Leo Haviland provides clients with original, provocative, cutting-edge fundamental supply/demand and technical research on major financial marketplaces and trends. He also offers independent consulting and risk management advice.

Haviland’s expertise is macro. He focuses on the intertwining of equity, debt, currency, and commodity arenas, including the political players, regulatory approaches, social factors, and rhetoric that affect them. In a changing and dynamic global economy, Haviland’s mission remains constant – to give timely, value-added marketplace insights and foresights.

Leo Haviland has three decades of experience in the Wall Street trading environment. He has worked for Goldman Sachs, Sempra Energy Trading, and other institutions. In his research and sales career in stock, interest rate, foreign exchange, and commodity battlefields, he has dealt with numerous and diverse financial institutions and individuals. Haviland is a graduate of the University of Chicago (Phi Beta Kappa) and the Cornell Law School.


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The Rolling Stones sing in “All Down the Line”:
“We’ll be watching out for trouble, yeah
(All down the line)
And we’d better keep the motor running, yeah
(All down the line)”



Financial marketplace trends entangle in diverse fashions, which of course can change, and sometimes dramatically. Convergence and divergence (lead/lag) relationships between them can and do evolve, sometimes significantly. An increasing reversal of a given ongoing prior set of patterns between one or more key interest rate, stock, currency, and commodity marketplaces thus can attract growing attention and accelerate price moves in the new directions.


In general, since around the beginning of calendar 2022, as American and other key global government interest rates continued to rise (enlist the United States Treasury note as a benchmark), the S+P 500 (and other advanced nation and emerging marketplace stock playgrounds) declined. Growing fears regarding substantial and persistent consumer price (and other) inflation by the Federal Reserve and its central banking allies and the linked policy response of raising Federal Funds and similar rates played key roles in the yield climbs and stock price falls. Bear trends for other “search for yield” assets such as corporate bonds and United States dollar-denominated emerging marketplace corporate debt converged with those of the S+P 500 and emerging marketplace stocks. Commodities “in general” (“overall”) of course do not always trade “together” in the same direction around the same time as the S+P 500. Nevertheless, in broad brush terms since around late first quarter 2022, their downward price and time trends converged. A very strong US dollar encouraged the relationships of higher US Treasury yields, descending stock prices, and eroding prices for commodities “in general”.

However, the US 10 year note yield achieved an important high on 10/21/22 at 4.34 percent. Using the Federal Reserve Board’s nominal Broad Dollar Index as a weathervane, the dollar peaked at 128.6 on 9/27/22 and 10/19/22. The S+P 500 established a trough in its bear trend with 10/13/22’s 3492. Based on the S+P GSCI, commodities in general attained an important low on 9/28/22 at 591.8. Note the roughly similar times (and thus the convergence) of these marketplace turns, which thereafter reversed, at least temporarily, the preceding substantial trends.

What key changes in central bank policy and marketplace inflation yardsticks encouraged the recent slump in the UST 10 year yield, the depreciation in the US dollar, and the jump in the S+P 500 and the prices of related hunt for yield (adequate return) battlefields? First, various members of the Federal Reserve leadership hinted that future rate increases would slow in extent (be fifty basis points or less rather than 75bp). See the Financial Times summary of officials leaning that way (11/12-13/22, p2). The Fed probably will tolerate a brief recession to defeat inflation, but it (and of course the general public and politicians) likely would hate a severe one. In today’s international and intertwined economy, further substantial price falls (beneath recent lows) in the stock and corporate debt arenas (and other search for yield interest rate territories), and even greater weakness than has thus far appeared in home prices, plus a “too strong” US dollar, are a recipe for a fairly severe recession. Hence the Fed’s recent rhetorical murmurings aim to stabilize marketplaces (and encourage consumer and business confidence and spending) and avoid a substantial GDP drop.

