Search
Podcast
Markets
June 10, 2022 | Monday Morning Minutes

MMM Episode 69: Hot, Sticky Inflation; Flattening Treasury Curve; Speculation on Stagflation

In their review (1:49) of the carnage in the equity and bond markets June 6-10, Jeff Mayberry and Samuel Lau zero in (3:50) on “a big compression of the differential” between the yields of the two- and 10-year Treasury notes. As of Friday’s close, the 10-year yielded only 9 basis points more than the two-year. Not yet an inversion, so not enough to put Jeff and Sam on recession watch, but thin enough to put them on “the pre-watch to the watch.” In their discussion of the week’s macro news (11:32), the showstopper of course was the CPI and Core CPI reports for May (12:42), both showing accelerating inflation. While one economist suggested the negative news was tempered by the fact that inflation was limited to energy and energy-linked inputs (14:18), Samuel Lau pointed out that the rising cost of shelter is “already a big contributor to that Core CPI print” and “is picking up speed.”

For their Topic of the Week (20:12), the podcast cohosts discussed the phenomenon of stagflation, which is the prevalence of high inflation amid a sluggish economy. They found similarities between the present environment and the economic context of the 1970s-early 80s when the U.S. last experienced stagflation. Turning to the economic calendar (23:38) for the week of June 13, the cohosts concentrated on the Federal Open Market Committee meeting, scheduled for Wednesday June 15. Jeff Mayberry noted the federal funds futures market on Friday June 10 increased the probability of a 75-basis point hike in the fed funds to 27%, up from 9% as of the previous day’s close. He doubts, however, that Friday’s inflation report will be enough to “spook the Fed” into a 75-basis point hike and still expects a 50-basis point move by the FOMC.

About the Speakers

About the Speakers

  • 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.