Strategy Note /
Global

Wednesday, March 16th Was A Very Big Day

  • Wednesday swept away uncertainty in 3 key areas: China's market policy, Fed rate cycle outlook and ceasefire in Ukraine

  • China has chosen growth, financial markets and foreign investors - it saw what "uninvestable " did to Russia in 2 weeks

  • Areas of opportunity include Europe from both a tactical & strategic POV, Hi beta thematics, China and gold

Jay Pelosky
Jay Pelosky

TPW Founder & Global Strategist

TPW Advisory
18 March 2022
Published by

I learned early on in my career as a sell side strategist at Morgan Stanley that one can give a date and one can give a level but one should never give a date & a level – thanks Byron. Another great piece of advice from the MS macro team of the day, this one from Barton Biggs: the news doesn’t have to be good, just less bad.

 

With some of the wildest volatility I can recall in my 30 + years of global investing it is cliché time for sure. Maybe because cliches contain an element of truth - otherwise they wouldn’t have made it to become a cliché.

 

I don’t think I will violate either piece of advice by stating that Wednesday was a very big day for global investors – so big that I think its ramifications will only settle in over time. Here then is my on the ground, up to the minute, read on what is happening. Cheat sheet – its very positive.

 

It takes a lot to sweep the Fed off the front page – especially on the day it kicks off a rate hike cycle for the first time in almost 4 years. Yet that is what China’s multiple announcements (BBG link) did on Wed, sweeping the shorts out to sea (KWEB up 40% on the day… 40%), giving the bulls some hope and taking out all the oxygen for the Fed’s headline act (reminds me of watching Lynyrd Skynyrd as the warmup band back in the 70s leave the audience spent for the headliner). Here are the highlights from Fintwit:

 

*China pledged to keep capital markets stable

*Vowed to support overseas stock listings

*Said dialogue with US re ADRs is 'good'

*Promised to handle risks for property developers

*Clarified regulation of Big Tech will end 'soon'

*BOOM....

 

Boom indeed. China’s moves, momentous as they were, was just the first big move of the day; the second was the Fed announcing its 25 bp rate hike and more importantly setting out its new rate hiking path and economic forecasts. Keep in mind the Fed had not met since late January, which might as well have been last century. This was a mark to market meeting for the Fed – it is now lined up with the market on hikes this year - fixed income volatility should ebb considerably.