Equities were rallying through this period, unsurprisingly. So, were digital bit apes and other assorted things.
However, there appears to be evidence that credit conditions are now heading the other way:
“The Federal Reserve has reduced its balance sheet by $626 billion since the peak in April 2022, with total assets now down to $8.34 trillion, the lowest since August 2021, according to the weekly balance sheet released today. Compared to a month ago, total assets dropped by $94 billion.” “Over the past four weeks, the Fed has shed $61.2 billion in Treasury securities, exceeding by a smidgen the monthly cap of $60 billion.” – Fed’s Balance Sheet Drops by $626 Billion from Peak
“As it stands, the average lender is now back up into the low 7’s for a well-qualified 30yr fixed scenario. These aren’t the highest levels we’ve seen during this cycle, but they are the highest in more than 4 months (and not too far away from the long-term highs just under 7.4%).” – Calculated Risk: “Mortgage Rates Now Back Above 7%”
We have had a 15 year bull market with low interest rates and lots of liquidity. In other words, “Disneyland.”
My sense is most market participants are going to be slow to change how they learned to behave during the bull market cycle, until they are forced to do so.
Not saying that you should, but let’s assume that you might want to track maturity schedules as you termed out some cash – because rates on Treasury bills and notes are increasing much faster than bank rates.
I see a chart like this, and the value hunter in me, cannot help but see an opportunity. This fund is plumbing its all time lows.
But then I look at a chart like this, and think, well maybe all time lows when the history is only from 2010 forward, is irrelevant (maybe even dangerous) given the macro squishing that could happen if large flows / rate trends reverse (i.e. return to more normal levels).
The vast majority of interest rate history is above, not below, where we are today.
