Throwing darts at a dot plot – June 16th 2023

“Every economist for themselves”!

With CPI [YoY] cooling to 4% on Tuesday, the FED finally displayed some prudence during this week’s FOMC meeting and unanimously held monetary policy rates between 5-5.25% for the first time in 10 prior rate decisions. However, their tone remained hawkish and signaled additional hikes would be necessary into year end while presenting the most distorted dot plot a group of PhD’s has fathomed in recent history.

One takeaway from this lack of consensus is that the FED has pushed rates as far as they could before rendering their current predictive models useless in this multi-faceted economic conundrum. In response, markets called “bluff” and fueled a buy everything rally suggesting the end of rate increases for J. Powell’s administration in spite of inflation remaining above target levels of 2% for the time being.

** Thoughts on RCG Portfolio Positioning
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** Dynamic Macro Strategy
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This strategy relies on historical data and quantitative techniques to detect statistical disparities and make predictions in global markets through liquid ETF’s.

“FED credibility issues have led to further USD weakness. With global central banks no longer following the once US leader, we explore opportunities in areas with a deeper understanding of domestic and localized pricing pressures and structural imbalances.

The BoC increased rates by another 25bps last week and the ECB followed suit yesterday with another hike highlighting: “uneven conditions in some sectors” with weaker manufacturing data but strength in oil services, further supporting our core positioning in the portfolio. ” – Nick Diaz

** Inflection Strategy
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The strategy takes positions in highly out of favor US equities which we believe are inflecting due to changing fundamentals/events.

“Sometimes, no news is good news. With earnings only a few weeks away, markets remain range bound and in volatile trading patterns. Both mid and small cap stocks continue to track strong versus major indices for a 2nd week running, yet have plenty of catch-up to do as risk is re-distributed in the market during this second half of the year. No changes to positioning this week and we continued vesting new accounts into our more cyclical names as favorable price points present themselves.” – Stefan Lingmerth

** Safe Haven Strategy
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This strategy protects capital during inflationary environments and seeks to maximize yield using fixed income instruments and defensive assets.

“Slower growth was suggested during the Fed minutes in order to control CPI, leaving higher unemployment as the lagging variable before entering our much anticipated stagflationary environment. With headwinds cleared we continue to target the front end of the curve as we expect flatness to persist sub 12m and look to secure positive real yields slightly further out. Book duration remains well within 2.5yrs.” Nick Diaz