recessions: the heavy buying of longer-dated bonds keeps long-term financing rates suppressed, which is stimulative to various types of real estate and other debt-dependent activity.
That‘s a great example, yes
What are the chances that the US does not have a recession if China and Europe have one? It’s a rhetorical question. 😁
I expect a global recession.
Interesting article and is always important to question yourself.
My perspective is that the probabilities r still firmly on a recession coming in the next 6-10 months.
The signal coming from the inversion of the 3m-10y rate takes between 6m to 18m to hit the economy, so we are still comfortably within that range. But a 6 to 18 month waiting period is not easy for the human mind that is used to live in the here and now.
Everything is posible but generally "this time in not different".
Sure. Could also be we are already in recession and it is just a mild one...
But a recession with essentially no unemployment?
Has there ever been one like that?
Florian,
when the tantrum happens, likely bond, tech stock, cyclical stock, all would drop. Which would you be more interested in picking up for more risk adjusted upside?
Not sure how much stocks would drop given adverse positioning...
Florian,
Regarding the positioning metrics you use:
1) extreme short on cyclical positioning while long on tech according to CTA data, while CFTC speculator data shows record short on equity overall. How do you interpret this? cyclical is super short now that dwarfs the long in tech such that overall is net very short?
2) For bonds, why do you use survey data instead of CTA/CFTC data for positioning understanding?
COT data has basis trade in there (HF long bond short future for a few bps, shows up as non-commercial short)
With deficits so high, Western countries' debt is unsustainable. We will be OK short term, but the long term pain keeps growing.
Well done. Thank you.
Thanks!