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How Much Market Stress Is Enough

How Much Market Stress Is Enough

By Nick Colas of DataTrek Research

Topic #1: How bad do capital markets have to get before the Federal Reserve and Chair Powell change their minds about raising interest rates and/or reducing the size of…



How Much Market Stress Is Enough

By Nick Colas of DataTrek Research

Topic #1: How bad do capital markets have to get before the Federal Reserve and Chair Powell change their minds about raising interest rates and/or reducing the size of the balance sheet? We have one recent historical precedent to consider: December 2018. Recall that during Q4 2018 Chair Powell was quite vocally saying that Fed Funds were still “a long way from neutral”; they were 2.0 percent at the time, and the Fed had been bumping them higher all year.

In December 2018, capital markets sent a strong signal to the Fed: policymakers there were wrong about the neutral rate of interest. Chair Powell got the message and changed his stance in early January.

Here is how various markets performed that month, and how that compares to January 2022:

  • S&P 500: -14.8 percent from the start of December 2018 to the lows (December 24th)
    • Now: -8.3 pct from 2022 highs (January 3rd, 2022)
  • Dow Jones Industrials: -14.7 percent from the start of December 2018 to the lows (also on the 24th)
    • Now: -6.9 pct from the 2022 highs (January 4th, 2022)
  • CBOE VIX Index: peaked at 36.1 on December 24th, 2018
    • Now: 28.9
  • Investment grade US corporate bond spreads over Treasuries: 159 basis points, on December 31st, 2018
    • Now: 100 bp over Treasuries
  • High yield US corporate bond spreads: 533 bp over Treasuries on December 31st, 2018
    • Now: 310 bp over Treasuries

Takeaway: by any measure as the Fed looks to assess capital markets stress (e.g., stock prices, VIX, corporate bond spreads), we are nowhere near the same point as in 2018 where the central bank reconsidered its monetary policy stance. The gap in terms of near-term stock price performance is 7-8 percentage points and the VIX needs to go to 36 (2 standard deviations from the mean) rather than the current 29 level (just over 1 standard deviation).

Put another way: until we get a further selloff in risk assets, the Fed will simply not be convinced that raising interest rates and reducing the size of its balance sheet in 2022 will more likely cause a recession rather than a soft landing. Either outcome would dampen inflation, of course, which is why 10-year Treasury yields have stopped climbing. But only a soft landing would allow public companies to continue to post strong earnings. The risk of a hard landing is why US large caps are under so much stress.

Topic #2: Building on the prior point, let’s look at US corporate bond spreads over the last 3 years. The chart below shows investment grade (IG, green line, left axis) and high yield (HY, red line, right axis) spreads from 2019 to the present. As noted, IG spreads are currently right in line with their pre-pandemic lows (99 – 100 bps) and HY spreads are actually lower than early 2020 (310 bp now, 338 bp then).

We had a long conversation on Friday with a senior NYC investment banker who specializes in leveraged finance about why HY spreads remain so tight. His answer was that this market is taking a “wait and see” approach to recent equity market volatility. HY investors, in his view, remain confident in US economic growth and feel the companies in this space will continue to generate free cash flow. Also, the duration of paper in the HY bond/leveraged loan market is substantially shorter (3-4 years) than investment grade (10 years) so it is not as susceptible to moves at the long end of the yield curve.

Takeaway: as much as US equities are ringing alarm bells, the corporate bond market is not. We have a deeper dive into BBB paper in “Data”, below.

Topic #3: A brief update on Fed Funds Futures’ current odds for how rate policy develops in 2022:

  • There is almost no chance (just 5 percent odds) that the FOMC will increase interest rates at this week’s meeting (January 26). This makes sense given that the Fed is still purchasing bonds, albeit at a reduced rate, and will not be done with tapering until March.
  • The March 16th meeting will almost certainly see a rate hike of 25 basis points (89 pct odds), but not 50 basis points (5 percent odds).
  • The May 2nd meeting will most likely see another rate hike of 25 bps (55 pct odds), but there’s also a reasonable chance (40 pct odds) that the FOMC will stand pat after raising rates in March.
  • The odds of a 3rd sequential 25 bp rate hike at the June 15th meeting are low (32 percent). This implies that Fed Funds Futures believe the FOMC will move twice between March and midyear but then stand back in June to see the near-term effects of its change in policy.
  • By December, Futures put the highest odds on 4 rate hikes in 2022 (32 pct), followed by 5 hikes this year (23 pct) or just 3 hikes (23 percent). The odds of 6 hikes is small (9 percent) but higher than either a week ago (8 percent) or a month ago (2 percent).