Second, US consumer price inflation for October 2022 stood at “only” 7.7 percent year-on-year. This rate fell short of expectations for that month and declined from heights exceeding eight percent in the several preceding months. This sparked hopes that American (and maybe even global) inflation would continue to decline even more in the future, and that the Federal Reserve and other central bank guardians would engage in less fierce tightening trends.

Of course the Fed policy hints and US consumer inflation statistics do not stand apart from other variables. Might China ease its restrictive Covid-fighting policy, thus enabling the country’s GDP to expand more rapidly?

The trends for commodities in general (employ an index such as the broad S+P GSCI) and the petroleum complex in particular sometimes have diverged substantially for a while from that of the S+P 500. After all, petroleum, wheat, and base metals have their own supply/demand and inventory situations. The broad S+P GSCI stabilized in early autumn 2022 due to a determined effort by OPEC to rally petroleum prices via production cuts. And over the long run, the S+P 500 and commodities tend to trade together. OPEC+’s ability to successfully defend a Brent/North Sea crude oil price around 83 dollars per barrel (nearest futures continuation) depends substantially on interest rate and stock levels and trends, as well as the extent of US dollar strength.

The “too strong” US dollar during calendar 2022 encouraged price declines in assorted search for yield asset classes, including emerging marketplace stocks and debt instruments as well as commodities. The recent depreciation of the US dollar thus has interrelated with (confirmed) the price rallies in recent days in the S+P 500 and other marketplaces. Yet the Federal Reserve probably will remain sufficiently vigorous in comparison with other central banks in its fight against inflation, which should tend to keep the dollar strong, even if it stays beneath its recent high.


Investors in (and other owners of) stocks and other search for yield realms and their financial and media friends joyously applauded recent price rallies. However, to what extent will these bullish moves persist?

US consumer price and other key global inflation indicators remain very high relative to current central bank policy rates. Not only does the US CPI-U all items year-on-year percentage increase of 7.7 percent for October 2022 substantially exceed UST 10 year yields over four percent, but so does October 2022’s 6.3 percent year-on-year increase in the CPI-U less food and energy.

Imagine consumer price inflation staying at only 4.5 percent. To give investors a 50 basis point return relative to inflation, the UST should yield five percent. Thus the Fed will continue to push rates higher in its serious battle against inflation, and eventually the rising UST yield pattern probably will reappear, persisting until there are signs of much lower inflation or a notable recession.

Although marketplace history is not marketplace destiny, history reveals that significant climbs in key US interest rate signposts (such as the UST 10 year) tend to precede substantial falls in US stock benchmarks such as the S+P 500. Thus the S+P 500 probably will resume its decline, although it will be difficult for it to breach its October 2022 depth by much in the absence of a sustained global recession. So a return to rising UST rates, all else equal, probably will keep the dollar fairly powerful from the long run historic perspective, even though the dollar will find it challenging to exceed its recent highs by much (if at all) for very long.

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Critical Conditions in Financial Marketplaces (11-13-22)

HUNTING FOR YIELD: THE THRILL IS GONE © Leo Haviland October 4, 2022

BB King complains “The thrill is gone” in his song named after that lyric.




Financial warriors in securities and other marketplaces always hunt for adequate yield (sufficient return) on their capital. Especially in Wall Street’s stock and interest rate realms, the majority of institutions and individuals (not the market-makers) eagerly searching for yield are owners, thus initiating their positions from the buying side. Most of these owners on Wall Street and Main Street seeking wealth and economic security grant themselves or receive the honored cultural designation of “investor”, with their long positions generally labeled as investments. Especially in stock and debt arenas, “investment” is deemed “good”. On Main Street, homeowners likewise as a rule view their property as an investment. And since the appealing investment badge and related rhetoric excites interest and encourages action, such as buying and holding, Wall Street guides and their media and political comrades enthusiastically and liberally employ investment wordplay, especially in stock and interest rate territories. Given the persuasiveness of investment talk, many Wall Street wizards often extend the label to other asset classes such as commodities “in general”, perhaps calling them “alternative investments”.

