DISCLAIMER: The performance data presented for our separately managed accounts (SMAs) represents past performance and does not guarantee future results. All performance figures shown are net of all fees and expenses. Returns for individual client accounts may vary significantly from the representative performance shown due to factors such as timing of account opening, individual client restrictions, cash flows, and differing fee arrangements. The minimum investment for our SMA strategies is $250,000. Our SMAs are open to all investors who meet this minimum investment requirement. Performance data and other information displayed on this website are based on data provided by a third party. While we believe this information to be reliable, Robin Capital Group does not guarantee its accuracy, completeness, or timeliness. We are not responsible for any errors or omissions in the data provided by Interactive Brokers. Investment returns and principal value will fluctuate, and an investor’s account, when redeemed, may be worth more or less than its original cost. Current performance may be lower or higher than the performance data presented. Robin Capital Group is a registered investment adviser with the State of Florida. Registration does not imply a certain level of skill or training. The firm’s registration status can be verified on the Investment Adviser Public Disclosure website. Investing in securities involves risks, including the potential loss of principal. SMAs are not suitable for all investors and may involve significant fees, expenses, and tax implications.

Please carefully consider your investment objectives, risk tolerance, and financial situation before investing. The information provided on this website is for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy, or investment product. For more detailed information about our investment strategies, fees, and services, please visit our main page or contact us directly through the contact information provided on our website.

As we draw the curtain on 2023, I find myself reflecting on the year’s events while perusing various investor letters and year-end reviews at my local coffee shop. The Wall Street orchestra, with its symphony of narratives, seems to have a penchant for verbosity, where the correlation between the length of prose and its accuracy appears to be inversely proportional – the longer, the “wronger” when attempting to encapsulate the intricacies of the past year.

Thankfully, for our clients, the persistent dedication and strategic fortitude throughout the year bore fruit across diverse fronts. The diligent efforts, coupled with strategic capital reallocation earlier in the year, proved instrumental as the final strategic move orchestrated by the Federal Reserve initiated the expected broadening and repricing we had anticipated throughout the year. Looking ahead to 2024, it is not merely the aftermath of recent market dynamics that stirs our anticipation, but the array of new opportunities aligning with the next phase of the economic cycle.

Our multi-strategy portfolio, complemented by timely capital reallocation, furnished us with the requisite tools to deftly navigate the unpredictable market currents. All three strategies not only outperformed most institutional funds but also closely tracked or exceeded their benchmarks. Remarkably, this achievement was realized without recourse to leverage, short positions, or exposure to the enigmatic Mag7. Our hands-on approach, particularly evident in managing our rates portfolio with a duration of 1.8 years, played a pivotal role in steering us through the complexities of the market.

As we turn our gaze to the horizon of 2024, one might wish for the dominant themes of 2023 to gracefully exit, but reality insists otherwise. The trajectory is shaped by the Fed’s manipulation of interest rates and the evolving narrative of softening inflation, while geopolitical shifts, war, immigration, and an unrestrained fiscal spree preceding an election year signify a singular course – more debt and additional financing by the Fed…

Last week ushered in a series of important developments in the economic landscape, necessitating a proactive approach to this forth coming week’s outlook for our esteemed audience…

The winds of change have undeniably swept across the financial horizon. In accordance with our earlier projections, the Federal Reserve (FED) adopted a notably dovish stance following a comprehensive review of policy decisions by central banks both near and far. The decision to maintain interest rates within the 5.25-5.5 range was largely anticipated, but the underlying shift within the FED’s overarching strategy emerged as the pivotal development.

The revelation surfaced during Tuesday’s refunding announcement, serving as the metaphorical “red pill” for the market. This marked a pivotal alteration in the FED’s approach to financing the United States Treasury and hinted at the impending introduction of a modified iteration of Yield Curve Control (YCC) or Yield Curve Control Financing (YCCF) as it stands. To place this into historical context, the last instance of YCC was witnessed between 1941 and 1952 during the crucible of World War II, designed to cap borrowing costs for the U.S. Treasury during this fiscally demanding period. It is imperative to recognize the resonance of the current geopolitical landscape with the historical backdrop. Furthermore, the FED has acutely acknowledged the vulnerability of the prevailing economic conditions, not merely on account of the data emanating from consumer behavior, but more so in response to the dour forecasts articulated by key stakeholders in the issuance of credit and the deteriorating financial health of their portfolios, particularly as it pertains to longer-dated U.S. government bonds.

