📑 Research Notes for 2023-05-15
This week, we look at elevated bond market volatility, the increase in bankruptcies, a potential hard landing, and the stock market stuck in a trading range.
We conduct extensive investment research and share the most interesting content that we come across every week. Here is a curated list of this week’s top observations.
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Last Week’s Market Performance Heatmap
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Bond Traders Bet on Biggest Fed Shift in Decades to Address Credit Risks.
Bond traders are betting on the biggest shift in Federal Reserve policy in decades as they anticipate the central bank will start to address credit risks. The Fed has been buying corporate bonds and exchange-traded funds since last year to support the economy during the pandemic, but traders are now expecting the central bank to start reducing its purchases and raising interest rates to address inflation and credit risks. This shift could have significant implications for the bond market and the broader economy.
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Private Equity Firms Brace for Wave of Bankruptcies in Coming Years.
Private equity firms are facing a wave of bankruptcies in the coming years as the companies they have invested in struggle to repay their debts. This is due to a combination of factors, including high levels of debt and declining revenues. The firms may also face increased scrutiny from regulators and lawmakers, who are concerned about the impact of private equity on workers and communities.
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Billionaire Stanley Druckenmiller Warns of US Recession and "Hard Landing".
Billionaire investor Stanley Druckenmiller has warned that the US is on the brink of a recession and could experience a "hard landing" due to the Federal Reserve's monetary policy. He believes that the central bank's decision to keep interest rates low for an extended period of time has led to a "massive misallocation of resources" and could result in a severe economic downturn. Druckenmiller also expressed concern about the country's growing debt levels and the potential impact of inflation on the economy.
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Investors Should Wait and Get Paid Amidst Trading Range.
Emily Roland, head of capital markets research at John Hancock Investment Management, says that stocks and bonds have been in a trading range while the bulls and bears have been duking it out. She advises investors to wait and get paid as the volatility plays out, and to own higher quality areas of the market with great balance sheets, lots of cash on their balance sheets, and a limited need for the capital markets to grow. Roland believes that a recession will unfold later this year, and that owning quality, embracing bonds, and owning defense is the name of the game.
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Curated by Joseph Lu, CFA®
Joseph is the founder and managing director of Conscious Capital Advisors, and a CFA® Charterholder.
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The information presented in this newsletter is for educational purposes only and is not a solicitation or recommendation for any specific security, product, service, or investment strategy.
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