Bonds Fall, Equities to Follow?

Published on: October 12th, 2018

Bond yields are rising worldwide. As QT bites, Term Risk Premium is beginning to respond. Equities won’t like it, but will they pre-empt the bond bear and stop it in its tracks?


  • MS
    Mark S.
    15 October 2018 @ 15:01
    Both you and Raoul have indicated that when the Renminbi crosses the 7.0 that there will be increased volatility. Can either of you provide more meat as to what that will look like. Equities? Specific currencies that will be more impacted than others etc
    • JB
      Julian B. | Contributor
      17 October 2018 @ 16:41
      Hi Mark. As we discussed in the piece, we believe financial conditions need to tighten and a stronger dollar would be one way. So far that is being prevented because the Chinese are holding the peg in USDCNY just below 7. But if an when that level goes, I believe the risk is we could see a rapid USD acceleration. In that scenario, US equities will suffer but EM equities could really get crushed. As for which currencies move the most? My bet would not be EURO but EM and even EM Asia, which up until now has been pretty stable.
    • DY
      Dmytro Y.
      20 October 2018 @ 16:31
      Wow Julian, so you see a lot more downside risk to EM equities and currencies even after they fell substantially so much already...?..
  • RK
    Ryan K.
    12 October 2018 @ 19:14
    Why is it that lower stock prices create tighter financial conditions?
    • JB
      Julian B. | Contributor
      14 October 2018 @ 22:17
      Hi Ryan, essentially financial conditions indexes contain 5 metrics: short term rates, long term yields, an FX element, stocks and credit. So if stocks fall all, then other things being equal, financial conditions tighten. I'm not sure if you were a subscriber at the time but we covered this topic quite extensively in the June 2018 Meeting of Minds.
  • TR
    Tom R.
    13 October 2018 @ 13:11
    Sincerely appreciate the update Julien, could I trouble you expand on your final comments concerning paring US equity longs? As you rightly point out, we’ve had some sizable capital allocation out of European and EM equities. While I thoroughly agree that a collapse in US stock markets will take everyone else with them, at what stage do EM (in particular, rather in Europe in my opinion) equities become attractive vs US? Thanks
    • JQ
      JACK Q.
      14 October 2018 @ 14:55
      i'd still be patient with EM/European equities until she really hits the fan. Meanwhile i've been pairing longs with a little tech exposure for the RV play and anticipate the sell off. But Julien be helpful to hear your thoughts as well
    • JB
      Julian B. | Contributor
      14 October 2018 @ 22:10
      Hi Tom, re US equity longs, while I believe there's a decent chance of a short term bounce, off oversold conditions, it should be used to cut back on longs. As I discuss in the piece, US financial conditions need to be tighter period end of story! In theory, that tightening could all be delivered by higher rates or yields. But we all know that in that process equities will take some of the strain. In that sense, the dip of the last week is just a foretaste of what is to come. A couple of months ago, in a prior post I explained I use a simple metric for the S&P, which works like a charm. You buy the market when the 20 week moving average crosses, the 50 week to the upside and visa versa. This recent correction, has killed momentum, which suggests that unless it reverses immediately the moving averages could cross to the downside early next year. At which point, you should be prepared for a much more significant drop in stocks. In terms of EM, if we use EEM historically the dips are binary i.e. 30% ish or 55-60%. We aren't even down 25% yet and my gut suggests this won't be a 30% drop.
  • B
    Bob .
    13 October 2018 @ 05:18
    My base case is that we will see a surprising number of earning misses. However, the real issue will be the chorus of concerns expressed in forward guidance. If this scenario does develop, I think it will cause a further market decline and serve along with the upcoming mid-terms as the dominant market catalyst until the December Fed meeting. . Our Wall of Worry is getting crowded.
  • J
    Jim .
    13 October 2018 @ 01:00
    Very timely and well thought out. It would be interesting to get an bond update from Raoul given the recent sell off in the bond market to get the other half of the Macro Insiders perspective. Great analysis!
  • AS
    Armando S.
    12 October 2018 @ 19:01
    I thought the NYFANG index/futures were silly, but could be an interesting way to look into playing a short. NYFANG futures now have agreement between stretched valuations plus negative trend/momentum. Negative on all major momentum signals such as 10/100 crossover, 200day MA, etc. (whereas s&p and and nasdaq still have some time before some ma crossovers turn negative).

Mark Yusko

Morgan Creek Capital Management, Co- Founder, CEO, & CIO

Mark Yusko is the Founder, CEO and Chief Investment Officer of Morgan Creek Capital Management. He is also the Managing Partner of Morgan Creek Digital Assets.

