What A Democratic Senate Would Mean For Investors

Although some election modelers have reduced the odds of a Republican Senate, we’re keeping our odds at 60%. However, given that the Democrats could very easily maintain a majority in the Senate, it is worth considering what such an outcome could mean for investors. Obviously, since a Democratic Senate (and a Republican House, which is a given) would represent a status quo outcome, one should not expect a big change in the policy outlook. Nevertheless, we highlight the issues where Democrats may get more traction and that could have a better chance of becoming law.

 

Roberto’s Video Update: What’s Next For Rates After The FOMC? (With A Connection To Europe)

Main Points:
- What did the FOMC do this week?
- What should investors pay more attention to?
- Where are market expectations relative to the Fed’s?
- What would happen to bond yields if the market catches up?
- What does a decline in the term premium signal? Read More »

 

Washington Week In Review: Taxes, Energy, Defense

Before they head out the door for the midterm elections, Congress passed a bill to fund the government, extend the Export-Import bank, and authorize the use of funds to train and arm Syrian rebels to fight ISIS. In today’s report we provide an update of these issues, along with others that are relevant for investors. We held a webinar earlier this week to provide our outlook for the midterm elections and to discuss the policy and market implications for 2015. Please click here to view the webinar replay.

 

The Fed May Be Sowing The Seeds For A “Rate Tantrum”

The FOMC’s new projections for the federal funds rate (including Yellen’s) moved up once again. Those projections are now entirely not consistent with the common market view that the Fed will start raising rates in June of next year in increments of 25 bps every other meeting. A discrepancy between the FOMC statement, Yellen’s words, and the FOMC projections has likely held back the bond market. In today’s note we quantify how far behind the Fed the market has fallen and how much yields could move if and when the market catches up with the Fed.

 
 

First TLTRO And Beyond: How To Gauge The Odds Of QE In Europe

The ECB will publish the results of its first TLTRO tomorrow. It will be the first indication of how successful the ECB’s ABS purchase program will be. In today’s report we discuss what amount would satisfy the ECB, how much would disappoint it and what would be considered a big success. This is one measure, along with whether the combined takeup at the first two TLTROs will exceed the amount still outstanding from the original LTROs, investors can use to help predict the odds of large-scale QE in the EZ. **TODAY, September 17th at 3:30pm ET, we are hosting a … Read More »

 

What Bellwether Senate Races Might Tell Us About Next Year’s Agenda

How certain Senate races turn out may tell us something about how different issues played among the voters. Politicians from both parties will take notice of what worked and what didn’t, which could impact the congressional agenda next year and beyond. In today’s report, we look at some Senate races that could hinge on the ACA, energy policy, climate change, monetary policy and foreign policy. We also look at a few races that could provide insight into the broader political environment. **TODAY, September 16th at 10am ET, we are hosting a webinar to provide our outlook for the midterm elections … Read More »

 

What The Bond Market Is Telling Us Ahead Of The FOMC Meeting

A couple weeks ago we noted that the market was expecting a lower terminal fed funds rate than the FOMC may have in mind. Since then, market expectations have moved up and now virtually match the Fed’s 3.75% terminal rate. The shift up in market expectations has correspondingly pushed up long yields in recent weeks. In today’s report we decompose the 10-year yield to show what caused the recent increase in yields and discuss if a hawkish FOMC outcome is fully priced in. **Wednesday, September 17th at 3:30pm ET, we are hosting a webinar to provide our quick reaction to … Read More »

 

Washington Week in Review – Crude Exports, Inversions, Russian Sanctions, ACA

There were a number of developments this week of interest to investors, especially on crude exports, LNG exports, corporate inversions, sanctions on Russia, health care and housing. We provide updates in today’s report. Watching Republican candidates self-destruct in spectacular fashion during the last two election cycles, some investors have come to believe it is a law of nature that only Republicans commit huge gaffes or otherwise blow winnable races. And for this reason, some expect that somehow Republicans will manage to snatch defeat from the jaws of victory and fail to pick up the Senate. At least so far this … Read More »

 

Roberto’s Video Update: FOMC Meeting Preview – Why Investors Need To Pay Attention

Main Points:
- There are three important issues on the table at the next meeting that pose a risk to the market.
- Where will the new “dots” be?
- Will the “considerable time” language change?
- Will the exit strategy be finalized?
- How might markets react to changes in the statement and projections? Read More »