Alpha Report: Week Ahead and Macro Flows
New year capital flows
Big Picture:
As we move into this week, we are entering a new year which means there will be indiscriminate buying and selling, especially since we are up so much in 2024. The macro views for HOW the current drivers are functioning have been laid out in the recent reports noted below:
In this report, we are going to dig into the specific things to watch as we move into this week.
Main Ideas:
Returns for the month of January vary with more negative returns occurring in February. However, you will notice, many times when we are at an extreme (like the 2018 lows or 2021 highs), this can function as a short-term pivot point for buying and selling pressure.
This dynamic is further amplified by the fact that price-to-sales ratios are at highs as the Fed is pausing:
The forward curve is already pricing an almost absolute certainty for a pause in the January FOMC and there is no meeting in February:
There are some minor economic dataprints this week BUT there will be a new model released to everyone for 100% Free.
The Macro Rate Matrix Dashboard was launched with the main data points and HOW they connect to interest rates. The UPDATED model released this week will map the yield curve so that you can have clarity about the TYPE of macro regime we are in.
Right now, we are in a period of time where the higher rates are creating the expectation that cyclically sensitive sectors will experience some marginal weakening. These dataprints and how they impact the yield curve will frame all of the labor market data we get the following week.
More on these topics tomorrow
As always, a Pepe for the culture!
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Thank you for sharing your thoughts as usual!
Honeslty, looks like the FED has pivoted hawkish right before a resumption of the disinflationary trend. And clearly there is already significant inflationary and tariff risks already priced into the Dollar. Bonds too, any small downside surprise in the data ahead will be the perfect catalyst for an impulsive squeeze, USD and bonds in particular.