Macro thesis 2Q 2022 (USD)
Recession is expected in the near term.
My rationale:
-2-10 yield curve inversion happened 2-3 months ago
-Fed's 75bps rate hike; drop in short-end US Treasuries yields (which is supposed to be the the other way around with rate hike).
-I believe Fed's is behind the curve, unable to catch to the rising yields.
-Inflation is the main cause for such increase, believed to fuel by supply-side destruction (especially with energy related supply), pent-up demand and excessive QE .
-Should recession happens, money managers will move to safe havens, which in this scenario will be cash dan long-end bonds. Precious metal is out of the picture with rate hikes and high yield environment. Commodities are tricky to analyse and varies from one economy to another. Oil has competing demand-supply balance with renewables segment, seed oil have protectionism & war scenarios with it, corn is most likely to stay afloat while coffee shall be the most stable commodity in the near term.
Trade ideas:
-long USD short to medium term (the key is to find most active and less risky pairs)
-long longer end UST to prepare for yield flattening and eventually inversion.
My rationale:
-2-10 yield curve inversion happened 2-3 months ago
-Fed's 75bps rate hike; drop in short-end US Treasuries yields (which is supposed to be the the other way around with rate hike).
-I believe Fed's is behind the curve, unable to catch to the rising yields.
-Inflation is the main cause for such increase, believed to fuel by supply-side destruction (especially with energy related supply), pent-up demand and excessive QE .
-Should recession happens, money managers will move to safe havens, which in this scenario will be cash dan long-end bonds. Precious metal is out of the picture with rate hikes and high yield environment. Commodities are tricky to analyse and varies from one economy to another. Oil has competing demand-supply balance with renewables segment, seed oil have protectionism & war scenarios with it, corn is most likely to stay afloat while coffee shall be the most stable commodity in the near term.
Trade ideas:
-long USD short to medium term (the key is to find most active and less risky pairs)
-long longer end UST to prepare for yield flattening and eventually inversion.
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