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).
Credit: The correlation between CCC and BBB-rated US corporate bond spreads has dropped in recent months, which typically precedes periods of credit stress.
Equities: The stock-bond correlation continues to climb.
Stock volatility has been subdued.
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.
EM equity volatility is at relatively low levels as ETF flows improve.
United States: Based on BofA’s card data, consumers are increasingly spending outside of home.
Food for Thought: Western US drought conditions:
Edited by Richard Holmes
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