Deer Point Macro

Monthly GDP (Income Approach): The model currently implies Q2 real GDP growth tracking around the 2.5%–3.0% range. While growth is moderating from the stronger, underlying momentum remains positive and relatively stable. A key reason for the resilience is that labor income and payroll growth have continued to hold up, helping support consumption alongside looser financial conditions, offsetting higher energy prices, and broader geopolitical uncertainty. Thus it follows: RGDPPW_t=(r forecast_t / r_(t-1))×(NRTCPW_t / NRTCPW_(t-1))×RGDPPW_(t-1) One can estimate monthly such figures using monthly Total Compensation figures.

PCE Forecast: PCE per our forecast path is materially more hawkish than Bloomberg consensus. Bloomberg survey:
• PCE MoM median: 0.5%
• MoM Ours: 0.56%
• YoY median: 3.8%
• YoY Ours: 3.9% Note: April=May release: as data reflecting the economic activity and prices of the previous reference month (April) is reported in May.

High Yield: Gross Debt-to-Ebitda was higher last earnings season with the 7.07x median leverage for CCC High Yield. Interest coverage continues to decline in the high yield space with 0.75x coverage the worst in almost a decade.

@BickerinBrattle @BlacklionCTA Was that English? ChatGPT can spell check things for you, for free. If I understand any of that I’d have a response, but rest my case your model is incoherent just like the sentence above.

@deerpointmacro @BlacklionCTA Okay you nimnuts. Just give me the Ho Lee? Or do you think Merton was an ass and US not risk free. come at the king, better not miss. Why do you think I use Ho Lee and why do you think I say use Ho Lee as illustration. How shallow can you be?

Sorry @BlacklionCTA this is the term premium. It has been flattening sinc last year not increasing. You have to use the actual risk free rates. I use Nielsen Siegal and then Ho Lee projected. Just as US Treasurys headfaked all in 2022 is now doing same.

Egypt’s Hormuz Exposure: Egypt exposed due to reliance on crop imports, given the rising fertilizer prices anticipation of lower yields is a huge risk to Egypt. Currently they only have about 7 months of reserves to cover imports of goods and services.

Brent crude drops almost 5% to under $100 at open in Asia.

Volatility can push up Debt/Equity, but IG Cash ETFs’ liquidity makes them as reactive as CDX indices in shocks.

Last time there was a huge energy shock (Russia-Ukraine) war it coincided with the Fed raising rates much more rapidly than market expectations. Where we stand now is an interesting comparison Fed is much less hawkish, and market while seeing potential for some rate hikes but given the risks inflation > growth. It’s hard to see the Fed moving like they did in 2022. The bigger takeaway is that the market generally misses the actual path, to the upside and downside.

Higher average gas prices around 4.53 a gallon increasingly becoming a larger and larger share of consumer spending. Weighing on discretionary spending per recent data, but overall still believe consumption seems to be fine.