False Dawn: Why The Rally Is Over | Andy Constan & Joseph Wang

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Constan argues that favorable market conditions that allowed risk assets to rise during the summer are no longer present, and that this “false dawn” is over. Wang argues that QT will drain the banking system of reserves and the Fed may have to plug “leaks” in the financial plumbing.

Filmed on September 7, 2022.

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00:00 Introduction
00:44 Quantitative Tightening's (QT) Impact on Markets
10:38 Equity & Bond Market Flows Over The Past Few Months
15:46 Volatility (Vol) Targeting
24:18 Equity Risk Premium Model
32:13 The "False Dawn" In Asset Prices
38:28 Joseph Wang on Treasury Issuance
43:58 Joseph on "The Reserve Gap"
53:50 The Fed's Ample Reserve Regime
57:11 Andy Constan's Outlook on Bonds
1:02:02 How Far Can The Fed Go In Hiking Rates?
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Disclaimer: Nothing discussed on Forward Guidance should be considered as investment advice. Please always do your own research & speak to a financial advisor before thinking about, thinking about putting your money into these crazy markets.

[ScottSenkeresty]

Came for the Joseph Wang... and had my first experience with the Andy Constan... what a great guest!

[ClyDIley]

Jack, love it. Would also love to see Mr. Wang on every episode, although I know he already comes around alot. I feel more comfortable and willing to trust guest claims when you and Joseph are here together to walk us through things. Many thanks.

[BlueWaterSTAX]

Awesome show Blockworks. We appreciate everything 👍😀

[DrunkenXiGinPing]

I just want to remind Wang that his lamp shade behind him is crooked !

[raw-bot]

Is Joseph Wang flying a Helicopter? With his headset on, he looks like a pilot giving weather report from the city above! 🤣

[napoleon]

When the fed announced they were gonna start hiking I sold most of my positions and focused on paying off debts. That has been the best performing investment I could have reasonably made without taking a huge risk.

[GamingBear_Q_E_D]

Loved the way at 44 minutes you directed the conversation like a Stalinist political officer overseeing the clever people and directing them away from the real heart of things to suit the agenda of the political elites you seem scared of.
very interesting to see.

[yurik]

This is such a great discussion and explanation. Thank you for putting out the high quality videos.

[JamesMullarneyIsAFraud]

great chat! Love these 2 dudes. Super smart

[tonya]

You know what's missing in this discussion is the massive amounts of 2Y and 3Y treasuries auctioned in 2020 and 2021 that matures and will have to be refinanced. For that to happen while Quantitative Tightening is going on is beyond a stretch. Sometimes it make sense to look forward and see if your assumptions still make a lot of sense.

[Robyn-Hood]

Great piece of art an Agum!! this was a great video!!

[sagitta]

Great episode! And great audio too this time :P

[RadicallyFRUGAL]

Question when the Federal Reserve reduces its balance sheet by not buying a replacement treasury bond when it matures where does that cash go does the Federal Reserve have to remit the repayment of the bond back to the treasury or does it just sit in the Federal Reserves checking account

[slowridefpv]

If the fed doesn’t let all the maturing assets roll off the balance sheet they are still easing. Want to impress us sell assets, that would be tightening.

[adamc]

Super interesting and insightful conversation. 👍

[kapdolkim]

Super great content. Would be better if it was in presentation and graph form as some concepts are hard to remember.

[surfreadjumpsleep]

if the gatekeepers of the economy can't afford lambos or used rolexes then aren't they more likely to raise prices on everyone else? ;-)

[tonya]

Is it the size of the balance sheet, or the zero-bound interest rate, or both?

[mikebarosh]

Too many ads it’s hard to pay attention

[jamesmontgomery]

I don’t think of jack as a “ member of the media “, he’s like a trusted family friend. I am an orphan. But I. Mean … if I had a family.