연방준비제도가 금리를 인하함에 따라 자산 배분은 어떻게 조정되어야 할까?

원문 배열 번역: TechFlow

손님 : Alfonso Peccatiello , Macro Expert, Founder of The Macro Compass

Moderators : 라이언 숀 애덤스 , Bankless의 공동 창립자 데이비드 호프만 , Bankless의 공동 창립자

팟캐스트 소스 : 무은행

원제목 : Fed Rate Cut: What Will Happen to 시장s?

방영일 : September 18, 2024

배경 정보

Jerome Powell and the Federal Reset are on the verge of cutting rates, but the question on everyone’s mind is…what happens next?

Alfonso Peccatiello, known as “Macro Alf,” is a macroeconomic analyst and investment strategist who has joined the group to help us address this issue.

• Are these rate cuts timely or too little too late?

• Will the Fed cut rates by 25 basis points or 50 basis points?

• Will we have the recession or soft landing the Fed is hoping for?

• What happens to crypto assets?

We discussed all this and more with Macro Alf, one of the leading thinkers in the macro field.

Fed policy lags

In this podcast, David and Alfonso discuss the Federal Reserves monetary policy and its impact on the economy.

• Alfonso pointed out that the Fed appears to be lagging behind in the current economic situation, especially in terms of interest rate cuts. He mentioned that the Feds main task is to maintain economic stability, although its official goal is to control inflation around 2% and maintain a healthy labor market.

• Alfonso explained that the Federal Reserves focus on curbing inflation over the past two years has led to a rise in real interest rates to positive levels, which has had different effects on borrowers and investors. For investors, high real interest rates make it more attractive to keep money in cash, reducing the incentive to invest at risk. For borrowers, the burden is increased because they have to repay their debts at higher interest rates, which slows down economic activity.

The risk of over-tightening

• David raised the question of whether the Federal Reserve was too slow in keeping interest rates high, which could lead to an economic slowdown.

• Alfonso believes the current situation is that the Fed may lag again in cutting interest rates. He warned that if the Fed continues to do nothing, the economy may be at risk of a sharp slowdown.

• Alfonso further stressed that the monetary policy tightening in the past 18 months has exceeded the levels in 2006 and 2007, which means that the current policy is very restrictive. He mentioned that historically, the impact of monetary policy is usually delayed and may take 12 to 15 months to show its effect. Therefore, although many people now believe that the economy can withstand high interest rates, in fact, the lagged effects of the policy may show negative effects in the coming months.

Future economic outlook

• The podcast ended with a discussion of the future economic direction. Alfonso mentioned that although the market is generally optimistic at present, historical experience shows that when the economic situation seems stable, it is often a precursor to problems. He reminded the audience that although the current policies seem to be effective, the long-term lag effect cannot be ignored, and there may be greater economic challenges in the future.

Why hasnt the economy collapsed yet?

• In the podcast, Ryan asks a key question: Why hasn’t the economy collapsed despite the Fed’s tightest monetary policy in history? Alfonso explains why.

• Alfonso pointed out that the current economic lag effect is very long due to a variety of factors. Normally, when interest rates rise, borrowers (such as households and businesses) will borrow less, thereby reducing spending. However, the current situation is different. Since more than 90% of US mortgages are 30-year fixed-rate, many households will not feel the impact of rising interest rates immediately. Their fixed-rate loans mean that even if new mortgage rates reach 7%, existing homeowners will not be directly affected because their loan interest rates are still low.

Enterprise response strategies

• The situation is similar for companies. Many large companies (such as Apple and Microsoft) adopted a strategy of extending debt maturities before the pandemic, borrowing long-term debt at low interest rates. This means that even if the Federal Reserve raises interest rates, companies do not have to immediately bear higher borrowing costs. Therefore, companies still maintain ample cash flow in the short term and may not reduce investment or spending due to rising interest rates.

The impact of fiscal policy

• 게다가, Alfonso also mentioned that fiscal policy in 2023 also supported the economy. The Biden administration implemented a large-scale fiscal deficit, which brought additional capital inflows to households and businesses. This fiscal stimulus offset the tightening effect of monetary policy to a certain extent, so that the net wealth of companies and households increased despite rising interest rates.

