Bearish exhaustion driving risk markets too far?: The MUFG Global Markets Podcast

In today’s episode, MUFG Head of U.S. Macro Strategy George Goncalves discusses how the developments in the bond markets have been more logical lately, especially around key macro events. Whereas risk assets, like the performance of equities, have been more perplexing. George attributes the multiple bounces higher for stocks over the last month as a function of “bearish exhaustion” as investors try to determine if a solid bottom has been put in for 2022. George believes that broader markets are perhaps confusing a potential Fed pause as a pivot, and even then it’s still too early for the Fed to be signaling a transition in policy given how high inflation remains.

George gave us a glimpse of some of the risk factors into the end of 2022. He is most worried about liquidity risk after one of the worst bond market performances in history. Meanwhile, what has been happening in the FX markets suggest that dollar liquidity and access could be an issue into year-end. For now, we need to get through the next Fed meeting and the mid-term elections before we can have a better outlook on how this year may end.

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