Our random collection of interesting graphs of the week:
The Fed’s balance sheet is enormous. They don’t need to mark to market, so that is a positive, but eventually they will need to wind that portfolio down. Even if they don’t outright liquidate the portfolio, the Treasury will need to find replacement buyers.
Morgan Stanley suggests that the stock market has become immune to Fed purchases, and calls out in the tune of Blue Oyster Cult, “Don’t Fear the Taper.”
The ECB and the Fed once in lock step have now diverged.
The widening of the 2YR and the 10YR shows the beginning of the discepancy between the Fed’s control and the market’s expectations.
Although volatile, Sentiment continues to march upward.
Off a low base, Loans have seen rapid growth. Unlike fixed rate bonds, Loans are typically floating rate instruments and thus less suspectible to rate increases.
A blip in rates has brought some investors back into bonds.
Looking at the big picture, rates although up are still historically low
Division in Equity Buyers. Mutual Funds, ETF and closed end funds buying less, while Pension Funds buying more (note that Pension Fund allocations to Equities is quite low to historical standards).
Cleveland not as happy as Chicago, sending mixed messages. Then again, I wouldn’t be happy in Cleveland either…
Absolute bond prices in general create a poor assymetric risk profile to interest rate changes. I guess “Distressed Investing” is buying things below par…
Global issues have become less of a concern, replaced by U.S. fiscal concerns and event-related issues.
Research Affiliates compares U.S. equities to Emerging Markets – and each to Shilling, which we have discussed here before.
Although Growth Premium to Value stocks has rebounded, it remains quite low in a historical context.
