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Withdrawal Symptoms
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Withdrawal Symptoms

This is going to be painful

Shyam Sunder
Apr 10
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Central Banks are finally getting serious about withdrawing the emergency measures they had instituted during the pandemic. Inflation went from being “transitory” to “supply-chain related”, and is now on its way to becoming “embedded” with a layover in “Ukraine.”

It’s hard to know how much the U.S. Federal Reserve will need to do to get inflation under control. But one thing is certain: To be effective, it’ll have to inflict more losses on stock and bond investors than it has so far. Bloomberg

With $95 billion being “run-off” (where the Fed stops reinvesting proceeds from maturing securities) every month, and 50bps hikes being advertised, risk markets will likely experience severe withdrawal symptoms (FT).

On the domestic front, the RBI finally signaled that it putting inflation over growth and delivered a “stealth normalization” of its interest rate corridor (MC).

The bright spot is that equity inflows continue to be supportive.

According to BAML, weekly flows into US equities were +$1.5bn and EM equities were +$5.3bn. And new records are being set in India.

[year-on-year] Folios have grown 32%, while retail AUM has grown 38%. Retail investors have continued to repose faith in mutual funds as an investment vehicle despite some volatility even in March. - NS Venkatesh, chief executive officer at AMFI (BQ)

We’ll see tighter monetary policy interacting with flows over the next few months. Things are going to get interesting.

Markets this Week

The US long-end got smashed to bits while the Indian 10-years sold off after RBI’s shift in policy. Indian equities continued to recover and are within ~5% from their all time highs.

Links

A lesson in investing from The Wizard of Oz (rock-wealth)

The new middle-class gambling addicts: how day trading is ruining lives (thetimes)

Just because something is “fintech”, doesn’t mean it doesn’t missell. It could just be misselling at scale.

Twitter avatar for @StojBojJohn Stoj @StojBoj
I have a Betterment account that I funded in 2019 with $100 so I can see how it works. They have me in eleven funds: 10 stock, 1 bond. My 1099 is 8 pages long. The value at the end of March, 2022 was $137. $100 of VTI held for the same period is now worth $173. Simplicity FTW

April 6th 2022

11 Retweets373 Likes

Five Things I Know about Investing (dimensional)

RBI finally course-corrects; begins normalizing in baby steps (LiveMint)

Twitter avatar for @MikeSmithAFRMichael Smith @MikeSmithAFR
The situation in Shanghai is scary. Reports of millions struggling to feed themselves, elderly unable to access medicine, videos of small riots breaking out circulating on social media. Many households relying on inadequate govt food deliveries.

April 8th 2022

13,645 Retweets26,352 Likes

Meme of the Week

Twitter avatar for @SMTuffySean Tuffy @SMTuffy
The actual consequences of the WFH revolution
Image

April 8th 2022

104 Retweets1,188 Likes

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