Antipodean Capital Macro Strategy Daily Dec 20 - Sorry Jay Powell, that ain’t enough for me. Stocks and US macro data will need to weaken a lot further than currently before the Fed saves the stock market.

Macro: Fed: The problem the Fed had today was that domestic US macro data was not weak enough for them to do more than hike to the lower range of neutral rates, and shave a dot hike off their profile going forward. Yet markets are over valued, and worried about slowing leading indicators, irrational or not, and there is no sign that that worry is evaporating or being replaced by optimism to date. That means that either financial conditions need to tighten a whole lot more (via lower stocks), or domestic US data needs to weaken a whole lot more, for the Fed to then think they need to shave more dots off their hike profile. That therefore implies that stocks need to fall further, and meaningfully (say to be -20 or -25%) such that financial conditions really tighten, or data needs to collapse, which given its lagging nature, will take time (at least 3mths, ir not 6mths), before the fed can deliver a rate hike profile (ie. no more) than markets currently price.

Summary: US markets and bond yields fell heavily post the Fed decision, the USD rose and commodity prices were mixed. The Fed has not been able to validate current market pricing for no further rate hikes after today simply because data is not weak enough nor stocks low enough for them to do so. So stocks will have to fall a lot further, and data weaken a lot further, for them to validate current market pricing.

New trades: None.
FX: Short $JPY at 112.80 risk 114.20 tgt 110. Long EUR$ at 1.1360 risk 1.1260 target 1.18. Sold NZDJPY 78.30 risk 78.90 target 75. Long JPYKRW at 9.85 risk 9.76 target 10.30
BONDS: Long 2 units ASX Banks 5yr CDS at 54bps, target 140. Long NZ 10s short NZ 2s at 104bps risk 130bps target 50bps. Sold Portugal 10yr bought German Bund at 158bps, risk 110bps target 350bps. Bought US 10’s at 2.91% risk 3.1% target 2.6%. Sold HYG at 83.55 risk 85 target 80.
EQUITIES: Long ASX All Ordinaries Top 100, Short ASX Small Ordinaries at 0.81x ratio. Stay short 1 unit Homebuilders at 751. Short US Banks Index at 93.25 risk 100 target 80. Stay short Dow Transports at 10375 risk 10800 target 9000.
COMMODITIES. Long Silver short Gold at 83.9x risk 87 target 65. Long Silver 14.08 risk 13.85 target 14.80+. Bought Gold at 1243 risk 1230 target 1300.