Chief Macro Strategist, Clocktower Group. formerly at the Fed and White House.
Santa Monica, CA
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yes… though the migration of lending to NBFIs (private credit using floating-rate products) means higher rates translate to credit risk immediately
Don’t get me wrong - the higher rates go the more likely something breaks. But the reason they’re so high in the first place is that post-BTFP it has actually been really fucking difficult for pure interest rate risk to break much of anything and therefore we have to wait until it transforms into credit risk due to unaffordable debt service…which is hard to predict in terms of timing and not nearly as immediate as margin calls or bank runs
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agree
If earnings were not booming stocks would be much lower today. Hard to see earnings pulling the market up at this point. in the last several months, rising earnings have been largely offset with lower PEs. The higher rates go the faster P/Es are likely to fall for each incremental BP. And at some point down the road that green line of earnings strength is going to see its slope flatten. Being bullish on earnings is no longer enough IMO.
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i’m pretty sure 95% of people don’t care about “optimizing” their life… so either gen alpha really buys in to using agents (more than just chatgpt for generic search) or there’s a huge b2b opportunity.
but normal people don’t do this shit
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Eric Wallerstein retweeted
1/ Is the Fed hiking into a supply shock a policy mistake setting up for a 2022 style bear market?
I discussed with @ericwallerstein, Chief Macro Strategist at Clocktower Group on this episode of @opmpod.
YouTube: bit.ly/4h9khRB
Apple: bit.ly/3TR32eV
Spotify:bit.ly/3VLKAot
00:00 Intro
00:56 Fed Hike and Higher for Longer
02:30 Oil Driving Global Yields
05:58 Canada and Global Neutral Rate
07:14 Energy Crisis and Degrowth Risks
08:44 Politicized Fed and Credibility
11:50 Neutral Rate and AI CapEx Boom
14:47 Inflation Outlook and Policy Mistakes
17:20 Plutus Sponsor Break
18:46 Key Data to Watch: Bank Lending
20:07 Doves vs Hawks and Fiscal Drag
23:30 2022 Style Bear Market Setup
25:56 What Could Invalidate the Thesis?
26:41 BOJ Hike and Yen Intervention
31:20 Korea Silicon Boom
35:43 Europe Under Pressure
39:25 Middle East Outlook
43:06 Midterm Issues: AI vs. Gas Prices
48:34 China Oil Strategy
52:10 Big Calls Wrap
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in this interview AOC frames her possible presidential run entirely thru the lens of identity—zero percent thru policy.
if she runs, it will fracture the Dem presidential primaries, pull other candidates far to the left, and render their chances of winning in 2028 kaput
AOC on 2028 decision to @ShaneGoldmacher: “life doesn’t wait for you to be ready for things. Sometimes life just makes things ready for you.”
nytimes.com/2026/09/22/us/po…
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I think the idea that Treasury buybacks were "ineffective" is misplaced.
10s30s are significantly flatter. Swap spreads are ~10bps wider.
In absolute yield terms, rates are driven by growth, fiscal trajectory, and central bank policy. But issuance shifts are certainly "effective".
2s10s are -12bps flatter over past 10 days.
2s30s -20bps flatter.
as i wrote on Aug 18: Flattening > Fiscal Dominance. Just as everyone is max-short long bonds, it was perfect timing to get bullish.
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Eric Wallerstein retweeted
This last point is important because it goes back to 2): One reason asset managers are demanding more long futures is *because* increasingly Treasury supply is driving up the duration of the agg benchmark.
5/🧵 The Bloomberg US Aggregate Index is a particularly popular choice. The share of Treasuries in the Agg has grown over time as Treasuries have begun to make up a larger share of outstanding debt
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partly why it’s much better to short the belly than the long-end (applies globally)
Striking quote in here from one bond market observer - describes the Bank, DMO and Treasury as working on "soft yield-curve control" bloomberg.com/news/articles/…
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the biggest question for me right now is, assuming global CBs do hike ~3 more times, what level of restriction will that exert? and therefore, how significant would the negative effects on labor markets and spending be?
if neutral really has risen this year, real growth can continue at a decent pace. if not, then combinatory effects of a supply shocks + rate hikes suggest a 2022 redux is possible next year.
The European Central Bank published today its Wage Tracker indicator based on wage contracts signed until the end of August. On that basis it predicts that nominal wage growth YoY will be 2.7% in December this year, 2.7% in Q1 2027 and 2.8% in Q2. (see the Table) . This means that there aren’t wage second round effects on the horizon, which imply that, from that perspective, there is no justification for a cycle of 2 or 3 new hikes that the market is predicting.
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so if I have this right: the Bank of England is selling £146 billion of previously-purchased long-dated Gilts back to Treasury—which Treasury will replace by issuing (in all likelihood) shorter duration Gilts back to the market…
and this is being broadly cheered by commentators despite implying that QE was indeed monetizing debt issuance?
Bailey says this “preserves CB independence” but it looks like the opposite and far more impactful than UST’s buybacks
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dollar strengthened decently against most pairs.. since hikes are broadly already priced in, do global central banks have to out-hawk the Fed to protect against import inflation now that energy (and byproduct) prices are rising rapidly?
if we spiral into a legitimate global hiking cycle and the war persists, I struggle to see how K-shape and affordability concerns dont materially worsen and dominate next year’s election cycle
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3.9 for 2028 is a very hawkish revision. means the FOMC effectively raised their estimate of neutral by 50bps at this meeting.
(yes long run up just 10bps, but that’s the slowest moving part of the SEP)
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