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Your Quiver | Monday, May 1, 2023

CIO | Nadine Terman @SolsteinCapital details what she's seeing in global financial markets.

One or Two?

We may learn on Wed whether the Fed has the appetite for just one rate hike in May or also another in June. Over in the EZ, managers are worried that they won’t just see another 25bps hike on Thursday from the ECB but potentially a 50bps hike.

Goodbye FRC

Many of us here on the West Coast are saying goodbye to First Republic today, as JP Morgan stepped in to buy most of their assets out of receivership in a deal struck over the weekend. They will share losses and recoveries on the bank’s single-family and commercial loans with the FDIC. Private rescue efforts failed to materialize given deposit outflows and balance sheet woes. BBG had an interesting picture of how the Hamptons were a big beneficiary of low, interest-only FRC loans. Now we have a new category: “REALLY too big to fail.”


The VIX closed below 16 on Friday, and its cross-asset rank fell to 5%, the lowest since Mar 2022, as per UBS. This typically signifies too much complacency versus other asset classes. (Historically, it only occurred 4 times at a level <6% since 2012, as reported by UBS). Plus, 2 mo and 4 mo intraday recovery scores fell from recent highs of 23% and 17% to 5% and 14%. So, the 2 mo score needs 4 recovery days to turn bullish, versus 1 day previously.

A New Pocketbook

Per Bernstein, $400 of COVID-driven monthly benefits (17% of low-income-take-home pay) rolled off in March for most of the <$40k earning households, comprised of roughly $200 of SNAP EBT benefits and $200 of tax credits. Thus, investors should expect a decline in discretionary spend from this cohort.

Upcoming Earnings

We’ll be watching Apple, Marriott, Starbucks, MGM, among others this week. So far, per GS, companies with negative earnings surprises have been harder hit than usual. Also, consensus bottom line estimates for the S&P for the remaining 3 quarters of 2023 have declined since last Monday—but, interestingly, consensus forecasts for next year increased a bit. The current forward multiple is 18.4x, which is high.

Time for Healthcare?

The sector has seen its 1-year outperformance versus tech wiped away. Since only 3% of the NASDAQ’s members have made a new 6-mo high, this hasn’t been a broad-based move.

US vs Them

Alpine Macro is out with a thoughtful piece, unpacking why offshore shares have meaningfully underperformed onshore shares, when usually they trade more in line. Given decent growth, low inflation and stimulative policy, they discuss why this is happening: foreign investors pulling out. They mention public pension funds reducing Chinese exposures and shutting down research teams. With next year’s election coming into view, we doubt the geopolitics will improve the situation, so maybe investors need to continue to calibrate that flow risk.

6 Months

BREIT is limiting withdrawals for a 6th consecutive month. Investors wanted $4.5bn out, and they only allowed $1.3bn to go.