After reviewing market and macro news for the week of March 21-25, DoubleLine’s Jeff Mayberry and Samuel Lau answer a listener’s question on how quantitative tightening (QT) could impact the 10-year U.S. Treasury yield (19:41) as well as the TIPS market, in which the Federal Reserve has a large footprint. Jeff and Sam look back at previous QT periods and note the accelerated pace of plans for interest rate hikes and balance sheet reduction in 2022. After discussing a pair of alliterative QT events, the Taper Tantrum and Powell Pivot (24:18), the duo reviews hiking cycles in 1984 and 1994 that Fed Chair Jerome H. Powell says resulted in economic soft landings (29:21), with the lack of inflation a key factor both times. Jeff and Sam conclude the segment with a breakdown of QT’s possible impact on the TIPS market and breakevens (33:29).*
The week of March 21-25 delivered a lot of action in U.S. soccer as well as a risk-on sentiment in the markets (2:05). The S&P 500 had a strong week, Fixed Income Land observed some curve flattening (3:18), and while commodities stayed strong (6:22), the nickel market remained reined in (7:42). The past week was relatively light on macro news (9:42); next week’s macro numbers will include home prices, JOLTS data and nonfarm payrolls (40:14).
*The following previous episodes contain more information on this week’s topic:
Real and Nominal Yield Curves
What Is a Bear Flattener?
FOMC Guidance on Tapering
Mr. Mayberry joined DoubleLine in 2009. He is a Portfolio Manager on DoubleLine’s strategic commodity strategy while working in portfolio management and trading for derivatives‐based and multi‐asset strategies. Mr. Mayberry is a Strategist on the Fixed Income Asset Allocation (FIAA) committee and a contributing member on our Global Asset Allocation and Macro committees. He also co-hosts DoubleLine’s weekly Monday Morning Minutes (Twitter @DLineMinutes, Minutes@Doubleline.com) podcast. Prior to DoubleLine, Mr. Mayberry was a Senior Vice President at TCW for nine years within the Mortgage Group, where he specialized in portfolio and fund monitoring and analytics. He holds a B.S. in Engineering from Harvey Mudd College and an M.S. in Financial Engineering from the Peter F. Drucker Graduate School of Management at Claremont Graduate University.
Mr. Lau joined DoubleLine in 2009. He is a Strategist on the Fixed Income Asset Allocation (FIAA) Committee and a contributing member on the Global Asset Allocation and Macro committees. Mr. Lau is a Portfolio Manager on DoubleLine’s strategic commodity strategy while working in portfolio management and trading for derivatives-based and multi-asset strategies, including DoubleLine's Shiller Enhanced CAPE®, Shiller Enhanced International CAPE®, Real Estate and Income, and Multi-Asset Trend strategies. He also co-hosts the Sherman Show (Twitter @ShermanShowPod, ShermanShow@Doubleline.com) and Monday Morning Minutes (Twitter @DLineMinutes, Minutes@Doubleline.com) podcasts. Prior to DoubleLine, Mr. Lau was a Vice President at TCW where he worked under Jeffrey Gundlach as a Research Analyst in the Mortgage Group. He holds a B.S. from the University of Wisconsin, Madison and an MBA from the Marshall School of Business at the University of Southern California.