Of course therefore on Wall Street, investors generally are happy (joyous, pleased) when asset prices rise (especially in stocks) on a sustained basis, and sad (depressed, unhappy, angry) when such prices decline. Thus for stocks, high and rising prices (and bull market trends) are “good”, whereas low and falling prices (and bear markets) are “bad”. However, investment rhetoric and devotion to ownership do not abolish price risk. So capital preservation matters too. Because broad, longer-run directional price patterns are not necessarily a one-way street, numerous investors during a noteworthy price decline fearfully run for cover, selling some or all of their positions (or at least not buying more for their portfolio, even an allegedly well-diversified one).

Moreover, increasing fears regarding whether economic growth will be adequate can make investors (and others) considerably more nervous about holding on to a given quantity of assets. Uncertainty itself (as well as price “volatility”), if sufficiently substantial, can help to inspire many to flee out of assets which now appear to be “too risky”!


In any case, the bear marketplace trend in the S+P 500 which commenced in January 2022 (and related slumps in other advanced nation equity arenas) and significantly rising yields (falling prices) in the US Treasury marketplace (as well as in other sovereign and corporate debt landscapes around the globe) thus have disturbed, dismayed, and injured many investors (and other owners). That stocks and bonds have collapsed “together” in recent months is especially upsetting! Note also the long-running retreat in emerging marketplace stocks. Commodities “in general” have cratered from their first quarter 2022 highs. In recent months, even United States home prices have declined moderately. This scary financial carnage surely has substantially reduced financial net worth around the world, and especially within the consumer (household) sector. The US dollar, which is part of this capital destruction story, not only has remained very strong for quite some time, but also recently climbed to new highs.

In today’s international and intertwined economy, the interrelated substantial price falls in the stock and bond marketplaces, and the potential for even greater weakness than has thus far appeared in home prices, plus a “too strong” US dollar, are a recipe for recession. The net worth destruction resulting from substantial price falls in these assets probably indicates a significantly greater probability of recession, not merely an extended period of mediocre real GDP growth (or stagflation), in America and many other leading economies, than most forecasters assert. Although commodities are not a substantial part of household net worth, their significant price slump in recent months not only confirms the price downturn in the S+P 500 and related stock marketplaces, but also warns of underlying economic feebleness. Note recent year-on-year declines in US petroleum consumption.



“Marketplace Expectations and Outcomes” (9/5/22) restated the viewpoint of “Summertime Blues, Marketplace Views” (8/6/22): “Despite growing concerns about a United States (and global) economic slowdown or slump, and despite potential for occasional “flights to quality” into supposed safe havens such as the United States Treasury 10 year note and the German Bund, the long run major trend for higher UST and other benchmark international government yields probably remains intact.” Regarding the S+P 500, the essays concluded: “Although the current rally in the S+P 500 may persist for a while longer, the downtrend which commenced in January 2022 probably will resume. The S+P 500’s June 2022 low probably will be challenged.”


Marketplace history is not marketplace destiny, and convergence and divergence patterns between stocks, interest rates, and other arenas can shift, sometimes dramatically. However, despite the S+P 500’s ferocious rally after 9/30/22’s 3584 trough, it and other related stock marketplaces probably will fall beneath their recent lows eventually. The US Treasury 10 year note yield, given ongoing lofty inflation levels around the globe and the determined effort of the Federal Reserve and other central bankers to reduce inflation to acceptable heights, probably over time will climb higher, exceeding its recent high around four percent. Consumer price inflation probably will remain lofty for at least a few more months on a year-on-year basis. However, within that rising yield trend, UST prices occasionally may rally due to nervous “flights to quality”.

A victorious fight against the evil of excessive inflation probably requires a recession. If a notable global recession emerges (or if fears regarding the development of one grow substantially), then central bankers probably will slow or even halt their current rate-raising program.

