Over the last 12 months we learned: Citi surprise index means absolutely nothing (remember it was surprising to the downside causing you to predict doom and gloom?), number of cuts mean nothing to the market, it still goes up even as number of predicted cuts is down, yields really mean a lot! Who wants to risk with stocks when you get 5% 10 year tbill interest risk free?
Right… it’s just an amazing coincidence that yields keep marking major turning points when the trend in economic surprises changes and the Fed outlook priced into rate futures adjusts in the same direction. Nothing to see here 😂
@ Correlation!=causation. Yields follow the underlying economic factors, not the surprise index. What I had in mind was that the Citi index is not and was not an accurate recession predictor.
@@icenomad99 That’s a nice straw man you’ve constructed. Pretty. Well done. 😂 1. Of course correlation isn’t necessarily causation 2. Of course yields are a derivative of economic conditions The point I’m making is entirely a different one. I think you’re missing the “surprise” in Citi Economic Surprise Index (CESI). CESI couldn’t tell you if recession is coming or it isn’t. It’s not a growth indicator. It is a window into speculative sentiment about the economy & the policy to follow. When the Fed was resisting rate cuts May-June, the markets pushed long rates down and priced in aggressive easing next year. Why? Because by then economic data was surprising lower, so the markets feared the Fed was wrong and would have to cut in a hurry later. When the Fed cut rates by 50bps and gave a dovish outlook in Sep, that marked a floor in yields and long rates started rising. Why? Because by then economic data was surprising higher, so the markets inferred the Fed was doing something inflationary and future rate cuts would be limited. Markets are forward-looking, and CESI is a filter on that speculative process
The Fed’s own TH-cam channel has 120k views on the live broadcast of last week’s Powell press conference. They must’ve all been watching with the sound off 😂
thanks. nice charts
Much appreciated!
Over the last 12 months we learned: Citi surprise index means absolutely nothing (remember it was surprising to the downside causing you to predict doom and gloom?), number of cuts mean nothing to the market, it still goes up even as number of predicted cuts is down, yields really mean a lot! Who wants to risk with stocks when you get 5% 10 year tbill interest risk free?
Right… it’s just an amazing coincidence that yields keep marking major turning points when the trend in economic surprises changes and the Fed outlook priced into rate futures adjusts in the same direction.
Nothing to see here 😂
@ Correlation!=causation. Yields follow the underlying economic factors, not the surprise index. What I had in mind was that the Citi index is not and was not an accurate recession predictor.
@@icenomad99 That’s a nice straw man you’ve constructed. Pretty. Well done. 😂
1. Of course correlation isn’t necessarily causation
2. Of course yields are a derivative of economic conditions
The point I’m making is entirely a different one.
I think you’re missing the “surprise” in Citi Economic Surprise Index (CESI).
CESI couldn’t tell you if recession is coming or it isn’t. It’s not a growth indicator. It is a window into speculative sentiment about the economy & the policy to follow.
When the Fed was resisting rate cuts May-June, the markets pushed long rates down and priced in aggressive easing next year. Why? Because by then economic data was surprising lower, so the markets feared the Fed was wrong and would have to cut in a hurry later.
When the Fed cut rates by 50bps and gave a dovish outlook in Sep, that marked a floor in yields and long rates started rising. Why? Because by then economic data was surprising higher, so the markets inferred the Fed was doing something inflationary and future rate cuts would be limited.
Markets are forward-looking, and CESI is a filter on that speculative process
No one listens to him ...please
The Fed’s own TH-cam channel has 120k views on the live broadcast of last week’s Powell press conference.
They must’ve all been watching with the sound off 😂