The Fed will upset the rebalancing of oil markets if it misreads the current sell-off as weakness in oil demand.
Corporate profits are more sensitive to selling prices than to volumes. Falling prices even amid mildly rising volumes could produce a meaningful profit contraction. Stay with deflation trades. In particular, maintain the short EM…
There are no signs of broader financial stress in the Chinese corporate sector. The most recent financial market turmoil has had no systemic damage to corporate sector balance sheets. We are leaning against being overly bearish.…
The declining correlation between risk assets and Treasury yields suggests that the market perceives monetary policy to be overly restrictive. Historically, this has led the FOMC to adopt a more dovish policy stance.
With inflation expectations declining alongside asset prices in almost every major economy, central banks can at least not make things worse by being more hawkish than necessary.
An oversold bounce may be getting underway, but without a policy assist, it would be a rally to sell. Go to neutral in the growth vs. value trade and beware sub-surface weakness in the consumer discretionary sector.
