Ben, Janet, Jerome & the Gang (TWTW – Nov 15-19, 2021)

Ben, Janet, Jerome & the Gang – As this coming week bring forth the notion of there possibly being a change of figurehead at the almighty US FED – will a Jerome make room for a Lael? – the key takeaway might well be that it really doesn’t matter!

After all, what did matter is the change that Ben represented when he replaced Alan … BUT after that … Hasn’t it all been effectively just one prescription? Easy money at all costs (make that close to no cost whatsoever as yields have been driven into the ground …), and by all means, don’t ever threaten to turn off the taps, or dare unsettle capital markets.

But now … interesting times ahead – possibly. For one, looking at bond returns, it is rather clear that not much in the way of risk is being compensated for there any longer. Duration risk? Yeah, sure, take that on, be wrong, and lose a couple years worth of yield in a matter of weeks (How did you like them apples? …); Credit risk? seems the notion has vanished – I guess until it returns … – alongside any worthwhile “spread” over Governments … Oh well, at least we didn’t have … inflation … BUT now, transitory or not, it seems we do have some, don’t we?

Oh, and that buyer of last resort? you know, the one that gets a great deal because … well, the seller had no choice but to accept the terms of the buyer … in the case of “bonds” in general, that actually was a price – indifferent buyer, conveniently. AND that buyer, well, it is on its way to curbing purchases and eventually stop them entirely. Will “market” yields at that point reflect true buying “appetite”? or will there be a risk of buyer “strike”. Stay tuned.

And let’s be careful what we wish for going forward …

Last week’s notables:

Last week’s Thematic & Sector Performance:

Have a great week!