Suppose OPEC and its allies engineer a notable rally in petroleum prices from current levels which lasts for a while, or that the Russia/Ukraine war induces a renewed rally in energy (and perhaps other) commodity prices. Such ascents in commodities prices (if they indeed occur) will help to keep consumer prices high and thereby tend to induce central banks to sustain their current policy tightening (interest rate boosting) programs.

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Hunting for Yield- the Thrill is Gone (10-4-22)


“Are you gonna bark all day little doggie? Or are you gonna bite? Mr. Blonde asks Mr. White in “Reservoir Dogs” (Quentin Tarantino, director), after their gang’s jewelry heist went disastrously wrong.



The Federal Reserve watchdog and its central banking companions, after a very lengthy delay, finally awoke to widespread evidence that substantial consumer price inflation was not a temporary or transitory phenomenon. The Fed guardian generally has evaded taking responsibility for its important role in creating substantial inflation (not just in consumer prices, but also in stocks and numerous other asset classes) via its mammoth money printing and yield repression schemes. But to restore and preserve its inflation-fighting credibility and sustain its marketplace reputation, in recent months the Fed noisily has raised policy rates (and significantly reduced yield repression) and started to shrink its engorged balance sheet.

The Fed’s need to manifest genuine loyalty to its legislative mandate of stable prices (which other central bankers have echoed) thus has provoked it to do some nipping, and even a little biting, of “investors” and other owners in the S+P 500 and other “search for yield” marketplaces such as corporate bonds and US dollar-denominated foreign sovereign debt. Fed Chairman Jerome Powell’s 8/26/22 Jackson Hole, Wyoming speech (“Monetary Policy and Price Stability”) further emphasized its rediscovered inflation-fighting enthusiasm. The Chairman confesses: “Inflation is running well above 2 percent, and high inflation has continued to spread through the economy.” The Chairman barks: “overarching focus right now is to bring inflation back down to our 2 percent goal”; “Restoring price stability will take some time and requires using our tools forcefully”; “estimates of longer-run neutral are not a place to stop or pause”; this restrictive policy stance likely must be maintained “for some time”; after all, “The longer the current bout of high inflation continues, the greater the chance that expectations of high inflation will become entrenched.” Note the dogged determination expressed by this trusty guardian!


“Summertime Blues, Marketplace Views” (8/6/22) states: “Despite growing concerns about a United States (and global) economic slowdown or slump, and despite potential for occasional “flights to quality” into supposed safe havens such as the United States Treasury 10 year note and the German Bund, the long run major trend for higher UST and other benchmark international government yields probably remains intact.” Regarding the S+P 500, that essay concludes: “Although the current rally in the S+P 500 may persist for a while longer, the downtrend which commenced in January 2022 probably will resume. The S+P 500’s June 2022 low probably will be challenged.”

The Fed’s late August 2022 wordplay has encouraged the previously existing trends of higher United States Treasury yields and declining prices for the S+P 500 and related search for yield (return) arenas such as emerging marketplace stocks, corporate bonds, and US dollar-denominated sovereign debt. Prices for commodities “in general” also have withered.

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Marketplace Expectations and Outcomes (9-5-22)


In “Summertime Blues”, The Who complain:
“Well, I’m gonna raise a fuss
I’m gonna raise a holler
‘Bout workin’ all summer
Just to try to earn a dollar.”



Within and regarding marketplaces and other economic realms, as in other cultural domains, diverse storytellers create and promote competing perspectives, explanations, and forecasts. In this process, the selection and weighing of variables (“facts”, data, evidence, and factors) differs, sometimes considerably. Thus rhetorical crosscurrents and a range of marketplace actions in stocks, interest rates, foreign exchange, and commodities battlegrounds inescapably exist. And since opinions can persist or change, so can significant marketplace trends and relationships, sometimes dramatically.


