EPB Macro Research | Free Research
'Taper' Tantrum 2.0 Feb 22, 2021
- Interest rates are rising with a speed that is being referred to as the "taper tantrum 2.0"
- Are yields really rising due to an expectation of the Fed reducing the size of its balance sheet? No.
- Yields are increasing because growth and inflation expectations are rising, combined with an uncertain regulatory backdrop adding fuel to an existing trend of higher interest rates.
- The direction of interest rates (higher) is correct, but the speed is likely an overshoot, something...
Reflationary Momentum Has Not Subsided Feb 02, 2021
- Cyclical equities continue to outperform large-cap "defensive" equities.
- The Treasury curve is bear steepening as long-term yields rise and short-term yields remain flat-to-down.
- Leading indicators of cyclical inflation pressure continue to point higher, which will pressure long-term bonds and support cyclical equities.
- Corporate credit spreads highlight the exuberance and lack of caution in risk-assets.
- While cyclical growth and inflation indicators remain higher, risk...
The Role Of Gold In Your Portfolio Feb 02, 2021
- Gold plays a critical role in preserving wealth and should be considered in a context beyond a securities portfolio.
- The long-history of gold and correlation to real interest rates makes gold a sound proxy on the price of money.
- Gold also serves a separate role in a diversified securities portfolio, outpacing risk assets during large declines in real interest rates.
- Investors should consider "linking" or "backing" a percentage of net wealth in gold, in addition to the...
Unintended Consequences Feb 01, 2021
- Short-term interest rates are coming under pressure in a fashion that will require the Federal Reserve to defend the zero-lower-bound.
- Rapid growth in total banking reserves will cause banks to lower the rate on some deposits to limit their balance sheet growth, which comes at a cost.
- The demand for Treasury bills from money market funds and the Federal Reserve will outweigh the limited supply of new bills in 1H 2021 due to an overfunded TGA.
- The Federal Reserve will be...