Global Macro Overview
- Global equities recorded a second week of heavy losses after the Fed revealed that they expected official short-term interest rates to continue going sharply higher over the next several months.
- The Fed hiked U.S interest rates by 0.75%.
- Federal Reserve officials gave their clearest signal yet that they’re willing to tolerate a recession as the necessary trade-off for regaining control of inflation. Policy makers, criticized for being too late to realize the scale of the US inflation problem, are moving aggressively to catch up.
- Eurozone consumer sentiment fell to a new low in September which doesn’t augur well for spending. Meanwhile German producer price inflation surged to 46%yoy reflecting energy pressures which will help keep the ECB hawkish.
- The two-year U.S. Treasury note yield rose above 4.10% — its highest level since October 2007 — and the 10-year U.S. Treasury note yield jumped briefly to 3.77%—its highest mark since November 2008.
- Equity ETFs had $20B+ of inflows last week, 3rd highest total this year. That doesn’t feel like
capitulation… sentiment is bearish but flows are not.
- The SPDR Oil stocks ETF ($XLE) plunged by almost 7%, its second biggest drop since May 9.
- The UK’s biggest tax cuts Since 1972 trigger a crash in bonds & the British Pound
No other hiking cycle has started this steeply since the Fed started targeting the Effective Funds Rate in the 1980s.