Name: まだ相場の底には達していない。BNYメロンのストラテジスト (We haven't reached the market bottom yet: BNY Mellon strategist)
Uploaded: 2021-01-14T09:38:12.000Z
Duration: 6 min 44 s
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So what yesterday was with starting to price in the recession, the actual recession, not the fear of recession but the actual recession, driven by lower inflation expectations, a collapse of oil investment in this country and really the fear of where this is going in the real economy, on the demand side.

So before we had the supply shock problem and that we have the demand problem, this school's closed and municipality starts really curtail what people are doing.

Some are arguing the markets is overplaying that thesis because we don't know what the's stimulus response is going to be.

Look, the announcement from the White House yesterday and the suggestion there might be some action with Congress would be extraordinarily helpful here.

On the sentiment side, I suspect this is part of the process of bottoming and not the bottom, meaning.

There's a lot of shop because the news is not all that we discussed this before, like there's a lot of bad news still in front of us, and so you're going to see chop.

Yesterday's bottom is it was a reasonable place to go if you look at all the technical levels.

But we also went through some technical levels as well, so you have to start pricing it if we have a recession and if we have a 15% earnings decline, where's the rational place for the market to bay?

And it's lower than yesterday's low David, for the moment, are you getting enough talk of stimulus from the federal government, the president and the Federal Reserve to feel more comfortable about this market?

I think I would take a slightly different interpretation of the price action.

I mean, the bond market price action to me was really pricing.

In a move to the zero lower bound that the Fed is going, the Fed is going to be at zero with a very high probability in the next maybe 3 to 5, five weeks, maybe even sooner.

Certainly, I would say after the March meeting there's a really good probability of that with another intermeeting cut.

If things get worse and the and the stock market is sort of not really, you know, doesn't know how to exactly deal with that, because if there is an aggressive stimulus coming in an aggressive response from the Fed and we get fiscal responses like something in small business lending something in tax cuts, then we might be able to skirt through this.

And the S and P can kind of flirt around with this 3000 area, not have to go down to 252,300 which would probably be much more consistent with the recession area.

So I'm not sure that I interpret this as pricing in a recession.

I think what Monday was about is really sort of almost front running Fed policy and thinking about the Fed coming on board quickly.

It's funny you say that because as we're talking, here comes the president.

Our pathetic, slow moving Federal Reserve, headed by Jay Powell, who raised rates too fast and lower too late, should get our Fed rate down to the level of our competitors nations.

They now have a CZ Muchas a two point advantage, with even bigger currency help also stimulate and then adds the Federal Reserve must be a leader, not a very late follower, which it has been.

We're gonna see how Powell responds to that next week.

Yeah, look, look, if you have more days like yesterday, you'll have another immediate response.

But I would just say to David's point, the other thing that was being priced in yesterday was the fear of negative yields here.

However, with such a rapid movement in yields and such a rapid decline in sentiment and expectations that we're going to the zero bound here, you could see the fear of negative yield.

That's why the banking sector collapsed yesterday.

That's why you had moves like that, because they're pricing in what happens to Europe as a result of negative yields, not saying we're going there because of fear out there that we could get there.

I think I think the question is sort of moved on David, which is can the Fed actually do anything to help this problem?

We see the market's pricing in extreme more cuts.

We saw the Fed injecting more liquidity into the repo market and sort of easing rules on lending.

What else can the Fed do to help the economy if it's paralyzed in fear about a Corona virus?

Well, I mean, I think, Look, we still have a 1 to 1 and 1/4 percent funds right, and we have no risk of inflation.

We just saw the oil market collapse in an epic way, the second largest in modern history.

We're gonna have pretty big disinflationary forces hit this economy.

The idea that the Fed is trading off some sort of inflation risk with a monetary easing worry makes no sense here.

Not to mention that the other sort of trade office financial instability, meaning they create bubbles.

And we're pretty far away from bubble creation after what we've seen in the stock market over the last few weeks.

So there's not a lot of excuses for them to sit here, and I'm somewhat sympathetic toe what the president's tweets said.

And I think they're actually independent of politics.

I think they're probably on board with that, that the idea is that the rates don't need to be here.

And Sarah, I do think it's not gonna cure viruses or cure anything, but it is gonna ease financial conditions I think John Williams has said that Jay Powell said that they're just trying to ease a tightening and financial conditions.

You guys have seen what's happened in the high yield market.

You know, there's no issue Mark, no new issue market.

It's shut, You know, The secondary spreads have blown out very aggressively.

Where 8 to 10 points down in the h Y J H I G secondary trading is really difficult to get it here, you know?

Well, of course you know Jeffries obviously important in those markets, David.

So I know you know them well, but it's only right now.

It doesn't necessarily mean it's going to extend for a long period of time.

What about this argument that says the Fed should be preserving something for when and if we do actually have a recession?

I never understand that because we know that last time we took the balance sheet from 800 billion tau 4.6 trillion doing Q E in a 123 step, and every Federal Reserve official that was part of that says we should have probably done a little bit more, a little bit faster.

That's kind of the lesson of the last 10 years in the crisis.

So they've got They've got ammo coming coming out of their years.

As far as I'm concerned, the balance sheet of the Fed is something like 22 22% of GDP.

We could expand this balance sheet and add a fun of liquidity into the system tomorrow if they wanted to do it.

And I think that would have a very large impact on financial conditions and would have a very large impact on asset prices.

 Will it stop some of the contagion that we're seeing on the ground? 