In light of these multifaceted concerns and the pronounced volatility in interest rates, which the FED itself engendered through its recent tightening cycle, coupled with lackluster demand from both domestic and international buyers for U.S. dollar-denominated debt with tenors exceeding seven years, the FED has opted to implement a controlled approach to the issuance of new debt across the key segments of the yield curve. This step, akin to a rudimentary form of YCC, signifies a significant shift or pivot in the FEDs mandate. The refunding announcement delineates the allocation of $48 billion to the 3-year point on the yield curve, while reducing the supply of 10-year notes to $40 billion and curtailing the 30-year bond issuance to a more manageable $24 billion.

While some may perceive this as an exercise in financial minutiae…

Pain continues to make its unwelcome rounds in the global market scene, with geopolitics stealing the spotlight. Last week, the Fed left us with a gentle dovish note as they entered their period of market silence until November 1st. The Bank of Canada (BOC) and the European Central Bank(ECB) have paved the road for the Fed with their “no-action” prelude. The upcoming Fed decision might not set off fireworks, but all ears are tuned to the press conference for potential surprises. Why now you ask? September’s data painted a sunny picture for the U.S. consumer, splurging on homes and self-indulgence. Yet, let’s not forget that markets are forward-looking, and the tumultuous past month hints at a different October narrative. Cracks in the economic façade are becoming visible, with the recent earnings season and corporate guidance exposing vulnerabilities across various sectors. We even witnessed some market heavyweights stumble, nudging the S&P into a technical correction zone. Subtract the dominant Mag7 from the S&P, and we’re left with a single-digit loss for the year. Short term correlations between asset classes have unraveled as well, leaving them to navigate alone through the these erratic markets. Not great news for those holding 60/40 portfolios, unless the “40”happens to be in cash or short-term debt instruments (see below). The heavy sell-off of U.S. treasuries from overseas, coupled with a wave of new issuances looming in November, begs the question: why is there no “war premium” embedded in asset prices given the global circumstances? The 10-year and beyond section of the yield curve seems to have lost its allure. So, what’s the magic recipe to restore investor confidence before we hit the elusive “BUY” button? Behind door #1…

Ladies and gentlemen, can we just take a moment to appreciate the sheer spectacle of the last three weeks? It’s been like front-row seats to the financial circus, “clowns to the left of me, jokers to the right, here I am…” and the past six trading days? Well, they’ve been like a wild ride in a theme park of pain and emotional distress. But guess what, brave souls? When I finally dared to stick my head above the trench this morning, amidst the smoke and the wreckage, I saw it—a ray of sunshine! It’s like a beacon of hope, reminding us that, perhaps, the worst is behind us.

Let’s talk big numbers first. Brace yourselves for this one: a whopping 336k jobs added in September, while the so-called experts, those PhDs who are clearly overpaid to preserve their own jobs, had predicted a measly 170k. It’s almost comical, isn’t it? Reality instantly hit the long bond which held a perfect swan dive through the 5% mark, only to correct once the law of round numbers took over the market. [30yr yields closed at 4.958%].

But here’s the kicker: this move allowed the yield curve todo something it hasn’t done in a while—show some signs of rationality! Yep, you heard me right, it’s actually steepening! Sure, it’s more like a flat line drawn with chalk on a bumpy sidewalk, but hey, at least it’s no longer doing that awkward inversion dance. Now, I’m about to make a call that’s so early, it’s practically in a different time zone. The front end of things isn’t quite on board yet, with 2-year rates stubbornly pinned around 5 1/8. Of course, the overall rates picture is still a bit of a puzzle and levels will hang in the balance of consumer strength and the looming specter of an economic blow-up. But here’s the interesting part—the term structure is normalizing. And history tells us that’s usually a sign of transitioning from a downturn to recovery, or even expansion down the road. The bounce in risk assets today? Well, that might just be the first hint of it.

Now, let’s not forget to exercise some caution.

