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April 22, 2022 | Monday Morning Minutes

MMM Episode 62: A Red Week for Markets, Predictive Gauges for Fed Funds

After covering the week of April 18-22 for U.S equities, fixed income and commodities (2:06), hosts Jeff Mayberry and Samuel Lau put the 9.4% year-to-date negative return of the Bloomberg US Aggregate Bond Index into historical context (6:41). So far, the ongoing drawdown that began August 2020 is the second-worst peak-to-trough decline in the history of the Agg. The worst, recorded back when the then-Lehman Brothers US Aggregate Bond Index was calculated monthly, was a decline of 12.7% from a peak at the end of July 1979 to a trough at the end of February 1980. After that perspective from the rear-view mirror as well as a review of the week’s macro news (11:08), Jeff and Sam put on their forward-looking glasses for insight into future movements and levels of the Federal Funds rate (17:08). Among their recommendations, they agree with Federal Reserve Chairman Jerome Powell that the monthly dot plot, which depicts simple polling of Federal Open Market Committee (FOMC) members on the future level of the Federal Funds rate, provides little useful information. For better guidance, Jeff and Sam rely on the formal statements of the FOMC itself, the Fed chairman’s news conferences and inter-meeting statements by Fed officials. For market indicators of expected rate moves at future FOMC meetings, they rely on the Bloomberg WIRP function and the Chicago Mercantile Exchange’s Fed Watch page. Both these tools distill rate level probabilities from pricing in the Fed Funds futures market. For an idea of where the Fed Funds rate will ultimately end up, they, like DoubleLine CEO Jeffrey Gundlach, use the yield on the two-year Treasury note.

About the Hosts

About the Hosts

  • Jeffrey Mayberry

    Macro-Asset Allocation

    Jeffrey Mayberry

    Macro-Asset Allocation

    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.

  • Samuel Lau

    Macro-Asset Allocation

    Samuel Lau

    Macro-Asset Allocation

    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.