EPB Macro Research | Free Research

'Taper' Tantrum 2.0 Feb 22, 2021

Executive Summary

  • 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...
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Reflationary Momentum Has Not Subsided Feb 02, 2021

Executive Summary

  • 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...
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The Role Of Gold In Your Portfolio Feb 02, 2021

Executive Summary

  • 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...
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Unintended Consequences Feb 01, 2021

Executive Summary

  • 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...
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