=== MARKET IMPLICATIONS === - Equities: Expected to benefit from underpriced easy monetary policy and strong underlying economic fundamentals (upside surprises in stats, good earnings), suggesting a potential catch-up rally. - Fixed Income (Yield Curve): Anticipated easy policy, particularly with a politically influenced Fed, should keep short-term rates anchored, while growth expectations could push longer-term rates higher, leading to yield curve steepening. - Currencies (Dollar): The dollar is likely to weaken as easy monetary policy diminishes its relative attractiveness and potentially fuels inflation. - Commodities (Metals): Metals, having already seen significant price appreciation, are considered to have largely priced in the easy policy narrative, making them less attractive for new momentum based on this theme. - Policy Risk: The appointment of a politically beholden Fed chair introduces a higher degree of political influence on monetary policy, potentially leading to less independent decision-making and a bias towards growth over inflation control.
| Ticker | Direction | Speaker | Thesis | Time |
|---|---|---|---|---|
| LONG |
Bob Elliott
Substack author, Nonconsensus |
Stocks have traded flat despite strong economic stats and good earnings, and the Fed is expected to deliver easy policies to juice the economy. Metals, in contrast, have already surged. The "Easy Street" policy momentum and strong fundamentals are underpriced in equities compared to other financial assets where this is already discounted. Long broad equities to capitalize on the expected flow of easy policy and robust economic performance that is not yet fully reflected in stock prices. Economic data could unexpectedly weaken, corporate earnings could disappoint, or the Fed could surprise with a more hawkish stance than anticipated. | — | |
| LONG |
Bob Elliott
Substack author, Nonconsensus |
The yield curve has only modestly steepened, and 2yr rates have hardly moved, despite the increasing clarity of easy policy ahead from a politically influenced Fed. Politically motivated easy policy will likely anchor short-term rates, while longer-term rates could rise due to expectations of growth and potential inflation fueled by easy money. Position for a steeper yield curve, benefiting from the divergence between suppressed short-term rates and potentially rising longer-term rates in a pro-growth, easy-money environment. Economic growth could falter, leading to a flattening or inversion, or the Fed could implement unexpected tightening at the short end. | — | |
| SHORT |
Bob Elliott
Substack author, Nonconsensus |
The dollar has moved only a tad and is still around last summer's levels, despite the increasing likelihood of easy policy ahead. Politically driven easy monetary policy will likely diminish the dollar's relative attractiveness, leading to its devaluation against other currencies. Short the US dollar to capitalize on its underpricing of future easy monetary policy and the associated reduction in its value. Other major central banks could pursue even easier policies, or global risk-off events could trigger safe-haven demand for the dollar. | — | |
| AVOID |
Bob Elliott
Substack author, Nonconsensus |
Gold is up a ton, Copper has surged, and Brent is up a tad, indicating that the easy policy flow is already largely priced into these hard assets. They showed the highest beta in the recent "mania." The author explicitly states that "it isn’t the metals" where Easy Street momentum is modestly priced in, implying they are already fully priced for this theme. Avoid or reduce exposure to metals, as their recent run-up has likely already discounted the expected easy policy, and new momentum based on this theme is likely elsewhere. Unexpected geopolitical events, supply shocks, or higher-than-expected inflation could drive further demand for metals regardless of monetary policy pricing. | — |