This week, Jay Powell delivered a surprising pivot on policy expectations that rattled markets, opting not to play the role of “Santa Powell.” While his hawkish tone caught us slightly off guard, our cautious positioning ahead of the meeting allowed us to weather the storm better than most, limiting our losses and outperforming the broader market.
On the inflation front, Friday’s PCE report confirmed that Powell’s fears of an imminent inflation spike appear premature. Our models point to easing inflation pressures, a trend echoed by declining prices in energy and raw materials. This environment has provided opportunities to capitalize on lower traded inflation through well-positioned commodity trades.
Meanwhile, China’s economy continues to deteriorate, with our nowcasts signaling a sharp decline in demand. The government’s lackluster efforts to boost consumer expectations with promises of 2025 stimulus have failed to gain traction. This weakness is beginning to ripple outward, and we expect it to exert downward pressure on US and UK bond yields through falling inflation expectations, a theme we are actively trading.
Although we ended the week with a slight loss, our performance far exceeded global market benchmarks. As we head into the holiday season, we remain vigilant, ready to seize opportunities and deliver a strong finish to the year. Wishing you a Merry Christmas and Happy Holidays—we’ll be closely monitoring the book over the festive period to ensure we stay ahead.
Best regards,
Andreas Steno
CIO, Asgard-Steno Global Macro