Takeaway: Fed Funds Futures are very clearly expecting the FOMC and Chair Powell to strike a much more hawkish stance than its December guidance at this week’s meeting and Chair press conference. US stocks have been weak as a result and even 10-year Treasury yields have pulled back since Tuesday, mirroring the equity market’s concern about a monetary policy overtightening mistake.

Tyler Durden Mon, 01/24/2022 - 06:30

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Spread & Containment

Cold Spring Harbor Laboratory press announces the release of the medical revolution of messenger RNA by Fabrice Delaye

Cold Spring Harbor, NY – Cold Spring Harbor Laboratory Press (CSHL Press), a publisher of scientific books, journals, and electronic media, today announced…



Cold Spring Harbor, NY – Cold Spring Harbor Laboratory Press (CSHL Press), a publisher of scientific books, journals, and electronic media, today announced the publication of The Medical Revolution of Messenger RNA by science and technology journalist Fabrice Delaye.

Credit: Endpaper Studio, George Restrepo
iStockphoto: Christoph Burgstedt

Cold Spring Harbor, NY – Cold Spring Harbor Laboratory Press (CSHL Press), a publisher of scientific books, journals, and electronic media, today announced the publication of The Medical Revolution of Messenger RNA by science and technology journalist Fabrice Delaye.

Many people think it took just ten months to develop a vaccine against the virus that causes COVID-19. What most don’t know is that it was made possible by using messenger RNA (mRNA), the molecule that instructs cells to make a viral protein that stimulates the production of antiviral antibodies, and that this breakthrough technology, which Nobel Prize winner Thomas Cech calls biology’s equivalent of putting a man on the moon, had been in development for three frustrating decades—decades preceded by thirty years of fundamental research. In fact, two scientists, Katalin Karikó and Drew Weissman, won the 2023 Nobel Prize in Physiology or Medicine for their pioneering work in messenger RNA.

Karikó and Weissman are among the many prominent scientists interviewed by veteran science journalist Fabrice Delaye for his book The Medical Revolution of Messenger RNA, which tells the story of how mRNA’s medical potential was finally realized, setting the stage for a coming revolution in which our own bodies will generate the therapeutic molecules we need. Though it’s now thought to show promise for the treatment of everything from cancer to cystic fibrosis to cardiovascular disease, mRNA was long overlooked by mainstream molecular biologists. The path to recognition of its therapeutic possibilities was littered with broken careers, lawsuits, and opportunities missed by pharmaceutical companies. For the scientists who persisted through years of academic and commercial disappointment, the COVID-19 vaccine was a huge vindication and an important step toward a new generation of therapies.

When mRNA-based vaccines came to the rescue during the pandemic in seemingly record time, Delaye realized that their development could not have been as simple and quick as people wanted to believe. But when he tracked down the origins of mRNA technologies, he uncovered a dramatic story that had never been told. Building on decades of contacts and his unique grasp of the science and the stakes involved, Delaye interviewed more than fifty mRNA scientists and entrepreneurs worldwide. His book documents the long, harrowing, unlikely but ultimately triumphant road to a discovery with the potential to revolutionize medicine far beyond the pandemic.

For more information visit

Fabrice Delaye is a science and technology journalist based in Switzerland. He was U.S. correspondent at the daily Swiss newspaper L’Agefi, science and technology editor at magazine Bilan, and is now a reporter-at-large for in Geneva. He is a graduate of the Institut d’Études Politiques de Paris and has a master’s degree from the Swiss Institute of Technology in Lausanne, EPFL.

About Cold Spring Harbor Laboratory Press

Cold Spring Harbor Laboratory Press is an internationally renowned not-for-profit publisher of books, journals, and electronic media, located on Long Island, New York. Since 1933, it has furthered the advance and spread of scientific knowledge in all areas of genetics and molecular biology, including cancer biology, plant science, bioinformatics, and neurobiology. It is a division of Cold Spring Harbor Laboratory, an innovator in life science research and the education of scientists, students, and the public. All revenue from sales of CSHL Press publications supports research at Cold Spring Harbor Laboratory.

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New specimen collection system enhances assisted reproductive technologies

New Specimen Collection System Enhances Assisted Reproductive Technologies Credit: TTUHSC New Specimen Collection System Enhances Assisted Reproductive…



New Specimen Collection System Enhances Assisted Reproductive Technologies

Credit: TTUHSC

New Specimen Collection System Enhances Assisted Reproductive Technologies

Considered an experimental procedure during the late 1970s when it made headlines with each birth it produced, in vitro fertilization (IVF) has helped many couples overcome infertility issues for more than four decades. In several nations, IVF is responsible for up to 3% of the babies born. 