In today’s entangled global financial marketplaces, battling viewpoints frequently involve assessments of inflation (especially in consumer price measures) and fears regarding recession (or at least stagflation).

Long run American marketplace history shows that substantially rising United States interest rates in key benchmarks such as the United States Treasury 10 year note leads to bear marketplaces in the S+P 500 and Dow Jones Industrial Average. UST 10 year yields began rising in early March 2020, accelerating upward following 8/4/21’s 1.13 percent trough as American (and worldwide) consumer price inflation became very significant. The S+P 500 peaked 1/4/22 at 4819, plummeting almost 25 percent collapse to its mid-June 2022 low.

A “too strong” US dollar also interrelated with (encouraged) ongoing price weakness in both emerging marketplace equities and dollar-denominated sovereign debt securities (both emerging marketplace equities and debt prices peaked in first quarter 2021). The very strong dollar and price slumps in emerging marketplace securities also helped to undermine the S+P 500. Prices for commodities “in general” climbed substantially after December 2021 (Russia invaded Ukraine 2/24/22), magnifying inflation concerns and levels and thus assisting the price decline in global stock marketplaces. Though commodities peaked in early March 2022, on balance they remained quite high until around mid-June 2022.

As prices tumbled in the S+P 500 and related financial arenas (such as emerging marketplace stocks; corporate bonds and US dollar-denominated emerging market sovereign debt), avid “searches for yield/return” transformed into fearful “runs for cover”. Consumer (Main Street) and small business confidence destruction interrelated with capital destruction (loss of money) by “investors” and other owners) in stock and interest rate securities marketplaces.


However, during the past few weeks, the S+P 500 has rallied vigorously, about 14.6 percent from 6/17/22’s 3637 to 8/3/22’s 4167. Given the high consumer price inflation pattern as well as concerns about feeble economic growth, what intertwined factors probably played key roles in this S+P 500 ascent?

Within the context of a long run trend for increasing yields, a modest interim yield decline in the UST 10 year can help to spark a notable rally in the S+P 500. Note the timing of the recent yield top in the UST 10 year note, 6/14/22’s 3.50 percent in conjunction with the S+P 500’s 6/17/22 trough at 3637. Also, perhaps the renewed slide in the overall commodities field (especially the petroleum complex) since its June 2022 interim highs allayed the inflationary concerns of some marketplace participants.

Share buybacks, disappearance of substantial stock “overvaluation” in yardsticks such as price/earnings ratios, and ongoing optimism that nominal corporate earnings growth will continue over the long run (perhaps keeping pace with the Consumer Price Index) also helped to motivate an interim bull move in the American stocks. Perhaps short covering in American stocks further inflamed the ascent.

What other interrelated phenomena probably have promoted the S+P 500’s summer rally, especially after the second low on 7/14/22 at 3722? The US dollar’s depreciation since mid-July 2022, although not substantial in percentage terms, arguably has inspired some buyers to venture into American stock playgrounds.

Wall Street and its economic and political allies have long popularized, often as part of American Dream wordplay, the outlook that over the misty long run, American stocks in general (the S+P 500; investment grade equities) will keep rising (at least in nominal terms). Thus the roughly 25 percent slump in the S+P 500 since its majestic January 2022 pinnacle perhaps looked to many “investors” like a good buying opportunity over the misty long run, especially as the UST 10 year yield arguably fell sufficiently from its mid-June 2022 crest to mitigate (at least to some extent) concerns regarding inflation (and Fed rate-raising).

Everyone knows that the American stock marketplace is an investment realm greatly favored by Main Street retail players. Wall Street and Main Street guides and their friends in financial media diligently advise Main Street on the merits (goodness; reasonableness) of investment in United States stocks (especially over the long run) as a means of achieving economic security and wealth.

