Summary – A top-down review of interesting calls and comments made last week in Treasuries, monetary policy, economics, stocks, bonds & commodities. TAC is our acronym for Tweets, Articles, & Clips – our basic inputs for this article.
Editor’s Note: In this series of articles, we include important or interesting Tweets, Articles, Video Clips with our comments. This is an article that expresses our personal opinions about comments made on Television, Tweeter, and in Print. It is NOT intended to provide any investment advice of any type whatsoever. No one should base any investing decisions or conclusions based on anything written in or inferred from this article. Macro Viewpoints & its affiliates expressly disclaim all liability in respect to actions taken based on any or all of the information in this article. Investing is a serious matter and all investment decisions should only be taken after a detailed discussion with your investment advisor and should be subject to your objectives, suitability requirements and risk tolerance.
1.First Sign – Divergence in Cross Assets:
Friday showed some interesting action – Gold Rallying 3%; Drop in 2-year yields of 7 bps while 10-30 yr yields were up; Oil rallying 5.5%; Dow down 793 points & S&P down 108 with Semis semi-trashed.
We are simple folks & we couldn’t go beyond noticing with a hmmm! Then, thanks to CNBC’s Mike Santoli, we heard from Warren Pies of 3Fourteen Research who is playing like Tom Brady this year.
- ” and you are seeing some cross-assets moves; you are seeing gold rally; 2-yr yields drop in the face of oil rallying & the stock market falling today; that’s the first, I think, warning sign that the market is going to start looking thru the inflationary early impacts of this into the recessionary consequences; “
What did he say before the “and” above to set up his above conclusions?
- “ … we are getting to the point where this sell-off is trying to move into the 2nd phase, which is where investors are seeing that this is not a short-lived conflict; you are seeing the back-end of the crude curve start to reflect like a longer time elevating crude oil prices…“
So we got the observation & then the framework behind the observation. But where does he think we might go?
- “Knowing the oil market as I do, we are looking down the barrel at a very, very serious situation; It looks like Rubio’s comments to the G7 today was “2-4 weeks more“. If this lasts 4 weeks, you know, the S&P 500 is going into a bear-market; Oil will be $150 dollars a barrel; there will be shortages;”
He adds that he is not being an alarmist but you need to be sober-minded about what we are facing,
- “and I don’t see sentiment reflecting that yet; we look at like managed money, inverse ETF volumes & it is like what you would expect to be like in a run-of-the-mill pullback & things like that; I don’t see the real fear or panic in the levels we are talking about”
He adds,
- “we moved into the consolidation range where we lost momentum back in February; that’s when we initially downgraded Stocks; and we said we want to see the range resolve; And that range was 6538 to the downside & 6900 to the upside; we broke thru 6538; we are waiting to get some good weekly closes below that; So I think you should expect the momentum to accelerate to the downside from here based on technicals & sentiment to me.”
But this entire selloff has been driven by Oil & its supply and price. So what does Mr. Pies see happening to Oil inventories if we go for another 2-4 weeks?
- “One day, as a good rough estimate, and this includes the SPR release, this includes the bypass pipeline to the Red Sea for the East-West pipeline, I still think there is a hole of 10 million barrels per day in the market and that’s with the best assumptions I can possibly make.”
- “If we roll that forward one month, that’s about 300 million barrels we lost … we can already see that … water excess inventories are gone; now we are cutting into an on-shore excess inventories. As we go into April, you are going to draw below what we consider excess;”
- “then you move into, even if we get a resolution to the war & we have opened the Strait of Hormuz, you still have time to get production, lost refinery capacity back online, this tells me that the best scenario is we are going to lose 600 million barrels out of global inventories. That’s about 8 billion barrel storage globally.“
- “That is a huge number; its more than we have ever seen in any calendar year on record. So that’s in 2 months. We are changing the shape of the oil market in real time in a short 2-month window; never seen anything like this before.”