The procedure, now a cornerstone of infertility treatments, has expanded to include other assisted reproductive technologies (ARTs). One of those ARTs, known as intracytoplasmic sperm injection (ICSI), involves using a microscopic needle to inject a single sperm into an egg. 

Though viewed as an almost universal means for egg insemination, ICSI does have limitations. It requires expensive equipment and well-trained individuals. And while many other technologies for selecting viable eggs have been developed over the past few years, there remain few options for selecting healthy sperm beyond assessing their movement and morphology (structure). 

In an ongoing effort to improve healthy sperm selection, Samuel Prien, Ph.D., and Lindsay Penrose, Ph.D., from the Department of Obstetrics and Gynecology at the Texas Tech University Health Sciences Center (TTUHSC) School of Medicine have worked for years to develop a specimen collection cup that creates a more favorable environment for sperm.

In 2022, they received a patent (“Method and Apparatus for Collection of Fluid Samples”) to produce a second-generation collection cup that made important improvements to the first such patented device invented at TTUHSC several years prior by Prien and Dustie Johnson, Ph.D. That second-generation device, known as the DISC (Device for Improved Semen Collection), is marketed today by Reproductive Solutions under the brand name ProteX.

In their latest study (“A Simple One-Step System Enhances the Availability of High-Quality Sperm for Assisted Reproductive Procedures”) that was published Oct. 10 by the Open Journal of Obstetrics and Gynecology, Prien and Penrose provided preliminary results of their latest collection technology system design, which provides a simple, one-step method of sperm selection for ICSI which also may prove useful for conventional IVF and IUI (intrauterine insemination).

The system, defined as the sperm isolation device that uses a barrier mesh between fluids, is known commercially as the NovaSort and also is marketed by Reproductive Solutions. The basket-like device was designed to work in any properly shaped holding vessel, but ideally in tandem with the ProteX collection cup.

“This new design allows us to process the sample and very simply recover mobile sperm,” Prien said. “In a one-step process, we put the little basket in, we wait the appropriate amount of time and then we have mobile sperm which have not been through the rigors of all the other ways we process sperm right now, such as with centrifuges and different kinds of gradients that can damage the DNA. We can isolate the sperm without ever having exposed them to anything that might damage them.”

Prien said the NovaSort is designed to prevent the mixing of seminal fluid and media while allowing the motile (moving) sperm to move out of the seminal fluid and into the media while keeping unwanted debris out. This provides a clean highly motile population of sperm to use in ARTs.

John Smothers, co-founder and executive vice president of Operations and Technology for RSI, said the new system design helps address two issues clinics face in collecting viable samples: chain of custody and time.

“Any potential chain of custody issue goes away because the sample never leaves the collection cup,” Smothers said. “It also provides efficiency because the clinics can conduct the process in about 15 minutes, whereas before it was taking an hour or more. And they complete the process with much healthier sperm, which increases the chances of having healthy pregnancies.”

Prien, Penrose and TTUHSC have filed patent applications for the new system design, which was demonstrated live at the American Society for Reproductive Medicine Scientific Congress and Expo Oct. 14-18 in New Orleans. Penrose said she’s most excited to display the overall efficiency the new system provides to practitioners and the hope it provides patients.

“We’re going to be able to help our lab colleagues be more efficient in their work, and we’re going to be able to help more patients have healthy pregnancies,” Penrose added. “That’s always our goal.”

And while the new system is exciting for RSI from a commercial standpoint, Smothers said it also demonstrates how the successful collaboration between TTUHSC and RSI is helping patients. 

“We wouldn’t be at this point if we didn’t have partners like TTUHSC that would collaborate and work with us,” Smothers added. “It makes a huge difference for us, TTUHSC and patients.”


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An Award Announcement With a Dash of Market Commentary

With words like "Schneider’s dedication to educating others about stocks is unparalleled," Traders World Fintech Awards honors me in the most amazing way…



With words like "Schneider's dedication to educating others about stocks is unparalleled," Traders World Fintech Awards honors me in the most amazing way possible.

I have always been a teacher, whether in Special Education, or on the floor of the NY Commodities Exchanges as a chartist to my fellow traders, or in the last two decades, with MarketGauge and our clients.

Financial literacy might be one of the most underrepresented curricula in the US, if not the world!

My Economic Modern Family was created to fill the gap between basically no financial literacy taught in schools and beyond, to how folks can learn about stocks and the markets in a fun, tangible, and incredibly accurate way.

In yesterday's Daily, we covered the Family and how there is no better time to look at the charts on a weekly timeframe.

Today, the Family shifted.

