Dovish Reset and What to Expect in Q2

We highlight the most important events of Q1 and what to expect for Q2.

Dovish Reset and What to Expect in Q2

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IN THIS PUBLICATION:

  • The most important market event in Q1 was the pricing of a more dovish Fed going forward.
  • Energy is the sector that trades at the largest discount vs its 20-year average.
  • We look at the implications of moving from financial contagion risks to economic contagion risks.

What We've Learned in Q1

  • Back to basics. The most important market event in Q1 was the pricing of a more dovish Fed going forward. This means the market is chasing long-duration assets (Bitcoin, tech, bonds) as it believes the Fed will soon begin cutting rates. This is a very different market set-up compared to the majority of last year, and more in line with 2020 (post-COVID) and 2008-2019.
Fed funds rate expectations
  • Most of what traded up and down last year has traded in the opposite way this year.
Bitcoin, nasdaq, treasuries, dollar index, commodities
  • This repricing didn’t happen gradually. February was actually characterized by expectations of a more hawkish Fed, but that changed in a heartbeat in early March after the SVB + Credit Suisse turmoil.

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