2. Interest Rates
It seems Thursday was the peak in CNBC’s mission to broadcast passionate approval about the Fed raising interest rates to quell inflation. The peak was what we deemed to be an inflamed performance by an angry afternoon CNBC anchor who was almost shouting on air about the need for the Fed to raise rates.
Then came Friday with the cross-asset action described above with the 2-yr yield falling by 7 bps amidst the entire 1-7 year curve falling in yield, a hint of potentially recessionary consequences as Mr. Pies said above on CNBC.
And David Rosenberg sensibly wrote in his summary of his Friday piece:
- “highlight why deteriorating leading indicators make a strong case for the front end of the yield curve, as markets appear to be overpricing the risk of further Fed tightening.”
Look what Rick Rieder of BlackRock, one of the most trusted voices on the street & a respected ex-candidate for this Fed, said on Thursday afternoon in the clip below while the above CNBC Anchor was nearly losing his voice on CNBC’s air:
- I don’t think the Fed’s going to hike. In fact, I think they’re going to cut rates. I’m looking for an opportunity, like when we think we’re on the other side of this, buying interest rates, particularly front end interest rates that I’m super excited about.
Go lower in the section below to notice that Peter TChir, Head of Macro Strategy at Academy Securities actually said, he would go long Treasuries now & he likes the 10-yrs & beyond sector of the Treasury curve.
And the strongest comment about the Fed came from Barry Knapp of Ironsides who said ” the Fed is really off-base on all of this“. He also provided actual data from 2021 & show how 2026 is different. And a TV anchor from Bloomberg showed an open mind to present views of a well-known strategist:
- Lisa Abramowicz@lisaabramowicz1 – This past week, long-term bonds had second largest ever outflow and largest since March 2020: BofA, EPFR data. Strategists led by BofA’s Michael Hartnett expect “policy panic” to avoid recession and are recommending going long yield curve steepeners.
In keeping with the above, guess what we found:
- Mike Zaccardi, CFA, CMT 🍖@MikeZaccardi – 66% market-implied chance of a rate cut by January 61% by October
2.1 Rick Rieder
By chance, we saw & heard what Rick Rieder from BlackRock said about interest rates & the markets going forward on Wednesday, March 25.
Below is a condensed version of his comments:
- I don’t think the Fed’s going to hike. In fact, I think they’re going to cut rates. I’m looking for an opportunity, like when we think we’re on the other side of this, buying interest rates, particularly front end interest rates that I’m super excited about.
- small businesses, young people, low income are really getting hurt by this interest rate. And the other place is getting hurt by this interest rate is the US government. We have too much debt. We have to get that rate down…. We have an energy shock and inflation shock. So you’re a bit more patient around it. I think the equilibrium funds rate is closer to 3%. I think you need to get there ; (PS: MacroViewpoints cut its MV-ONR rate to 3% on February 15, 2026)
- I would get the rate down and then the most important thing is we need to stabilize long end interest rates. Personally, I would stabilize the back end of the yield curve. And I think I think if you are Fed, you have to use the balance sheet or threaten to use the balance sheet; the Fed funds rate is interesting, but nobody borrows off the overnight funds rate anymore.
- They borrow out the yield curve. That to me is going to be how we manage that and how we get mortgage rates down is a really big deal.
- I’d say the premium that’s in there today in the yields is a view that the Fed’s got to fight inflation first. I actually think that when you have a supply shock, this is not inflation ; it is not because of higher demand. We have a supply shock; … think about particularly low income people You’re getting hurt by higher fuel prices, higher food prices. Why would you raise mortgage rates at that the end of the day? I think that premium should come out and we should lower that rate.
