Summary

Jon outlined his view that on the one hand, the base case is that the economy is still strong, and the Fed will continue to get marginally more hawkish. Which continues to be his more dominant global macro theme, strong growth and less dovish Fed. Which should play out something like 1) In terms of the dollar, it seems like this range should continue to hold. On the one hand, a dollar bear market must come out of the distribution because the Fed can no longer embrace good outcomes, which means pro cyclical policy is out. However, the economy is still strong, and there is no policy divergence, i.e., the Fed isn’t getting more hawkish alone. This should keep a lid on how high the dollar can go. The dollar is capped by the strength of growth and has a post FAIT floor. 2) Reflation but not a steepener… he thinks reflation trades should continue to do well, but also on balance favours flatteners in the rates space. Flatteners are more asymmetric to policy tightening and equities are more asymmetric to growth upside. Jon say’s that is the best way to think about this current duality. 3) Another way of saying this is, he wants to be the short scope for both growth and inflation because policy will cap that right tail, but he still wants to bet on both being strong. Which is something like long S&Ps and flatteners.

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