The bad news

• In the podcast, Ryan and Alfonso discussed the meaning of bad news in the current economic situation. Ryan mentioned that the Feds tools do not seem to work as expected, and the potential problems in the economy are like a tsunami coming in the distance. Although there is no obvious impact now, the crisis is approaching.

• Alfonso pointed out that in the past few years, the markets reaction to bad news is very different from now. In the pre-epidemic period, weak economic data was often seen as good news because it meant that there might be interest rate cuts and fiscal stimulus. However, Alfonso believes that the situation has changed now, and bad news has really become bad news.

Changes in the economic environment

• Alfonso explained that in past economic environments, the market was accustomed to viewing bad news as good news because it usually meant that the Federal Reserve would take measures to support the economy. He mentioned that from 2013 to 2019, the market generally believed that bad news did not mean real risks because the Federal Reserve always supported the market behind the scenes.

• However, the current situation is that the economy is close to the brink of recession, and the impact of bad news has become more obvious. Alfonso emphasized that when economic growth is weak, the tolerance for unemployment is reduced, and any economic data below expectations may cause market panic. For example, the United States currently needs to create about 120,000 jobs per month to maintain a stable unemployment rate, but in fact, the private sector only creates about 100,000 jobs per month. This gap means that once there is bad news in the economy, the market will react quickly, causing the stock market to fall.

Memories of the past

• Ryan asked when was the last time investors felt that “bad news was bad news.” Alfonso responded that this situation dates back to the 2008 financial crisis. At that time, bad economic data meant that a recession was approaching, and the market sentiment changed fundamentally.

Bond market signals

• Alfonso also mentioned that the current bond market is also sending signals. Bad economic data will cause bond prices to rise and yields to fall, reflecting the markets expectation that the Federal Reserve will adopt further easing policies. However, the stock market often falls as a result, showing the markets concerns about the future economic outlook. In this case, bad news is not just bad news, but exacerbates market anxiety.

• Alfonso stressed that under the current economic situation, the impact of bad news has changed, and the market can no longer easily ignore bad news. As economic growth slows, the market will be more sensitive to bad news, and investors need to re-examine this new economic environment.

Fed rate cut forecast

• In the podcast, David and Alfonso discuss the possibility of an imminent rate cut by the Federal Reserve. David mentions the markets expectations for a rate cut, especially the discussion about a 50 basis point cut.

Alfonsos opinion

• Alfonso believes that the Fed is likely to choose to cut interest rates by 50 basis points. Here are a few reasons he gave:

• Missed Opportunities : Alfonso pointed out that the Fed should have cut interest rates in July but failed to act in time. Now that the economic situation has worsened, they should not continue to be stubborn, but should make up for their previous mistakes.

• Communication strategy : He believes that the Fed should clearly communicate the reasons for the rate cut, explain that this is to correct previous mistakes, and show that they realize that the economy is slowing down and are ready to take more easing measures.

• Future meeting arrangements : The next Fed meeting is in November. If they only cut rates by 25 basis points this time and the economy deteriorates further, they will have to wait until November to cut rates again, which is not wise risk management.

• Market expectations : Currently, the bond market is already pricing in future rate cuts, with the market expecting a 250 basis point rate cut over the next year. If the Fed does not follow suit, stock markets may get nervous because they rely on bond market expectations.

Nature of rate cuts

• David asked if the Fed chose to cut rates by 50 basis points, would that mean they were moving quickly.

• Alfonso said such a rate cut could be seen as a correction for not being able to cut rates in July, reflecting the Feds attention to the economic slowdown.

Impact of the global economy

• Alfonso also mentioned that the global economic situation is also affecting the Feds decision-making, especially the impact of Chinas economic slowdown on the U.S. He stressed that the Fed needs to be cautious in cutting interest rates while conveying their understanding of the economic situation and their response measures.

• Alfonso believes that the Fed should take a 50 basis point rate cut to respond to current economic challenges and reassure the market through clear communication. He stressed that the current rate cut is not only a response to the economic slowdown, but also an insurance measure against potential risks in the future.

Elizabeth Warrens open letter

• Ryan mentioned that Senator Elizabeth Warren recently wrote an open letter to the Federal Reserve calling for a 75 basis point rate cut. Ryan asked Alfonso what he thought of the letter and whether it would affect the Feds decision.