2.2. Barry Knapp
That brings us a summary of what Barry Knapp said on CNBC On Monday 3-23:
-
- from my perspective it was very clear in 2021; government spending growth was running at 45% annualized 30% of GDP; M2 growth was running at 27%; that’s way above the long-term median of 6.5%; so the conditions were in place to be able to pass on price increases when we had that shock;
- that’s not true today; Govt spending growth is 2%; … supply at 4%; so this implies if you have an increase in one row of the pricing … , you are going to have a big hit to demand;
- by the way, that’s exactly what happened with the tariffs a year ago; goods consumption fell from 5% to 1%; … services consumption was cut in half from 3.5% to 2%…. we did have a serious slowing of consumption; …
- the Fed is really off-base on all of this; and that’s the key to whether we really do get that big broadening out of growth … if you do push back those Fed rate cuts ….
2.3 Peter TChir – Academy Securities – Monday 3-23
We will stick to his comments on investments & on Treasuries in particular:
- At minute 19:45 – “Right now if I had to pick where I want to choose, I want to be actually long Treasuries now. I think we kinda hit this point and may be want to see if we fade from here; I think we are either going to get higher oil prices which at some point going to scare the global economy enough that we rally on Treasuries; so I like 10’s (10-yr Treasuries) or beyond ; I think recession comes into play so we get a little pause where rates can actually rally; I like that
3. Private Credit
Enter Dan Rasmussen of Verdad Advisors again, with another clear view of this sector:
- THIS IS JUST THE START OF A BIG CRISIS. RAPID GROWTH IN LENDING NEVER ENDS WELL. THE PRIVATE CREDIT MARKET WAS THE DARLING OF INVESTORS FOR ABOUT 15 YEARS, ABOUT 2 TRILLION OR SO OF NEW INFLOWS ALL WENT INTO VERY RISKY LENDING.
- THIS LENDING WAS GENERALLY DONE AT 500 BASIS POINTS 600, 500, 500 TO 650 BASIS POINTS SPREAD OVER SOFR (?) SO FAR. AND IT WAS DONE TO COMPANIES PRIMARILY LEVERAGED BUYOUTS THAT WERE TAKING ON FIVE, SIX TURNS OF EBITDA. IN TERMS OF DEBT, THOSE ARE SINGLE B RATED SECURITIES. SINGLE B RATED SECURITIES HAVE A 20% FIVE YEAR DEFAULT RATE, ACCORDING TO MOODY’S.
- I EXPECT DEFAULT RATES IN PRIVATE CREDIT COULD BE NORTH OF 20% OVER THE NEXT FEW YEARS. I DON’T THINK INVESTORS ARE PREPARED FOR THAT.
- AND ONCE YOU START TO SEE LIQUIDITY FLOWING OUT, REMEMBER LIQUIDITY FLOWING IN CONCEALED ALL THESE PROBLEMS ON THE WAY UP. BUT NOW THAT LIQUIDITY IS FLOWING OUT, WE’RE GOING TO SEE WHO’S SWIMMING NAKED TO TO CITE THE OLD PROVERB. >>
- IT’S CYCLICAL. IT LOOKS GOOD WHEN THERE’S LOW DEFAULT RATES. BUT THE MINUTE YOU HAVE MARKET STRESS, THERE’S HUGE PROBLEMS. AND THAT’S WHAT WE’RE WE’RE SEEING NOW.
- WELL, YOU’VE GOT TO REMEMBER, FIRST OF ALL, THAT A LOT OF INVESTORS ARE STUCK IN INTERVAL FUNDS AND PRIVATE PRIVATE CREDIT FUNDS THAT ARE STILL MARKED AT NAV. SO THE PUBLIC PRIVATE CREDIT FIRMS, THE BDCS HAVE TRADED DOWN 30-40%. RIGHT! BUT THOSE FUNDS ARE STILL MARKED AT NAV. AND SO THE FIRST THING YOU’RE GOING TO SEE IS EVERYBODY THAT’S IN THOSE INTERVAL FUNDS TRYING TO REDEEM AT NAV. AND AS THAT MONEY FLOWS OUT, THOSE OUTFLOWS CREATE THEIR OWN PROBLEMS AND INABILITY TO REFINANCE, INABILITY TO ROLL OVER NEW DEBT, LIQUIDITY ISSUES AT THESE FUNDS.
