Dovish Reset and What to Expect in Q2
We highlight the most important events of Q1 and what to expect for 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.
- Most of what traded up and down last year has traded in the opposite way this year.
- 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.