Greetings,
Rates: Investors’ response to the Fed’s hawkish dot-plot was to unwind some of the reflation trades, which have become crowded recently. In the equity markets, inflation-sensitive shares took a hit (2 charts).
![The Daily Shot Brief – June 18th, 2021](https://thedailyshot.com/wp-content/uploads/RA-Citi2106180430.png)
![The Daily Shot Brief – June 18th, 2021](https://thedailyshot.com/wp-content/uploads/EQ-Infl2106180430.png)
Credit: The correlation between CCC and BBB-rated US corporate bond spreads has dropped in recent months, which typically precedes periods of credit stress.
![The Daily Shot Brief – June 18th, 2021](https://thedailyshot.com/wp-content/uploads/CR-correl-CCC-BBBB2106180430.png)
Equities: The stock-bond correlation continues to climb.
![The Daily Shot Brief – June 18th, 2021](https://thedailyshot.com/wp-content/uploads/EQ-Correl2106180430.png)
Stock volatility has been subdued.
![The Daily Shot Brief – June 18th, 2021](https://thedailyshot.com/wp-content/uploads/EQ-Vol2106180430.png)
Emerging Markets: In the past 30 years, there has never been a rolling two-year period without a near 20% decline in EM stocks, according to Alpine Macro.
![The Daily Shot Brief – June 18th, 2021](https://thedailyshot.com/wp-content/uploads/EM-EQ2106180430.png)
EM equity volatility is at relatively low levels as ETF flows improve.
![The Daily Shot Brief – June 18th, 2021](https://thedailyshot.com/wp-content/uploads/EM-EQ22106180430.png)
United States: Based on BofA’s card data, consumers are increasingly spending outside of home.
![The Daily Shot Brief – June 18th, 2021](https://thedailyshot.com/wp-content/uploads/US-More-spending-outside-home2106180430.png)
Food for Thought: Western US drought conditions:
![The Daily Shot Brief – June 18th, 2021](https://thedailyshot.com/wp-content/uploads/VTN-AAA-Western-US-drought-conditions2-AAAA2106180430.png)
![The Daily Shot Brief – June 18th, 2021](https://thedailyshot.com/wp-content/uploads/VTN-AAA-Western-US-drought-conditions2106180430.png)
Edited by Richard Holmes
Contact the Daily Shot Editor: Editor@DailyShotLetter.com