Britain's fiscal and monetary farce is now on the right track. Britain's financial markets can catch their breath and don't have to worry about liquidity risk in the short term. As long as fiscal borrowing does not go against the trend, there will be less pressure on monetary authorities to sell overseas assets such as US Treasuries to replenish domestic liquidity. Especially for assets that are denominated with more liquidity risk (such as UK bonds, European bonds), there was a strong rebound expectation yesterday.
In contrast, Treasuries turned around after following other bonds higher for some time. There are two reasons.
1) there is no liquidity pressure on US debt for the time being, which can be seen from the statement of Fed officials that there is naturally no excessive pricing of price in liquidity risk in asset prices.
2) the cpi data released last week is still higher than expected, although this cpi will not allow the Fed to adjust the end interest rate, but judging from the Eagle King Brad's expectation of 75/75bp over the weekend, the Fed's tightening expectations will not be weakened.
The rebound in the stock market is more due to the warming expectations of corporate eps brought about by the good start of bank earnings.
The market has always expected that in a tight environment, not only valuations will need to be compressed, but corporate profits will also be significantly reduced. Q2 advertising industry thunderstorm, Q3 chip PC business thunder also exacerbated this concern.
In a pessimistic environment, the forward pe of the S & P 500 has reached a range of 15 times historical undervaluation, but the expected sharp reduction in eps has been delayed. As shown in the picture, forward eps is still in the high range.
Judging from the bank's financial statements, the ability of American consumers to carry the tripod.