About this Video

• Video Title: Markets Haven’t Priced In The End of Fiscal Tailwinds | Andy Constan
• Channel: Forward Guidance
• Speakers: Felix (Host), Andy Constan (Guest)
• Duration: 01:11:10

Introduction

This Forward Guidance video features an interview with Andy Constan of Dan Spring Advisors. The discussion centers on three key macroeconomic levers influencing markets: Federal Reserve policy, Treasury debt management, and the fiscal impulse from recent legislation, including the impact of tariffs. The speakers analyze the interplay of these factors and their implications for economic growth and market pricing.

Key Takeaways

• Fed Policy Crossroads: The July Fed meeting showed a slight slowing of the economy but no certainty about rate cuts in September. Two dissents signaled internal debate and potential for future rate cuts, with the upcoming appointment of a new governor adding to the uncertainty.
• Treasury Quarterly Refunding Announcement (QRA): The QRA resulted in a less-than-expected increase in Treasury buybacks, interpreted as a less stimulative move than some anticipated. The discussion explored the potential impact of different QRA outcomes on interest rates and the dollar.
• Fiscal Impulse and Tariffs: The "big beautiful bill" creates a mildly expansionary fiscal impulse, but this is likely offset by tariff revenue, creating a potentially contractionary effect overall. The speakers debate the incorporation of tariff revenue into fiscal forecasts.
• Rebuilding the Treasury General Account (TGA): The TGA rebuild is proceeding, but slower than some might expect. This process impacts net liquidity in the market. The discussion includes an analysis of the related Reserve Repo (RRP) facility and potential implications for bank reserves.
• Market Pricing and Secular Shifts: The conversation analyzes market pricing in the context of a potential multi-year secular shift away from US assets, driven by factors such as fiscal contraction and the need for the Treasury and the Fed to better manage their duration. The speakers discuss how to assess the impact of current events against this longer-term view, prioritizing macro forces over short-term data fluctuations. Constan expresses a bearish outlook on long-term bonds due to their supply problem but bullish on short-term bonds. Constan is bullish on the dollar and bearish on gold.

The transcript indicates that Andy Constan's bullishness on the dollar and bearishness on gold are based on several factors considered in conjunction with the potential fiscal contraction and shift away from US assets. The transcript does not explicitly state the reasoning behind this seemingly contradictory position. Further information beyond the provided transcript would be needed to fully explain this viewpoint.