Alfonsos analysis

• Alfonso believes that Warrens letter is actually a political bargaining tactic. Here are his thoughts on it:

• Political bargaining : Alfonso believes that Warrens request for a 75 basis point rate cut is actually an attempt to influence the Fed to make a final decision of 50 basis points. By making higher demands, she hopes to prompt the Fed to take more aggressive rate cuts.

• Fed communication strategy : Alfonso pointed out that the Fed cannot communicate publicly during the dark period (i.e. the silent period before the decision-making meeting), but they still convey information through the media. He mentioned that in the past the Fed has communicated its intentions to the market through Nick Timiraos, a reporter from the Wall Street Journal.

• Market reaction : Alfonso mentioned that at the beginning of the dark period, the markets expectation for a 50 basis point rate cut was only 10%, but with the Timiraos report, this expectation quickly rose to 55%. This shows that the Fed can still influence market sentiment through the media during the dark period.

• Stability vs. Instability : Alfonso cited economist Hyman Minsky’s view that “artificial stability actually leads to instability.” He believes that the Fed’s attempt to control market volatility to avoid recessions and market panics may itself lead to greater instability.

• Alfonso emphasized that as investors, we need to understand the rules of market operation and manage risks on this basis. He believes that the Fed is trying to convey their intention to cut interest rates by 50 basis points, and Warrens letter is part of the political game and may not directly affect the Feds final decision.

Market reaction

In the podcast, David and Alfonso discuss the markets reaction to a possible Fed rate cut, specifically the impact of Elizabeth Warrens request for a 75 basis point rate cut on the market and the Feds decision-making.

Alfonsos analysis

• Market expectations : Alfonso pointed out that the market has begun to price in the possibility of the Fed cutting interest rates by 50 basis points in September, and this expectation has reached 60%. He further stated that the market also expects that the interest rate may be cut by 25 basis points in November, and there is a higher probability of another 50 basis point cut in December. This shows that the market generally believes that the Fed will further cut interest rates in the coming months.

• Importance of economic response : Alfonso stressed that the effectiveness of rate cuts depends on the response of the economy. If the economy can quickly adapt to rate cuts, it may bring positive results. However, the positive effects of rate cuts usually take one to two years to appear, so the Feds policy needs to be forward-looking rather than just reactive.

• Performance of risky assets : David raised the issue of market participants’ focus on risky assets, such as cryptocurrencies, especially in the context of the Fed’s rate cuts. Alfonso pointed out that rate cuts are generally positive for risky assets, especially when the economy is doing well, and rate cuts are seen as support from the Fed. However, if the rate cuts are in response to economic weakness, the reaction of risky assets in this case may be different.

• Historical example : Alfonso mentioned the example of Japan in the 1990s, pointing out that after the economic bubble burst, although the Bank of Japan quickly cut interest rates, the market did not recover. This is because the interest rate cut was not a proactive measure to support the economy, but a passive response by the central bank in response to economic weakness.

• Alfonso believes that the impact of the Feds interest rate cut policy on the market depends on the nature of the rate cut. If the rate cut is seen as support for the economy, the market may react positively; but if the rate cut is seen as a remedy for economic weakness, the market reaction may be suppressed. Therefore, investors need to pay close attention to the Feds policy trends and the actual performance of the economy in order to make corresponding investment decisions.

How to prepare

Understanding the current market environment

• Performance of risky assets : Alfonso noted that risky assets, including cryptocurrencies and stocks, could suffer if the economy enters a recession. As cryptocurrencies are increasingly viewed as risky assets, they could be sold off to raise cash during a market downturn.

• The impact of deleveraging : In times of economic downturn, investors often face pressure to deleverage, which can cause all asset classes to become more correlated and show similar price movements. When investors need cash, they will not think too much about which asset to sell, but only choose assets that can be converted into cash quickly.

Portfolio Adjustment Strategies

• Maintain diversification and risk balance : Alfonso mentioned the risk parity strategy, which recommends that investors pay attention to the contribution of various asset classes to the overall portfolio risk, rather than simply allocating funds in a fixed proportion. For example, ensure that each asset class contributes the same amount of risk in the portfolio.

