Last week, we held our April research briefing, featuring guest speakers John Fagan and Brendan Walsh, co-founders of Markets Policy Partners (MPP). MPP is a Washington, D.C.-based independent advisory service that informs clients on matters at the intersection of markets and policy, and in the public sector.
Click here for a video of the research call
MPP’s presentation addressed the following topics:
Tectonic Shift by the Federal Reserve [2:57]
MPP said the FOMC has moved definitively towards draining liquidity from the economy amid the current supply-driven shock in the production chain. [3:35]
While the markets and growth surge in the first half of the year, expect the second half to be challenging growth-wise and will be choppy. [6:05]
The Federal Reserve will “take every rate hike” the markets will allow – meaning the FOMC might tighten monetary policy even faster and more aggressively than originally forecast. [6:35]
Core inflation may be hitting its peak for the year and supply-side bottlenecks will get worse – spurred in part by China’s “zero-COVID” tolerance policy. [8:10]
Stagflation is the new buzzword amid slower growth expectations. [9:05]
The FOMC could raise rates by more than 50bps at a time, possibly 75bps, as the market has fully digested a 50bps event. [9:55]
Cyclical Slowdown [11:20]
By either the July or September FOMC policy meetings, the body should have completed its most aggressive tightening campaign in recent memory and “return to normal.” [11:30]
Second half economic growth will slow. [12:30]
Inflationary pressures are beginning to appear “transitory” and perhaps overdone allowing the FOMC to move towards a more balanced and less aggressive tightening campaign in the third and fourth quarters. [13:10]
The Treasury yield curve will reverse its inverted nature and re-steepen in Q3. [15:00]
Expect Q3 strength in both the equity markets and the US dollar. [15:15]
China Syndrome Redux [16:04]
The Chinese government’s economic stimulus continues – with the hopes of propping up its property markets. [16:30]
Chinese tech companies will have difficulty moving higher and have the potential for stronger valuations. Delisting on the global exchanges will remain an issue for these stocks. [17:00]
Economic growth will stabilize – but that’s it. [18:05]
The country’s “Zero COVID” tolerance policy will continue to play havoc with global supply chains and hold up port traffic. It also keeps a lid on local asset valuations. [18:15]
Crypto Regulation Focuses on Stablecoins [19:29]
Regulation will focus on consumer protection and tax compliance. [19:35]
Eyeing systemic risk, US regulations and lawmakers view Stablecoins as presenting systemic risk. [20:10]
Future regulation will resemble that seen in Money Market account instruments. [20:42]
Mid-term Bloodbath [21:09]
MPP says the House will see tremendous Republican victories. [21:20]
The Senate is still up for grabs. [21:25]
Democrats can help their chances by passing some form of infrastructure, green energy bills, and/or prescription drug pricing bills – before campaign season. [21:40]
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For questions or to learn more about Markets Policy Partners, please reach out to [email protected] for more updates and insights.
