Excellent note - well written and structured - I haven't seen as clean a triangulation of fundamentals, positioning and valuations before and would love to understand the signals better.
Performance generally looks strong and consistent for both signals, but I'm curious to hear your thoughts on why they underperform (their historical returns) during the following regimes:
1) Cycle: Both signals struggle during late-cycle regimes. Is this related to the large carry exposure - i.e. tendency to short rates during flat curve/late-cycle periods?
2) Regime: Policy timing struggled during QE. Are QE/QT or other signals potentially missing?
3) Policy Errors: Policy timing struggled during 2003-2005 and flat in 2020-2021. Do you also see this as a 'feature not a bug', given both periods were subjective policy errors (too loose with hindsight);
Nice decomposition: short-end policy pricing vs long-end positioning are telling different stories, and that’s exactly where duration risk hides. We track how the strategist consensus is positioned across bonds (and the cross-asset implications) here: https://asset-allocation-report.com/p/what-strategists-really-write-62
Excellent note.
Thank you, Danny 🙏🏽🙏🏽🙏🏽
I don’t know about pricing but I can assure you holding bonds long term / or any formula is not gonna save your returns
https://jarviscapitalresearch.substack.com/p/proof-of-work-why-5-years-is-the?r=6qs9m8
Excellent note - well written and structured - I haven't seen as clean a triangulation of fundamentals, positioning and valuations before and would love to understand the signals better.
Performance generally looks strong and consistent for both signals, but I'm curious to hear your thoughts on why they underperform (their historical returns) during the following regimes:
1) Cycle: Both signals struggle during late-cycle regimes. Is this related to the large carry exposure - i.e. tendency to short rates during flat curve/late-cycle periods?
2) Regime: Policy timing struggled during QE. Are QE/QT or other signals potentially missing?
3) Policy Errors: Policy timing struggled during 2003-2005 and flat in 2020-2021. Do you also see this as a 'feature not a bug', given both periods were subjective policy errors (too loose with hindsight);
Nice decomposition: short-end policy pricing vs long-end positioning are telling different stories, and that’s exactly where duration risk hides. We track how the strategist consensus is positioned across bonds (and the cross-asset implications) here: https://asset-allocation-report.com/p/what-strategists-really-write-62