David Fuller and Eoin Treacy's Comment of the Day
Category - General

    Powell Stresses Commitment to Cooling Prices as Fed Hikes Rates

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    “We are committed to restoring price stability, and all of the evidence says that the public has confidence that we will do so,” Chair Jerome Powell said at a press conference following the Fed’s two-day meeting. “It is important that we sustain that confidence with our actions as well as our words.”

    Officials are prepared to raise rates higher if needed, he said.

    Powell also emphasized the US banking system is sound and resilient, reiterating what officials said in their post-meeting statement, and said the agency is prepared to use all of its tools to maintain stability.

    He also acknowledged recent banking turmoil is “likely to result in tighter credit conditions for households and businesses, which would in turn affect economic outcomes,” but added, “It’s too soon to tell how monetary policy should respond.”

    Fed policymakers projected rates would end 2023 at about 5.1%, unchanged from their median estimate from the last round of forecasts in December. The median 2024 projection rose to 4.3% from 4.1%.

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    GICS Change Adds Growth to Financials

    This article from Global X may be of interest. Here is a section: 

    After the GICS change, Financials will account for roughly 14% of the S&P 500 Index versus its current 11% weight. Information Technology will lose 11 stocks, resulting in the largest reduction in market capitalization among the 11 GICS sectors.2

    Reclassification Within FinTech and Impacts on the Financials Sector

    Mobile payments and payment processing companies have been the center of a digital revolution in banking, disrupting the traditional banking industry as society has become increasingly cashless. Up until now, some of these FinTech companies have been classified as Data Processing & Outsourced Services within the Information Technology sector. As part of the GICS sector changes, this portion of the FinTech theme will be reclassified to Transaction & Payment Processing Services, a proposed new sub-industry within the Financials sector.

    Focusing on the S&P 500 Index, the GICS sector reshuffle will involve eight companies moving from Information Technology to Financials. These firms account for roughly 10% of their present home in the Information Technology sector. Following the GICS changes, the eight payment companies will account for roughly 12% of the Financials sector, based on Bloomberg data as of March 16, 2023. The remaining three firms currently classified as Data Processing & Outsourcing Services will be moved to Industrials under a new sub-industry of Human Resources & Employment Services.

    The chart below shows current industry and sub-industry group weights for the Financials sector versus proposed weights by GICS. The new sub-industry, Transaction & Payment Processing Services, is also included.

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    Scorching UK Inflation Tears Up the Case for BOE to Pause Hikes

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    “This is an ugly report, and especially disappointing after the false hope given by the drop in core inflation in the January report,” said Antoine Bouvet, a strategist at ING Groep NV. “This cements the call for another 25-basis-point hike.” 

    UK food and non-alcoholic drink prices soared 18%, the fastest pace in 45 years, and increases in clothing costs accelerated. Core prices — which exclude volatile food and energy — also picked up last month to 6.2% after decelerating to 5.8% in January. Services inflation jumped to 6.6% from 6%, a sign of increasing domestic wage pressures that is closely watched by the BOE.

    The report will likely intensify the debate at the BOE, where divides have emerged on the Monetary Policy Committee over how much further to raise rates given the headwinds to growth. Officials raised the benchmark rate to 4% in February, extending a tightening cycle that has lifted borrowing costs from 0.1% in late 2021. Money-market pricing implies around 65 basis points of further hikes, up from around 40 basis points at Tuesday’s close. 

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    Email of the day on secular change and the Autonomies

    Dear Eoin, When you started the Corporate Autonomies Fund it was based on the correct hypothesis that globalisation was the future trend and therefore it was wise to invest in companies that had, or would have, a global footprint. Now it seems that there is a trend away from globalisation and towards the repatriation of national production. What does this mean for the fund and for our investment strategy?


    Thanks for consequential audio Friday in both content and timing. Overlaying today with 2007-09 is key at this time.

    Your focus on the 1980 - 2022 bull market in bonds I found spot on and would like a little more commentary on that. The bubbles of housing (2007) and technology (2000) have been put away but Japan (1990) has not. We've punctured a rather big bubble. How do you see this playing out moving forward as far as global U.S. Treasury ownership is concerned in scope (range in long rates) and timing (years to repair damage) considering how many bonds are and will stay underwater if not sold? It took U.S. stocks 25 years to unwind the 1929 bubble and Japan is 33 and counting.

    Considering the bond bubble is arguably the mother of all bubbles this side of 1929 and 1980 I would find it helpful to at least make a run at how it ranks in the standings.

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    Email of the day on investing in bitcoin

    Good morning, Eoin I hope you and yours are well. I am considering baby steps into Bitcoin ownership. I would welcome any guidance you may have. Particularly, where best to purchase and how to hold/protect. Many thanks for the excellent ongoing guidance.

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