Institutional players of course play critical roles in US and stock and interest rate securities marketplaces. But retail customers have a very substantial impact on stock price levels and trends. Moreover, in contrast with the situation of several years ago, in regard to the equity securities of key US corporations in general (and many Exchange Traded Funds/ETFs), Main Street over the past few years has benefited from rapid execution (internet) and low (or no) commissions. As the coronavirus pandemic emerged in 2020 and persisted into 2021, apparently many Main Street dwellers ventured into the US stock marketplace (not just large capitalization S+P 500-type firms). Many of these Main Street adventurers (investors, speculators, traders) were new participants in the stock trading game. Also, in an era of significantly rising (and high) consumer prices (note the trend since around mid-2021), probably stocks—like homes—can be an inflation hedge for some devoted financial pilgrims. Besides, speculators and traders, not only investors, seek to identify and profit from “good bargains” in stocks (and other marketplaces).

Many regiments of Main Street inhabitants raced into the exciting cryptocurrency wonderland during the global pandemic (and after the crash in the S+P 500 and Bitcoin to their March 2020 bottoms). Though cryptocurrencies generally have not yet won the honored “investment” badge, some believe cryptocurrencies (or at least some brands of it) are a “good investment” and “worth owning for a while”. In any case, many people have sought to make money by trading cryptocurrencies, usually initiating positions from the buying (long) side.

Despite America’s ferocious cultural wars across numerous economic, political, and social parameters, and despite declining consumer (and small business) confidence and widespread dissatisfaction with the overall direction of the country, American consumers in general (or at least the crucial high-earning and substantial net worth segment, the “haves”, have enjoyed substantial jumps in their nominal (and probably real) net worth in recent years.

The US and global stock marketplaces are far larger than cryptocurrency ones. But picture as well the noteworthy upward flight in recent weeks within another territory favored by some Main Street retail players: Bitcoin. Note the roughly similar timing shifts (trend changes) since first quarter 2020 for Bitcoin and the S+P 500. However, the impressive 40.3 percent upward march in Bitcoin from 6/20/22’s 17579 (another low 7/13/22 at 18892) to its recent high on 8/1/22 at 24658 probably encouraged to some extent the price rallies in the S+P 500 (and some other search for yield marketplaces).

Despite the withering slump in the S+P 500 since its 1/4/22 top and the bloodbath in many cryptocurrencies (Bitcoin peak 11/20/21 at 69000; note interim tops on 12/27/21 at 52100 and 3/28/22 at 48236 occurred alongside highs in the S+P 500), overall US household net worth (and thus nowadays probably still remains quite high. Thus “buying power” remained available from a substantial portion the Main Street (general public).

Some of this Main Street (retail) buying power, even in the face of notable CPI inflation and recession concerns, probably enthusiastically jumped from the sidelines into action in the S+P 500 (and other US equities) and some related playing fields, including Bitcoin, in recent weeks.


Institutional buying surely assisted the price rallies in the S+P 500 from its June 2022 and July 2022 troughs. But did institutional (Wall Street) money (insight and action) “lead” Main Street players into buying the S+P 500 around then? Probably not in a major way. Note the gloomy economic outlooks of the World Bank and International Monetary Fund released at that time. In addition, see the “dire” pessimism of “259 fund managers responsible for more than $700 billion in investments” [in other words, institutional/Wall Street types] manifested via a survey conducted between 7/8 to 7/15/22 by the Bank of America (cited on 7/19/22 by the NY Times website).

According to that Bank of America monthly review, optimism about global growth staggered to a record low, beneath levels in the immediate aftermath of the 2008 Lehman Brothers collapse. The share of respondents who believed a recession was likely was the highest since April 2020 (as the coronavirus pandemic emerged).

However, these institutional investors apparently were holding the most cash since October 2001, (after the 9/11 attacks), over 20 years ago. Consequently Wall Street (institutional) influence probably decided to put some of that extra cash to work and thus assisted (jumped aboard) the S+P 500’s rally from its June/July 2022 valleys.

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Summertime Blues, Marketplace Views (8-6-22)