Well, folks, let’s all gather around and celebrate the thrilling performance of the markets this week! It’s been a real hoot, with economic data that was about as surprising as your morning alarm clock. And guess what? The much-anticipated inflation data strutted in, right in line with our oh-so-tame expectations. Of course, we had to adjust for the rise in gasoline prices [CPI YoY 4.3%], because what’s inflation without a little fuel on the fire, right?

But there’s more! The ECB, in their infinite wisdom, raised their depo rate to a whopping 4%, giving the Euro a little nudge toward parity with the good ol’ greenback. Chamonix this winter, anyone? And as for price action, well, it was like a one-man show starring the unstoppable global strength in commodity markets. Crude oil said, “Move over, I’m breaking through $90 per barrel in WTI,” and the entire Energy Sector just smiled and waved.

Naturally, all this commotion has lured out the market’s wise sages and industry experts from their secret lairs. They’re busy regaling us with their profound insights on the current administration’s energy policies and the skyrocketing cost of gasoline across the US. But hey, who could blame them? It’s been a long time coming!

And for those of you who still hold a torch for good old gasoline instead of massive four-wheeled batteries, don’t fret! Our calculations show that gas prices at the pump are practically a drop in the bucket right now. Why, you ask? Well, that’s because while green energy policies are being shoved down our throats, the US oil market has decided to take a permanent nap with no intention of boosting investment or production to secure our daily fix. Smooth transitions? Nah, let’s go for prolonged pain for the average Joe and taxpayer instead! And the FED is off the hook on this one: “low rates, high rates, won’t pump oil, mates!”!

Remember the ’70s embargo when OPEC gave the US a stern time-out for being a bit of a bully? Gas rationing, speed limits, and day light savings time – those were the good old days. It even led to the birth of the Department of Energy in ’77, with dreams of energy independence and abundant reserves. Well, guess what? Those reserves are looking a bit anemic these days, with the SPR holding a mere 20 days’ worth of US crude. Could history repeat itself? A hard maybe. After all, the US isn’t the only one with an appetite for energy this time around. Emerging economies have emerged, and are flexing their muscles, investing heavily in all things industrial, and making sure they have a firm grip on the essentials. And guess what? They’re all cozying up within the ranks of OPEC+. Who’s the bully now, right?

Now, let’s fast forward to a frosty winter, courtesy of El Niño, and guess what’s sticking around like that distant relative who just won’t leave after the holidays? Pricing pressures, my friends. The physical market is so tight it could probably win a limbo contest, and while we did spot some new rigs daring to venture out to pump that sweet $90 oil this week, they remain far and few. High prices for a fleeting moment? Knock, knock – opportunity’s here. High prices for an eternity? Well, that’s the kind of change that could usher in a whole new regime. So, keep those crystal balls gleaming, because who knows what’s lurking around the corner? Fortune favors the bold, or at least those who see it coming!

Ah, in a past life, I had the privilege of hobnobbing with a bona fide sausage maker at the Federal Reserve. Now, before you nod off into a nap of indifference, let me serve up a succulent tidbit I gleaned from the venerable Ben Bernanke himself: “The Feds main job is to communicate, not cause panic…market participants should listen”.

Fast forward to today, and I’m still savoring every word of those FOMC minutes and parsing the delicate nuances in their pre-scripted speeches. My latest verdict after Powell’s Jackson Hole serenade? The hiking fiesta is, well, over. Despite the Fed’s mixed hints at needing to do “more”, it’s essentially a waiting game now. And the longer they can wait without triggering a catastrophic meltdown the better (a.k.a., a “soft-landing” and the market consensus). A modest 25-basis-point hike in September? A mere blip. 50? A stretch. Anything more? A recipe for a financial fiasco that will have Fed officials cleaning out their desks into the next election cycle.

Remember when the regional banks bailed out 75bps ago? Yeah ,that was a telltale sign. The big boys ( i.e. J. Dimon and co) are now clutching onto their bags of discounted treasuries as Basel III regulations threaten liquidity reserves, a slew of corporate expirations roll in [roughly 2T worth], and a seemingly endless and growing supply of government debt hits the market. The plane might just land, but who’s left on board? I reckon the Fed doesn’t fancy finding that out either. Add softer trending economic data to the mix, and you’ve got a no move, bear down rate decision as officials go radio silent until their upcoming September 20th meeting.

