Insights

In 2023, US financial markets defied widespread expectations of an economic slowdown to generate one of the best performances in history. Looking ahead, projections seem a bit more evenly balanced, though the tilt is towards a ‘soft landing’. We look back at history, and examine the implications of the facts deviating from this dominant narrative.

As we had predicted in our newsletter last year, financial markets did not conform to the dominant narrative at the time.Neither the trajectory of US interest rates, nor the reopening of the Chinese economy – both of which were expected to drive markets – played out as expected.We are pleased that we at Asas Capital

Things are unravelling pretty fast for the United States. Its national debt continues to balloon. It’s deficit continues to widen, and is expected to keep doing so for the next decade. Its politicians can’t seem to agree on anything and keep playing ‘extend and pretend’. Its attempts to bring manufacturing back home in an economically

The conflict in the Middle East is overshadowing other market news for now. This ‘risk-off’ sentiment is likely to continue until one of two things happen. Either the conflict comes to a close, one way or another. Or it continues to simmer for an extended period, and the market adjusts and starts making better informed

The sentiment in markets is one of fear and uncertainty. On the one hand is the worry that the Israel-Hamas war will metastasize into a wider conflict. On the other is the stated commitment by the FOMC to continue with a high interest rate regime despite the relentless rise in long-term yields, and the impact

Market sentiment has become extremely bearish. The S&P 500 has broken through support at 200 DMA, CNN’s Fear and Greed Index is in “Extreme Fear” territory and strong earnings report by most of the “Magnificent Seven” stocks have been glossed over. Uncertainty around the direction of the conflict in Israel will likely keep markets nervous

Markets had a rellef rally last week. As we mentioned a couple of weeks ago, the technicals were oversold, and looking for a positive trigger to go up. That trigger came this week with the FOMC decision to hold interest rates at current levels, as well as softish data on jobs and inflation. If the

While the US economy has managed to display surprising strength thus far, it is difficult to see this continue given the unbridled growth in federal debt. Bond markets are expressing their concerns with rise in yields to 16-year highs. Stock markets are likely to catch up at some point in time.

Markets continue to remain unsettled by concerns around US policy. Monetary policy has been closely followed and, to a certain extent, ‘baked into’ market prices. But the unbridled increase in debt, as well as the politicisation of fiscal policy, is making markets extremely nervous.

Markets have now accepted two narratives – “higher (interest rates) for longer” and “soft landing”, i.e., normalized inflation without a significant slowdown. In our view, these are not compatible with each other, especially given the high level of debt in the US.  The resilience in the economy has been mainly thanks to expansionary fiscal policy