Morgan Creek Capital Management was founded in 2004 and currently manages close to $2 billion in discretionary and non-discretionary assets. Prior to founding Morgan Creek, Mr. Yusko was CIO and Founder of UNC Management Company (UNCMC), the Endowment investment office for the University of North Carolina at Chapel Hill. Before that, he was Senior Investment Director for the University of Notre Dame Investment Office. Mr. Yusko has been at the forefront of institutional investing throughout his career. An early investor in alternative asset classes at Notre Dame, he brought the Endowment Model of investing to UNC, which contributed to significant performance gains for the Endowment. The Endowment Model is the cornerstone philosophy of Morgan Creek, as is the mandate to Invest in Innovation.

Mr. Yusko is again at the forefront of investing through Morgan Creek Digital Assets, which was formed in 2018. Morgan Creek Digital is an early stage investor in blockchain technology, digital currency and digital assets through the firm’s Venture Capital and Digital Asset Index Fund.

Mr. Yusko received a BA with Honors from the University of Notre Dame and an MBA in Accounting and Finance from the University of Chicago.

Anthony Scaramucci

SkyBridge Capital, Founder & Co-Managing Partner

Prior to founding SkyBridge in 2005, Scaramucci co-founded investment partnership Oscar Capital Management, which was sold to Neuberger Berman, LLC in 2001. Earlier, he was a vice president in Private Wealth Management at Goldman Sachs & Co. In 2016, Scaramucci was ranked #85 in Worth Magazine’sPower 100: The 100 Most Powerful People in Global Finance. In 2011, he received Ernst & Young’s “Entrepreneur of the Year –New York” Award in the Financial Services category. Anthony is amember of the Council on Foreign Relations (CFR), vice chair of the Kennedy Center Corporate Fund Board, a board member of both The Brain Tumor Foundation and Business Executives for National Security (BENS), and a Trustee of the United States Olympic & Paralympic Foundation. He was a member of the New York City Financial Services Advisory Committee from 2007 to 2012. In November 2016, he was named to President-Elect Trump’s 16-person Presidential Transition Team Executive Committee. In June 2017, he wasnamed the Chief Strategy Officer of the EXIM Bank. He served as the White House Communications Director for a period in July 2017. Scaramucci, a native of Long Island, New York, holds a Bachelor of Arts degree in Economics from Tufts University and a Juris Doctor from Harvard Law School.

Michael Saylor

MicroStrategy, Co-Founder

Mr. Saylor is a technologist, entrepreneur, business executive, philanthropist, and best-selling author. He currently serves as Chairman of the Board of Directors and Chief Executive Office of MicroStrategy, Inc. (MSTR). Since co-founding the company at the age of 24, Mr. Saylor has built MicroStrategy into a global leader in business intelligence, mobile software, and cloud-based services. In 2012, he authored The Mobile Wave: How Mobile Intelligence Will Change Everything, which earned a spot on The New York Times Best Sellers list.

Mr. Saylor attended the Massachusetts Institute of Technology, receiving an S.B. in Aeronautics and Astronautics and an S.B. in Science, Technology, and Society.

Alex Saunders

Nugget's News, Founder & CEO

Alex Saunders is the founder and CEO of Nugget’s News, a digital media company focused on all things crypto. Alex has been captivated by cryptocurrency since 2012 and in 2017 he began educating globally on the benefits of cryptocurrency and how to safely acquireit. Nugget’s News has been listed as a top-20 podcast by Business Insider, ShapeShift and Lifehacker and has over 120k YouTube subscribers with 9 million total views.Alex is also heavily focused on his cryptocurrency education platform Collective Shift which currently serves over 4,500 members. provides his unique perspectives by utilising his expertise in fundamental analysis, technical analysis and market sentiment. He is working towards his mission of making it easier for everyone to understand the financial world.

James Putra

TradeStation Crypto, Inc., Sr. Director of Product Strategy

James helped launch TradeStation Crypto’s offering which utilizes a true online brokerage model that self-directed investors and traders have come to expect for equities, futures, and foreign currency markets. He is a reputed crypto asset specialist and blockchain thought leader focused on helping people find innovative ways to participate in this space. He is active in the blockchain community with speaking engagements, TV appearances and mentoring. James has over 15 years of experience in the Fintech industry.

Raoul Pal

Real Vision, Co-Founder & CEO

Raoul Pal is the Co-Founder and CEO of Real Vision, the world’s pre-eminent financial media platform, which helps members understand the complex world of finance, business, and the global economy.

Real Vision members also have access to Real Vision Crypto, a cryptocurrency and digital assets video channel watched by over 80,000 people. In addition, Raoul has been publishing Global Macro Investor since January 2005 to provide original, high quality, quantifiable and easily readable research for the global macro investment community hedge funds, family offices, pension funds and sovereign wealth funds. It draws on his considerable 31 years of experience in advising hedge funds and managing a global macro hedge fund. Global Macro Investor has one of the very best, proven track records of any newsletter in the industry, producing extremely positive returns in eight out of the last twelve years.

