DoubleLine Podcasts

MMM Episode 50: A Wild Week for Stocks, A Curtailing Curve and a “Predictable” Powell

After reviewing a week that started scary for stocks (3:16) to finish up 80 basis points on the S&P 500 with a strong finish Friday and unpacking the heavy macro calendar for Jan. 24-28, Jeff Mayberry and Samuel Lau delve (16:58) into the prepared guidance released by the Federal Open Market Committee and Federal Reserve Chair Jerome Powell’s news conference. The co-hosts of Monday Morning Minutes note Powell made it clear the Fed’s mind is on keeping the lid on inflation, not on growth or the supposedly strong labor market. However, while striking a somewhat more aggressive tone than in the recent past, nonetheless did his share of “tap dancing.” He notably pivoted between repeated promises of a “predictable” policy trajectory and hedging with a call for the Fed to remain “nimble” in the event of unforeseen developments in the economy. For now, Jeff notes, the markets seem to have given the Fed “the green light” (34:18) for at least four rate hikes this year with balance sheet reduction to begin in the summer.

Among other items for the market week, within fixed income, Jeff and Sam took note of a flattening Treasury curve (6:15), driven by rising yields on the front end. Within the investment grade bond universe benchmarked by the Bloomberg US Bond Aggregate, which lost 37 bps on the week, the underperforming sector was investment grade corporate, down more than 90 bps. IG corporates are down 3.6% year-to-date, the worst performance of the fixed income sectors so far in 2022.

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