Here we go again!
Old Wall's Media is calling this a "bond rout" (we call it the 7th Long Bond buying opportunity in the last 17 months) as economists who are using the wrong US employment and GDP forecasts puff out their chests, asking for a "rate hike."
Let them eat hikes.
I said this last December. And while I can't believe I have to say it again, I will – a Fed rate hike, into a slow-down, is the most dovish catalyst of all!
You don’t have to have the best memory to remember what happened last December. High Beta markets started to crash, and the Fed had to pivot hard (back to dovish) in order to attempt to correct their policy mistake.
What's changed since then?
- Year-over-year US GDP growth has slowed from +3.3% at its 2015 peak to 1.2% y/y in Q316
- Long-term Bond Yields have crashed (10yr yield -19% YTD)
- Gold, Utilities, and Long-Bond (long duration) securities have double-digit % returns YTD
As opposed to "newsy" opinions on hikes, our Long-term Bond view has always been predicated on one very basic thing - the data.
If we're right, and both non-farm payroll and GDP growth continue to slow (for the next 2 quarters), the Fed will be cutting (like they did, rhetorically, in March) in 2017.
Editor's Note:
The piece above is from commentary in Real-Time Alerts and the Early Look.
