The 10yr-2yr yield curve is spiking impulsively and unlike the steepener into 2021 it ain’t inflationary. We know that because nominal Treasury yields are dropping, not rising. If this continues on to un-invert and begin a new steepening trend, we will have changed the macro as expected.
Junk bonds are tanking in relation to Treasury bonds and are getting uglier nominally as well. Other aspects of the market are intact like the technical parameters to the broad rally theme and the Libor/3mo. T-bill indicator shown in NFTRH 748 was calm as of yesterday’s close. Also, Tech (QQQ) is leading broad (SPY). So I am not trying to instigate emotional reactions. Just trying to update what is in play.
Commodities are tanking and rightfully so. Inflationists disoriented and hopefully soon to be in full retreat as the CRB index breaks down, energy and industrial metals (incl. copper) drop and soon we may well prove our macro view to the legions of robots following their touts. One can hope, anyway.
But for now let’s just note that the FOMC is on the horizon so I’d rather not short anything, because if they issue a dovish word the markets – including I suppose, the inflation stuff – could spike. Watch the gold miners. If they resume rallying they could lead a broader rally resumption. If technical parameters start to get taken out on broad stock markets (beginning with the SPX December low), all bets off and we’d prepare in earnest for the new macro, which for me would include cash, short-term Treasury bonds and gold miners, added on opportunity.
