SignalPlus Macro Review (202305029)
Dear friends, welcome to the SignalPlus macro research report. SignalPlus macro research reports update macro market information for you every day, and share our observations and opinions on macro trends. Welcome to track and subscribe, and follow the latest market trends with us.
Dear friends, welcome to the SignalPlus macro research report. SignalPlus macro research reports update macro market information for you every day, and share our observations and opinions on macro trends. Welcome to track and subscribe, and follow the latest market trends with us.Major U.S. indexes closed the week strong, with the SPX up 1.3 percent and the Nasdaq up more than 2 percent.
The deadly combination of Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla has risen more than 40% year-to-date, leaving the SPX 493 up just 1%. The performance gap between the market-cap-weighted S&P 500 and the equal-weighted S&P 500 has widened this year to the widest level since 1999, when Web 1.0 was about to change the world.In news that just came out over the weekend, President Biden and House Speaker McCarthy compromised andReached a debt-ceiling deal that barely mentions fiscal discipline and is still pretty much the same after weeks of political showmanship
. Highlights of the agreement include:The debt ceiling is suspended until 2025,
Give the Treasury Department full and unfettered borrowing authority until after the next presidential election.
Non-defense spending is capped at current fiscal year levels in 2024 and increased by 1% in 2025.
Defense spending increases 3.3% in 2024, at the expense of non-defense federal programs.
There are no new taxes or government programs.
Compromise on job requirements and other non-financial matters.The agreement will be voted on on Wednesday, Biden and McCarthy will be pitching the deal to lawmakers from their respective parties in the next few days;
A free-spending bill that will have little impact on GDP for the next two years and offers few concessions to some conservative House Republicans on spending.Assuming the deal doesn't fail in Wednesday's last-minute vote, equity sentiment should react positively to the news, as its passage removes a low-probability but significant tail risk; Long-term effects are more complex, as this leads toOptions for rate hikes in June and July back on the table, and the absence of a spending cap means that deficit spending will continue,
The supply of national debt can again expand arbitrarily.Strong core PCE, durable goods orders, personal consumption expenditures data and expectations for a debt ceiling deal later on Friday combined to push U.S. Treasury yields to a one-week high.USD/JPY also breached 140 and a rate cut was quickly ruled out, with the chance of a June rate hike now back at 70% from just 10-15% earlier this month. In addition, once any debt agreement is reached,Treasury will immediately seek to restore its cash balance, may quickly remove from the systemWithdrawal of up to $400 billion in liquidity
(by issuing treasury bills).
Equity markets have been able to completely ignore the continued contraction of central bank balance sheets (QT), thanks in large part to the strength of tech stocks and AI, though we remain cautious about the potential for rapid liquidity withdrawals from Treasury TGA accounts , while heading into summer, this could lead to some undervalued negatives; we have the same concerns about BTC/cryptocurrency prices, although the weakness in prices is mainly due to lack of mainstream interest rather than macro factors, higher Terminal interest rates will still have an impact on risk sentiment in the coming months.
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