- THESE PROBLEMS ARE GOING TO CONTINUE FOR A WHILE. THIS ASSET CLASS IS NOWHERE NEAR CHEAP. YOU NEVER WANT TO TRY TO CATCH A FALLING KNIFE. IT’S TOO EARLY TO EVEN CONSIDER GOING LONG. THESE VEHICLES ON THE PREMISE THAT THEY’RE CHEAP. I THINK FOR NOW, THE RIGHT ANSWER IS TO USE THEM AS A HEDGE. HIGHLY RISKY CREDIT. KEEP SHORTING IT ON THE WAY DOWN.
4. Markets Last Week
4.1 US Indices:
- VIX up 16.2% to 31.13; Dow down 90 bps; SPX down 2.1%; RSP down 1.1%; NDX down 3.2%; SMH down 2.7%; RUT up 49 bps; MDY up 39 bps; XLU up 2.1%;
Could stocks decline for 2 more weeks?
- Seth Golden@SethCL – 3-27 – $SPX may notch its 5th consecutive week lower, down nearly -7% over that time frame. Going back to 2005, we have only seen a handful of similar streaks, 2008, 2011 and 2022, all bear markets, all continued to fall for at least 2 more weeks. $SPY $ES_F $XLE $QQQ $RUT $IWM $NYA $DIA $VIX
- Augur Infinity@AugurInfinity – 3-29 – Is the MOVE Index (Treasury implied volatility) sending a bearish signal for equities? h/t @Marlin_Capital
And impact of credit:
- SentimenTrader@sentimentrader – 3-23 – Credit spreads have shifted into an unfavorable regime. When both high-yield spreads and CDS trend higher, equity upside has historically been limited, with higher volatility. This doesn’t signal an immediate decline, but the environment is less supportive for stocks. Read Full Analysis: https://users.sentimentrader.com/users/kaeppelscorner/the-combined-credit-spread-model-falls-to-unfavorable
4.2 MAG 7:
- AAPL up 33 bps; AMZN down 2.9%; GOOGL down 8.9%; META down 11.4%; MSFT down 4%; NFLX up 3.9%; NVDA down 3%; MU down 15.5%;
4.3 Key Financials:
- BAC down 40 bps; C down 2%; GS down 1.3%; JPM down 1.3%; KRE up 52 bps; EUFN up 45 bps; SCHW down 2.4%; APO down 3.2%; BX down 2.1%; KKR down 1.7%; XHB up 24 bps; ITB up 71bps; NAIL up 1.4%;
4.4 – Dollar & Metals
Dollar was up 58 bps on UUP & up 62 bps on DXY:
- Gold down 18 bps; GDX up 7.1%; Silver up 2.5%; Copper up 3.2%; CLF up 3.7%; FCX up 8%; MOS up 6%; Oil up 76 bps; Brent up 1.1%; OIH up 76 bps; XLE up 5.5 bps;
4.5 – International Stocks:
- EEM down 79 bps; FXI down 88 bps; KWEB down 1.1%; EWZ up 4.5%; EWY down 3.8%; EWG down 31 bps; INDA down 1.7%; INDY down 1.7%; EPI down 1.6%; SMIN down 1.4%;
4.6 Treasuries & Interest Rates:
- 30-year Treasury yield up 2.9 bps on the week; 20-yr yield up 2.1 bps; 10-yr up 5 bps; 7-yr up 6.3 bps; 5-yr up 6.2 bps; 3-yr up 2.5 bps; 2-yr up 1.4 bps; 1-yr down 4.8 bps;
- TLT down 22 bps; EDV down 34 bps; ZROZ down 57 bps; HYG down 25 bps; JNK down 31 bps;
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