Main into the weekend, the place the debt ceiling had not been settled, markets had been exhibiting very attention-grabbing positioning. To begin, US Treasuries throughout the maturity spectrum had been massively out of favor. Web speculator positioning in choices and futures had been as quick as they’ve each been. The charts beneath present the 2-year, 5-year and 10-year US Treasury.
On the identical time, buyers had been very quick shares. The subsequent couple charts present speculator web positioning within the S&P 500 and the MSCI EAFE Index (a proxy for the developed world ex-US).
Hopefully, a profitable debt ceiling deal brings some risk-taking again into the markets. At current, all cash flows are going into cash market funds, which is sweet information and dangerous information. The dangerous information after all is that these are cash flows not going into dangerous property. The excellent news is that, ought to the inflation fever break convincingly and US Treasury charges roll over, there’s a large sum of money that might be searching for increased returns.
Whereas early indications appear to recommend that spending might be curbed within the subsequent few years relative to the baseline by about $50 billion, whereas on the identical time the US Treasury might problem a flood of US Treasury payments to rebuild its coffers, maybe the extra engaging play proper now’s the medium-to-longer dated US Treasuries.
As of three/31/23, the iShares MSCI EAFE ETF was not held within the Data Leaders Technique.
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