He retired from managing client money at the age of 36 in 2004 and now lives in the tiny Caribbean island of Little Cayman in the Cayman Islands. Previously he co-managed the GLG Global Macro Fund in London for GLG Partners, one of the largest hedge fund groups in the world. Raoul moved to GLG from Goldman Sachs where he co-managed the hedge fund sales business in Equities and Equity Derivatives in Europe. In this role, Raoul established strong relationships with many of the world’s pre-eminent hedge funds, learning from their styles and experiences.

Other stop-off points on the way were NatWest Markets and HSBC, although he began his career by training traders in technical analysis.

Peter McCormack

What Bitcoin Did, Journalist

Peter McCormack is a full time journalist/podcaster covering topics such as Freedom, Human Rights, Censorship and Bitcoin. Peter created and hosts the What Bitcoin Did Podcast, a twice-weekly Bitcoin podcast where he interviews experts in the world of Bitcoin development, privacy, investment and adoption. Launched in November of 2017, the podcast has grown to over 100 episodes with a guest list that is a testament to the diversity of knowledge and opinions that represent the broader Bitcoin community. Expanding his growing list of human interest recordings, documentaries and films Peter has recently launched the Defiance podcast and DefianceTV.

Caitlin Long

Avanti Financial Group, Founder & CEO

22-year Wall Street veteran who has been active in bitcoin and blockchain since 2012. In 2018-20 she led the charge to make her native state of Wyoming an oasis for blockchain companies in the US, where she helped Wyoming enact 20 blockchain-enabling laws. From 2016-18 she jointly spearheaded a blockchain project for delivering market index data to Vanguard as chairman and president of Symbiont, an enterprise blockchain start-up. Caitlin ran Morgan Stanley’s pension solutions business (2007-2016), heldsenior roles at Credit Suisse (1997-2007) and began her career at Salomon Brothers (1994-1997). She is a graduate of Harvard Law School (JD, 1994), the Kennedy School of Government (MPP, 1994) and the University of Wyoming (BA, 1990).

Hunter Horsley

Bitwise Asset Management, CEO

Hunter Horsley is Chief Executive Officer of Bitwise Asset Management. Prior to Bitwise, he was a product manager at Facebook, working on advertiser products including the multibillion-dollar sponsored content ecosystem and ad breaks in videos. Before Facebook, Horlsey was a product manager at Instagram, responsible for multiple advertising products generating several hundred million dollars of revenue. He is a graduate of the Wharton School at the University of Pennsylvania, with a B.S. in economics. Recently, Horsley was named a member of Forbes’ 2019 “30 Under 30” list.

Luke Gromen

Forest For The Trees, Founder & President

Luke Gromen has 25 years of experience in equity research, equity research sales, and as a macro/thematic analyst. He is the founder and president of macro/thematic research firm FFTT, LLC, which he founded in early 2014 to address and leverage the opportunity he saw created by applying what clients and former colleagues consistently described as a “unique ability to connect the dots” during a time when he saw an increasing “silo-ing” of perspectives occurring on Wall Street and in corporate America.

FFTT caters to institutions and sophisticated individuals by aggregating a wide variety of macroeconomic, thematic and sector trends in an unconventional manner to identify investable developing economic bottlenecks for his clients. Prior to founding FFTT, Luke was a founding partner of Cleveland Research Company, where he worked from 2006-14. At CRC, Luke worked in sales and edited CRC’s flagship weekly thematic research summary piece (“Straight from the Source”) for the firm’s clients. Prior to that, Luke was a partner at Midwest Research, where he worked in equity research and sales from 1996-2006. While in sales, Luke was a founding editor of Midwest’s widely-read weekly thematic summary (“Heard in the Midwest”) for the firm’s clients, in which he aggregated and combined proprietary research from Midwest with inputs from other sources.

Luke Gromen holds a BBA in Finance and Accounting from the University of Cincinnati and received his MBA from Case Western Reserve University. He earned the CFA designation in 2003.

Meltem Demirors

CoinShares, Chief Strategy Officer

Meltem Demirors is Chief Strategy Officer of CoinShares, an investment firm that manages billions in assets on behalf of a global investor base, and is a trusted partner to investors and entrepreneurs navigating the digital asset ecosystem. Meltem oversees the firm’s managed strategies group and its New York office and leads corporate development.

Previously, she was part of the founding team of Digital Currency Group. As a veteran investor in the digital currency space, she has invested in over 250 companies in the ecosystem.

Meltem is passionate about education and advocacy, and teaches the Oxford Blockchain Strategy Programme and co-chairs the WEF Cryptocurrency Council.