So, here we stand. Equity risk premiums and volatility are lounging at their lowest, credit spreads are itching to explode, and, despite rosy growth forecasts, the average Joe is feeling the pinch, bit by bit. The global stage isn’t any more reassuring. Asian economies pondering stimulus, Europe huddled in a soon chilly slump, and team BRICS recruiting new players holding sizeable commodity reserves (including Argentina). A real Messi situation, isn’t it?

But here’s the silver lining: Uncle Sam has stacks of government debt to sell, and they’re practically begging for takers at these sweet interest rates. The peculiar strength in the dollar this week is likely an indication that the market has positioned to take down this supply. Once that’s been dealt with, we can gently dust off the “risk on” playbook. We’ve been banging this drum for ages now, and honestly, not much has changed in our data, our philosophy, or our general modus operandi. Snatch up the scarce and sought-after. But don’t overpay, stay thrifty! Complacency? That’s an extravagance we can’t afford. And, when you spot low-hanging fruit, don’t hesitate—back up the truck and load up

Bearish sentiment weighed heavily on risk assets this week after inflationary pressures out of the retail sector surprised markets with a hot July sales print of 0.7 vs a 0.4 forecast. Some of the Fed’s heavyweights went all hawkish in their speech, leaving the FOMC squad divided in their July minutes. The downtrend got a rocket boost with China’s frosty demeanor further putting the chill on things and markets sprinted for cover, scratching their heads once again this year. Long rates swung 30bps as the curve bear steepened and pushed equities down a gut-wrenching 7% by yesterday, erasing much of the choppy recovery we saw in July.

Let’s not kid ourselves, August is no walk in the park. With market liquidity as thin as a credit trader’s patience, volatility is again out stretching its legs. Navigating through this mess is like trying to sail through a storm with a paper boat. Owning long duration ahead of the record supply expected to continue eroding treasury markets keeps painting a grim picture for risk assets, particularly those richer names in the “quality” aisle. So much so, that fast money participants have re-loaded on short positioning while buyers remained scarce all week long.

A plethora of US issuance marked this week as the Federal Reserve conducted auctions of above-average volumes of 6-month and 1-year bills, followed by well-received auctions totaling $42 billion in 3-year notes and $38 billion in 10-year notes. The Federal Reserve wrapped up its open market operations with a relatively weaker 30-year auction, contributing to a yield curve steepening.

Market sentiment turned towards safety after softer than expected inflation data emerged from China, pressuring risk assets and prompting an influx of buyers into government paper, aligning with the Fed’s extensive supply schedule.

Although Federal Reserve communication exhibited a somewhat hawkish tone, it’s crucial to emphasize that the prevailing market consensus remains resolute in its conviction that the period of Fed rate hikes has reached its conclusion. This sentiment persisted despite the unanticipated uptick in the Producer Price Index (PPI) to 0.3%, surpassing the projected 0.2%. Today’s PPI release exerted pressure on the belly and long end of the curve, driving 10-year yields to 4.17% and 30-year yields to 4.28%. These movements underscore the market’s continuous assessment of inflation expectations and the gradual recalibration of term premia into the yield curve.

Central banks took center stage this week with the FED delivering yet another 25bp hike to policy rates (now 5.25-5.5%), while the European Central Bank(ECB) called with a 25bps hike of their own (bringing ECB deposit rates to 3.75%). The hiking trifecta was upset by the Bank of Japan (BoJ) this morning, which held its short term rates at -0.1% but increased the range in which 10yr yields can move around the 0% target to 50bps. This further flexibility to Yield Curve Control (YCC) hints at inflation beginning to percolate through their system, yet ultra loose policy remains the BoJ’s priority as their inflation projections are well below 2% targets for 2024 and 2025.

J. Powell’s press conference summary: Deja -vous.

No changes to the script, nothing new, nothing learned. Basically, the Fed bought itself more time (8 weeks) and full optionality to raise further if consumers and markets allow it.

What to expect: well, yield curves will remain inverted for the foreseeable future, all meetings are live from here, term premia on the curve to remain absent and price action and positioning to continue moving out the 2- 5yr part of the curve. With that, 2y5y steepeners become attractive in the face of this prolonged data dependency by the FED, absent a larger crisis that would trigger an unwinding of recent restrictive policy.