  • Small Caps (IWM) and Retail (XRT), a.k.a. Gramps and Granny, woke up while Sister Semiconductors (SMH) fell.
  • Transportation (IYT) tested the top end of the range we discussed, which is between 220–235.
  • For XRT, we can say the range to watch is 57–65.
  • Small Caps or IWM needs to hold 170 and clear overhead resistance at 180.
  • Biotech (IBB) has been stuck in time for the last four weeks. The best range to watch would be 120–125.
  • Prodigal Son Regional Banks (KRE), except for a couple of rallies and sell-offs, sits between 40–45.
  • Bitcoin, a new member of the Family, was featured over the weekend in our Daily. As it holds 28,000, we anticipate it can climb to $31,500.

And let's not forget commodities.

In my recent interview with Kitco, I warned, "Higher bond yields could already be taking their toll on the US economy, and weak economic growth and stubborn inflation continue to create a stagflationary environment, which would be bullish for gold."

In another recent Daily, we discussed DBA, the Agricultural ETF, and DBC, the commodity index ETF.

"Over 21.80, we would begin to think more bullish in agriculturals. DBC on the right, more oil and precious metals focused, also underperforms the SPY. That is surprising and supports a risk-on environment. Through 24.75 that picture changes."

Traders' World also wrote, "Her ability to connect with her students on a personal level, provide ongoing support, and foster a sense of community among her followers is remarkable."

And for that, I THANK YOU, my loyal readers! Because of you and your support, I won this incredible award!

This is for educational purposes only. Trading comes with risk.

If you find it difficult to execute the MarketGauge strategies or want to explore how we can do it for you, please email Ben Scheibe at, our Head of Institutional Sales. Cell 612-518-2482.

For more detailed trading information about our blended models, tools, and trader education courses, contact Rob Quinn, our Chief Strategy Consultant, to learn more.

Get your copy of Plant Your Money Tree: A Guide to Growing Your Wealth.

Grow your wealth today and plant your money tree!

"I grew my money tree and so can you!" - Mish Schneider

Follow Mish on Twitter @marketminute for stock picks and more. Follow Mish on Instagram (mishschneider) for daily morning videos. To see updated media clips, click here.

Mish in the Media

Mish and Dale Pinkert discuss the disconnect between news and markets-and how to best invest right now in this video from ForexAnalytix's pre-market show.

In this video from CMC Markets, Mish shares her short-term forecast for USD/JPY and popular commodity instruments ahead of the US PPI announcement and September's Fed meeting minutes, with recent dovish comments from Fed officials suggesting a potential shift in the committee's policies.

Mish joins Business First AM to discuss the market reaction to the war in Gaza in this video.

Mish discusses what's needed for a market bottom on the Financial Sense Newshour podcast with Jim Puplava.

Mish takes over as guest host for David Keller, CMT on the Monday, October 9 edition of StockCharts TV's The Final Bar, where she shares her thoughts in the daily Market Recap during a day of uncertain news.

To quote Al Mendez, "The smartest woman in Business Analysis @marketminute [Mish] impresses Charles with her "deep dive" to interpret the present Market direction." See Mish's appearance on Fox Business' Making Money with Charles Payne here!

Mish covers bonds, small caps, transports and commodities-dues for the next moves in this video from Yahoo! Finance.

In this video from Real Vision, Mish joins Maggie Lake to share what her framework suggests about junk bonds and investment-grade bonds, what she's watching in commodity markets, and how to structure a portfolio to navigate both bull and bear markets.

Mish was interviewed by Kitco News for the article "This Could Be the Last Gasp of the Bond Market Selloff, Which Will be Bullish for Gold Prices", available to read here.

Mish presents a warning in this appearance on BNN Bloomberg's Opening Bell -- before loading up seasonality trades or growth stocks, watch the "inside" sectors of the US economy.

Watch Mish and Nicole Petallides discuss how pros and cons working in tandem, plus why commodities are still a thing, in this video from Schwab.

Coming Up:

October 18: Crypto Town Hall X Spaces

October 19: Live Coaching

October 20: StockCharts TV's Your Daily Five

October 23: BNN Bloomberg

October 27: Live in-studio with Charles Payne, Fox Business

October 29-31: The Money Show

Weekly: Business First AM, CMC Markets

ETF Summary

  • S&P 500 (SPY): 440 resistance, 429 support.
  • Russell 2000 (IWM): 177 resistance, 170 KEY support.
  • Dow (DIA): 344 resistance, 332 support.
  • Nasdaq (QQQ): 368 pivotal.
  • Regional Banks (KRE): 39.80 -42.00 range.
  • Semiconductors (SMH): 150 pivotal.
  • Transportation (IYT): 237 resistance, 225 support.
  • Biotechnology (IBB): 120-125 range.
  • Retail (XRT): 57 key support if can climb over 61, better.

Mish Schneider

Director of Trading Research and Education

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