Watch the replay of our analysis of the FOMC statement below.
Today we live-streamed our recap of the FOMC statement and our outlook for financial markets over the immediate and intermediate terms. The discussion runs just shy of 30 mins and hits on every major risk investors must consider from here. It’s a real must-see in our opinion; we recommend finding the time to review it soon.
- Within equities: It’s a good spot to book the #Quad1 trade and rotate into the #Quad4 asset allocation from a sector and style factor perspective.
- Within fixed income: The April Jobs Report is the next catalyst for Treasury bonds and could prove decidedly bearish insomuch as slowing growth data over the next two quarters should prove decidedly bullish. Fighting buy-side consensus on the long side of Treasury bonds been a great call thus far so we’d be booking gains and taking down our gross exposure to this asset class on the next immediate-term pop. Ultimately, we think our #lowerforlonger theme prevails, but volatility is likely to pick up in the interim.
- Within foreign exchange: We still think that both the Europeans (ECB) and Japanese (BoJ) are unlikely to allow a sustained rally in either of their respective currencies, which would also imply a sustained correction in their respective equity markets. We expect one or both central banks to jawbone and/or expand their LSAP programs over the intermediate term. As such, we remain bullish on the U.S. dollar with respect to the intermediate-to-long term.
- General: The next few weeks will be a difficult time for any investor to gain conviction in either the deflationary trend in place since fall of last year or the counter-trend reflation rally we’ve seen in recent months. We certainly do not have a ton of conviction in either direction, specifically as it relates to our thematic investment conclusions. As such, we’d be raising cash and reducing our over and under weights across the board. Lastly, the risk of a “sell in May and go away” outcome is high in our opinion.
Best of luck out there!
-The Hedgeye Macro Team