IMO my own opinions 3 weeks ago:
* when bhp was 41.9, it might be due to (1) ultra bond was about to stall, threatening debt and banking sectors (2) BOJ exit (3) IO price
* US debts and banking (1) is for sure is the ultimate factor of this financial backbone
(2) and (3) is manageable with transition (e.g gensaki etc) and Copper, but they should mainly consider the most important, number (1).
What cause (1)? IMO is recently disclosed, global manufacturing, back to expansion. This is a huge game changer!
Should this global expansion is supported, IMO, forget lower inflation/rate cut, at least for now. But it's for good reason!
About IO (3), I think it's not that 50% IO is consumed in residential property but manufacturing is also consuming quite large IO. Plus green copper etc.
The issue is when PMI expands, inflation expands too, which causes ultra bonds threatened/loosing, someone has to take the loss or else BTFP and HTM (banking) issues will resurface, thus IMO the faster world expands, the bigger money easing is required. I would rather expect taper/ot or raising neutral rate happening prior to cut, in which both of them are easing measure anyway. In which of course, complexity might soon occur with debt limit near to 35T and many other things. US Q2 is expected to have lower borrowing, 250B vs 750B Q1 but of course higher coupon and net issuance. Complex, yes, always, but IMO I think is manageable for now.
It's getting worst with BOJ exit at same time causing much ripple into global currencies. However my hedge to other currency may help a bit here.
If PMI expands, IMO manufacturer should mainly consume (1) energy (2) materials. Unsure what else?
These 2 have been long suppressed by strength of USD and could be part of deals between US and China. The strength of USD is required to maintain the US debt (1) above and maintain China manufacturing supremacy. Should inflation and global expansion supported, rather than let economy stalled/crashed -> these two intrinsic value which had been suppressed for long year IMO might likely come to surface?
Of course rate cut is good, but that will only make expansion run twice faster and they need to come up with much higher easing. Luckily most treasury has been in shorter maturity but Fed SOMA is not, thus I think rather than easing, they can do OT to ease the long end.
TL/DR,iIf the PMI momentum can be maintained longer, we might have much higher output in longer run.
Anyway I'm just a scholar at my 30s, what do I know about the big world. I'll leave that to the experts.
(20min delay)