John Authers / Bloomberg cites ASR’s Asset Allocation Survey

“Rather than jolting the market out of an extreme position, the Fed may have given an extra shove to the direction in which it had already tentatively started to move.

For further evidence, Bowers of Absolute Strategy notes that:

1.U.S. inflation breakevens peaked in mid-May ... and have been falling ever since;

2.Quite a few commodity prices have peaked out 

3.U.S. Treasuries ignored not one, but two, atrocious CPI prints (totally unfazed - despite the negative surprises) 

4.Since May 12, the U.S. 30-year yield has fallen 40 basis points (from 2.4% to 2%) - which suggests the “long duration” trade is back in the driving seat

Bowers also draws attention to signs that China is tightening credit.

….Meanwhile, the two areas that demand attention are credit and currencies…. Bowers suggests that this is “ ‘probably the one to watch’ as credit spreads tend to widen when breakevens fall. They haven’t done so yet...”

To read the full column, see HERE (Bloomberg subscription may be required)

Clients can read the full ASR Q2 Asset Allocation Survey HERE

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