• Reference to historical data : Historically, investors tend to underestimate the extent of the Feds interest rate cuts. During recessions, the Fed usually takes more aggressive interest rate cuts, so bonds tend to perform well in such situations.

Recommended asset classes

• Bonds : Bonds typically hold their yields during a recession, especially if the Federal Reserve cuts interest rates. Although bond prices have risen, they remain a relatively safe investment option during an economic slowdown.

• Gold : Gold tends to perform well during times of economic uncertainty, and as central banks continue to add to their gold reserves, demand for the metal is likely to continue to rise.

• Safe-haven currencies : During times of economic crisis, investors often turn to safe-haven currencies such as the Japanese yen and Swiss franc, which tend to remain stable during market turmoil.

Avoid big losses

• Focus on risk management : Alfonso stressed that investors should prioritize how to reduce risk in their portfolios rather than looking for hedging tools. Avoiding large losses is the first principle of investment, as large losses can lead to financial situations that are difficult to recover from.

• Reassess your portfolio : When considering a possible recession, investors should review their asset allocation to ensure that they are not overly concentrated in high-risk assets.

The possibility of a recession

• When discussing the possibility of a recession, Alfonso offered his thoughts on a recession in the next 12 months. He believes that the probability of a recession is about 50%. Here are a few key factors in his analysis:

The impact of fiscal policy

• Rapid fiscal stimulus : Alfonso noted that the current political environment allows governments to act quickly to stimulate the economy when the economy weakens, spending more money to stimulate the economy. This is different from past situations, such as during the 2008 financial crisis, when fiscal stimulus measures usually took 6 to 12 months to be introduced. Today, the governments quick response can play a role in stabilizing the economy to a certain extent.

Private sector leverage

• Lower leverage : Leverage levels in the private sector are relatively low, meaning that companies and households are less indebted. This means that if the economy faces a recession, it may not be as hard hit as in the past. In 2007, many households and companies had excessive debt levels, which led to the financial crisis.

Market expectations

• Market Probability of Recession : The markets current expectations for a recession are between 35% and 40%, lower than Alfonsos 50%. This suggests that market participants have relatively high confidence in the future economy, but there may also be a possibility of underestimating risks.

• Although Alfonso believes that the probability of a recession is about 50%, he believes that if it does happen, the magnitude and impact of the recession may not be as severe as in the past. This is mainly due to the governments quick response to the economy and the low leverage level of the private sector. Investors should consider these factors when evaluating the future economic situation in order to better adjust their investment strategies and risk management.

Currency depreciation

In discussing currency debasement, Ryan and Alfonso mention changes in the money supply and the impact of such changes on the economy and asset prices.

Definition of currency devaluation

• Currency depreciation : Currency depreciation generally refers to a decrease in the purchasing power of a currency, resulting in the same amount of money being able to purchase fewer goods and services in the future. Ryan mentioned that although the economy may be in recession, currency depreciation is an almost inevitable phenomenon.

Changes in the money supply

• Fiat currency system : Alfonso pointed out that monetary policy has fundamentally changed since the United States abandoned the gold standard in 1971. Now, the issuance of dollars is no longer tied to a hard asset such as gold, which allows the government to create new dollars without limit.

• The impact of inflation : As the dollar continues to increase, the risk of currency devaluation increases. Alfonso explained that when the government creates too many disposable dollars through deficit spending, the goods and services in the market cannot increase quickly, which eventually leads to rising prices, which is inflation.

The role of government and banks

• Deficit Spending by the Government : The government creates new disposable dollars through deficit spending. For example, the government may write checks to citizens, increasing the money supply in the market. This practice has been going on for the past 30 years and has led to currency devaluation.

• Credit creation by banks : Banks inject credit into the economy through loans, such as mortgages. Alfonso explains that banks create new money by assessing the borrowers ability to lend based on their future cash flow potential. This credit expansion further drives up asset prices.

Impact on asset prices

• Housing market : House prices continue to rise due to low interest rates and continued credit creation. Even without significant wage growth, the increased borrowing capacity allows people to buy higher-priced properties.

• Comparison with Gold : Alfonso also mentioned that the actual growth in house prices may not be obvious if measured against gold. This suggests that the increase in house prices is mainly due to the effects of the fiat monetary system rather than the intrinsic value growth of the property itself.

