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.