macrotheme capital management, llc


market insights



September 10th, 2022



yield curve spread 10y-2y



Recession is coming!



The yield curve has been deeply inverted - the probability of a recession is very high:





10-year Treasury



View: Long 10Y Futures



Nominal rates are rising because the real rates are rising in response to the Fed's QT program. Inflation expectations are slowly falling, reflecting the expected recession. Nominal rates are expected to fall, as the recession approaches, and also due to flight to safety.





2-Year Treasury



View: Long 2Y futures



Expectations are that the Fed will hike to 4.02/% by April 2023 and leave it there until inflation falls to the 2% target. Possible cut in November 2023. Stock market will likely crash with the first signs of a recession, which will cause the Fed to pause or cut early – the dovish pivot. Wildcard: what happens in inflation remains elevated despite the stock market crash and the recession (de-globalization)?





s&p 500



View: Short S&P 500



Bear market Phase 2 recessionary selloff approaching as the earnings will likely get downgraded. PE ratio at 22 is still overvalued.





the euro



View: Short



The EU to enter the recession before the US due to the war in Ukraine and the energy shock, in addition to higher interest rates.





gold



View: Short



Real rates are rising, and the USD expected to get stronger. Change to Long with the dovish pivot as the US enters recession.





crude oil



View: Short



Recession, but limited with the threat of energy shock from Russia.





copper



View: Short



Recession approaching.





technical signals



Technical Summary Widget Powered by Investing.com


Economic calendar



Watch for the rising initial claims for unemployment as the leading indicator of a recession.



Real Time Economic Calendar provided by Investing.com.


macrotheme capital management LLC





815 BRAZOS STREET SUITE 500
AUSTIN TX,, 78701