Monetary liquidity

The concept of monetary liquidity

• Importance of the Denominator : Ryan mentioned that the key to understanding the flow of money in the economy is the denominator. He pointed out that the terms used by governments and central banks (such as quantitative easing, fiscal deficits, etc.) are actually describing the creation or destruction of money. In most cases, these measures are increasing the money supply.

The normalization of fiscal deficits

• Transformation of fiscal deficit : Alfonso pointed out that fiscal deficit has changed from a defect in the past to a feature now. He believes that the governments deficit spending of one trillion US dollars per year has become the norm, and this change has a profound impact on liquidity and the economy.

• Impact on investors : This continued fiscal spending will support economic growth, but it may also bring inflation and market volatility. Investors need to pay attention to how these policies affect bank reserves, inflation, economic growth and market performance.

Metrics Investors Should Watch

• Government spending and deficits : Investors should focus on large government projects and stimulus packages, especially tens of billions of dollars in spending, as well as the annual budget deficit. These data are public, and investors can get a sense of the governments spending by looking at the monthly deficit data released by the U.S. Treasury.

• Spending efficiency : In addition to focusing on the deficit itself, Alfonso stressed the importance of spending efficiency. How the government uses these funds and where the funds go will directly affect the productivity and long-term growth of the economy.

The widening gap in social wealth

• Increased wealth disparity : Alfonso also mentioned that the implementation of fiscal policies is exacerbating wealth disparity. As younger generations (such as millennials and Generation Z) gradually become the main voters, they are facing increasing economic pressures and may promote different policies to seek wealth redistribution.

• Sustainability issues : He believes that the current economic system is not sustainable and that there may be greater social and economic pressures in the future that will prompt policy changes.

Depreciation-resistant assets

Classification of Depreciation-Resistant Assets

• Stock Market : Alfonso mentioned that stocks are an important asset that resists depreciation because companies are denominated in US dollars and are able to generate cash flow. He stressed that although companies will grow in the long term, investors need to pay attention to the valuation at the time of purchase and avoid buying stocks at too high a price. He advised investors to choose high-quality companies and invest at reasonable valuations to ensure good returns in the next 10 to 20 years.

Risk asset allocation

• Aggressive assets: In the portfolio, Alfonso recommends allocating some risky assets, such as cryptocurrencies and gold. Although these assets have no cash flow, they have different monetary characteristics and can provide diversification for the portfolio.

Defensive asset selection

• Bonds : As defensive assets, bonds often protect portfolios during recessions or periods of deflation, but in some cases (like 2022), they can underperform.

• Commodities : Alfonso also mentioned that commodities, as dollar-denominated assets, can protect portfolios during periods of inflation and are therefore also defensive assets worth considering.

Macro Investment Strategy

• Macro Hedge Fund : Alfonso shared his plans for his upcoming macro hedge fund. He believes that the current changes in the macro environment have brought huge investment opportunities, and that specific strategies can take advantage of these macroeconomic fluctuations and provide a diversified source of income for the portfolio.

결론

Key takeaways:

• Feds decision : Alfonso believes that the Fed may take a 50 basis point rate cut to respond to the current economic challenges. He reminded investors to pay attention to the market reaction in different economic environments, remain flexible, and not be stubborn in their own views.

• Importance of asset allocation : In an uncertain market environment, the key to protecting your investment portfolio is to rationally allocate assets that resist depreciation (such as gold, stocks, cryptocurrencies, etc.). Investors should adjust their investment strategies in a timely manner based on their own risk tolerance and market changes.

• Keep learning and adapting : Markets change rapidly and investors need to constantly learn and adapt to new economic situations. Alfonso’s educational platform “Macro Compass” provides a wealth of resources to help investors gain a deeper understanding of macroeconomics.

Finally, thank you to all the friends who listened. Remember, investment is risky and decisions should be made with caution. The future is full of uncertainty, but we will continue to move forward on this road of exploration. I hope everyone can keep an open mind and actively respond to challenges on this journey. Thank you for your support, and see you next time!

원본 링크

This article is sourced from the internet: As the Federal Reserve cuts interest rates, how should asset allocation be adjusted?

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