Global Market – US Fed balance sheet and US economic data
This week we will discuss increase in US Fed balance sheet due to emergency funding and what are its implication on sentiment and its actual path of monitory tightening. US bond yield indicate soft monitory policy in futures.
US Fed balance sheet @ $ 8.73 trillion – as on 20-Mar-23
Recent increase in US Fed balance sheet could be considered as emergency funding rather than expansion of US Fed balance sheet which can be defined as change in monitory policy. This can be early sign of pause or pivot by US Fed but confirmation from US Fed is awaited.
US Bonds – Gap between 2-year / 10-year currently @ 60-bps
In February 2023 end there was gap of 100-bps, which was indicative of trend reversal and high probability of recession. Recent crisis in US & Europe banking system was due to distress selling in bond as higher interest rate impacted the regional banks.
Equichain Wealth Advisors: Market View & Opinion
Is financial crisis in US & Europe is over or not, it will be too early to judge as in next two weeks, quarterly earnings and US economic data will provide better clarity.
This week, there was no fresh negative news and market has witness relief rally. We continue to believe high probability of pause or pivot on or before next US Fed meeting on 3-May-23 and market will preempt from US Economic data & quarterly earnings season.