Some market participants believe in the peak inflation narrative. Looking at the price chart of the CRB Index, it is understandable why that is the case. However, it doesn't square with the fact that the Fed Funds rate is still way below the current CPI.It is dangerous to stick to a narrative without constant monitoring. The CRB Index has been trending up recently. This should at least call into question whether inflation has indeed peaked.The market is always talking to us by way of prices. Between listening to opinions and looking at market prices, the latter should always be more reliable. As the saying goes, "look at what people are doing, not what they are saying". Prices represent the aggregate action of market participants.On a day like today where almost all asset prices are down w

1 million-dollar Bitcoin? I am sure that is not new to you. Some so-called experts have put their predictions for the coin anywhere from a couple of hundred thousand to a even few million. And for your information, Bitcoin is trading at around USD 16,600 at the point of writing. Those who know me knew that I don't lean toward the camp of making forecasts when it comes to investing. Not that I am against it, there are portfolio managers who succeed in making sensible calls, and they also managed their risks well. And I hold great respect for those who find a consistent edge in this area. But it is just not my cup of tea. However, I feel I got to write something after reading this piece where Cathie Woods makes a call for a 1 million-dollar Bitcoin by 2030. It is one thing to just talk about

In case anyone has any doubt that we are currently in a credit-tightening cycle, just take a look at the total US monetary base over time. The monetary base was growing nicely at a pretty constant rate before the Great Financial Crisis in 2008. Then with Ben Bernanke at the helm of the Fed, the self-proclaimed student of the Great Depression unleashed a bold experiment upon financial markets. As a result, the monetary base jumped and expanded multiple times over the last decade. There was an attempt to reduce the monetary base but when COVID-19 struck, what took months of tightening was quickly reversed and then some. Of course, this led us to where we are today, with inflation not seen for the past 40 years.Total US Monetary BaseThis bold money printing experiment led some to believe that

We all know what buying the dip in the stock market is about. It is a very simple and commonsensical strategy. When stocks fall in price, we buy. But if you look beyond that, there is also an allocation perspective to it. Because to buy the dip, you need to have money around to deploy when stocks drop in prices. That means you need to have cash sitting around before that happens. So there are opportunity costs involved as these are cash that you could have invested elsewhere prior to it. So let's look into buying the dip a bit more systematically.Should I buy the dip when the stock market falls?For now, let's put aside the allocation consideration and imagine that you are now in a situation when the stock market is falling and you happen to have cash lying around. So should we buy into the

The FOMC meeting minutes for July 2022 were released.There were no surprises. The Fed Funds rate outlook seems pretty much intact for the year. There is nothing to indicate that the Fed will slow or increase in any big way the pace of hikes against what the market is already pricing in. They already anticipated inflation and growth to moderate in the coming quarters in line with the markets. And inflation did indeed come off as we now know after the July numbers were released this month. In fact, it came down more than expected. Growth, on the other hand, seemed to be holding up more than expected as evidenced by the latest retail sales figures. While certain sectors are seeing a slowdown in hiring, the overall labor market based on the latest payroll numbers also still seems to be going s

Those who attended our IBF-accredited course (https://www.allquant.co/ibf-accredited-course) on introduction to hedge fund strategies and quantitative investing know we teach 4 different investment strategies that focus on both risks and return. 2022 has been an eventful year and we did ashort video update previously on the model performance (see note at the end of the post) for the year. In this post, we provide more color on how these models fared in this tough environment. A Broad Overview Of The 2022 Performance The four models or strategies are Risk Parity, Trend Following, Volatility Trading, and Sector Rotation. Let's see how they stack up against the broader US stock market. Our investments focused on the US markets so I will be using the S&P 500 ETF (Ticker: SPY) as the benchm

The Fed has spoken – rate hikes will continue but the rate of increase will slow. This comes in the backdrop of inflation abating (which is still high by the way) and increasing risks to the functioning of the Treasury markets. At the same time, the yield curve is getting more and more inverted. A yield curve inversion is a fairly reliable indicator of an impending recession anywhere from 6 to 18 months after it appears. The first sustained inversion happens in July this year. So that means there is a good chance we will see one next year. And the Fed Funds futures market seems to be pricing that in. As of 30 November 2022, the market expects a 50bps increase in the Fed Funds rate to 4.5% at the next FOMC in December 2022. Thereafter, we are may see another 25-50bps increase in Feb 2023. B