Global cues hint discrete restart AND More.....

1. Bond yields have lagged the inflation upward trajectory.

2. Even after the Fed moving into the tightening stance and the new virus variant hurting the sentiments, I believe these elements cannot derail the recovery or restart, at the most can just pause the pace for a while. This in turn gives us the chance to enter the cyclicals at new lows.

3. Commodity prices already benefiting from strong global growth, energy restructuring and a growing list of negative supply-side factors could eventually get a boost from modest depreciation of the dollar. As an asset class, Commodities remain attractive for diversification benefits and inflation hedge.

4. Commodities tend to benefit on a relative basis from a more mature expansionary phase of the business cycle when the labor market is tight and capacity utilization and inflationary pressures are high. Commodities as an asset class have tended to offer important diversification benefits at this stage of the cycle because various commodity investment strategies can benefit from the inflation that hurts other asset classes.

5. Global equities versus US equities relative performance shows stark spread. US equities have outperformed global equities by more than 15%, and this is the highest spread seen in the past 15 years. This comes with the promising future of the US and relative economic outperformance.

6. U.S. household net worth skyrocketed in Q2, increasing $5.8 trillion, or 4.3%, to a record high $141.7 trillion, roughly $25 trillion higher than the end of 2019.3 Much of the buildup in wealth is due to rising home values as a result of low borrowing costs and strong homebuying demand but also the surge in financial assets with the S&P 500 up 22% year-to date on a total return basis.

7. Chinese debt seemed like the next best treasury haven, but given the regulatory crackdown combined with the lackluster credit rating rating dampening, the US treasury may still continue to lead the havens. This goes against the Chinese plan to push Yuan dominance. The safe haven matrix has been rejigged after the pandemic, with the hunt for real yields, China is leading the G7 markets.

8. With the omicron virus scare, profitless tech, IPO, and Small caps have nose dived in the last couple of weeks. But on the flip side this is the right time to enter cheap into the cyclicals. This close, with beta, earnings turbulence and low liquidity getting hit the hardest, is what you would expect to happen if people thought CPI would be really hot and Fed rate-hike expectations increase even more.

9. According to one of the biggest rate traders, SOFR is not the best alternative for LIBOR as it does not provide the best hedging solution. SOFR does not reflect the credit market tension during the covid crash. When there is stress in the market, IBOR tends to spike, but SOFR is guided by Fed action and falls in crisis, thus making it tough for traders to hedge.

10. Coming week is full of rate action, and thus one-week volatility for euro and sterling has risen to multi-month highs, with meetings by the Federal Reserve, the European Central Bank and the Bank of England in focus.

11. Interesting Charts: