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Chart of the Week and Weekly Report Highlights
This week: bond yield back-ups, sentiment stumbles, value vs growth, inflation and growth outlook, the risk case in bond yields, and LatAm equities
This email provides a look at what we covered in the latest Weekly Insights report
The weekly insights report presents some of the key findings from our institutional research service, providing an entrée experience (in terms of price and size).
Chart of the Week - Backlogs and Bond Yields
Back on Backlogs… and Bond-Yield Back-Ups: In this chart we map the path of the global backlogs indicator and the US 10-year treasury yield. I think it’s fair to say that there are a number of good reasons why this yawning gap opened up (e.g. the initial pandemic shock to activity, demand for safe assets in the early stages of the crisis, and the massive global monetary response - i.e. QE, QE, QE, and more QE (and rate cuts + silly forward guidance)).
There’s also a number of good reasons why the relationship shown in the chart below has been fairly reliable in the past (in that backlogs reflect the ebb and flow of demand, ultimately impact inflation, and also reflect and influence the path of monetary policy).
Now that QE is wrapping up around the world (many central banks have already ceased their asset purchase programs, and the Fed is tapering), and inflation/growth have come back, perhaps we see bond yields recoupling to backlogs?
Key point: Backlogs point to bond-yield back-up risk.
— UPDATE — 8 Sep 2022
Since the original post bond yields have risen to meet with backlogs, but now backlogs are headed in the opposite direction. It took a while for bond yields to catch up, and now that QT is in play, maybe it will take a while for bond yields to catch back down to easing backlogs…
Quarterly Strategy Pack - Macro/Asset Allocation 2022 Outlook
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Topics covered in the latest Weekly Insights Report:
Value vs Growth: rotation, rebound, and a failed breakdown
Investor Sentiment: some very interesting changes underway
Bond Yield Breakout: US 10-year treasury technicals
Backlogs & Inflation: where to next in 2022?
Bond Yield Fundamentals: the further upside risk-case for yields
LatAm Equities: an emerging value setup in these emerging markets
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Thanks for your interest. Feedback and thoughts welcome.