After recapping a mostly green market performance and mixed macro bag for the holiday-shortened first week of the year (Jan. 3-6), Monday Morning Minutes hosts Sam Lau and Jeff Mayberry kick off the 2023 Topics of the Week with a look at the spread between the yield of the three-month note and 10-year bond (13:18), and how the spread’s inversion is used by some as a recession signal with a prediction record of 8-for-8. The model’s creator, Dr. Campbell Harvey of Duke University, has been in the news recently discussing why (possibly) This Time Is Different and how the spread’s inversion in 2022 might not be pointing to a recession. Sam and Jeff run through Dr. Harvey’s four reasons: knowledge of the model might be impacting behavior (20:05), the healthy labor market (25:31), the strong consumer (29:16) and the Federal Reserve’s already hawkish stance on inflation (29:54).*
In their review of a shortened market week, Sam and Jeff hope the new year’s green shoots hail a reversal of a rough and red 2022 (1:38). Equities, fixed income and Bitcoin were all up with only commodities sitting out the surge. On the macro front (8:08), mixed signals were sent, including contractionary ISM manufacturing and services data and JOLTS numbers continuing to reflect a strong labor market. Next week will be light on data releases aside from the tightly watched CPI print (33:32).
*For more on the U.S. Treasury yield curve and its use in recession indicators, check out:
MMM Episode 59: Real Yield Curve and U.S. Men’s Soccer
MMM Episode 52: Yield Curve Flattening as an Economic Indicator
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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.