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CAPIS Insights


CAPIS Insights

"June Research Call RECAP: Colas Says Higher Rates Point to More Activity"

posted by CAPIS on 06/22/2021 at 9:12 am


06/22/2021 at 9:12 am

Last week we held our June research call, featuring Nicholas Colas, co-founder of DataTrek Research. Nick is a regular speaker on the CAPIS research call and renowned media participant.

Click here for the research call video

Our own Ed O’Dowd, Senior Vice President, Institutional Sales, started the call with an update on trading volume and the beginning of summer vacation season, where the latter is affecting the former,O’Dowd says. CAPIS is countering these summer doldrums with increased high-quality digital content. Check out our website at for more details and content.  

Colas’ presentation addressed the following topics:

  • Taper Tantrum Redux? 

Colas said that last week’s Federal Reserve opening of the discussion to curtail their bond purchases in the current economic cycle and thus push interest rates higher bears scrutiny, but 2013’s event is not the same as the current phenomenon. The 2013 “taper tantrum” was precipitated by then Federal Reserve Chairman Bernanke’s “off the cuff” remarks on the economy, which caused the market to misinterpret when and how the FOMC would alter rates. Now, the market is being given a clear timeline as to when the FOMC will act and by how much. Colas points to the August Jackson Hole meeting, where he expects more clarity and details will emerge. That said, he says the capital markets can easily absorb and might even welcome higher rates.

  • ETFs.

Issuers continue to see their assets under management (inflows) increase in 2021, counter to the long-term trend of net outflows in equities. Colas was amazed at the amount of interest in U.S. equity funds in particular this year, as measured by ICI data, which had previously reported heavy selling. Institutional inflows are the truest barometer pointing to any trends, Colas said, not retail interest, and cash is following “highly-liquid” low-cost securities. 

  • Traffic – Europe versus the U.S.

Colas examined traffic trends as economic indicators, utilizing data from cellular phone apps (Apple Mobility and TomTom) and discussed where the global consumer is moving to and from and their level of consequent activity. 

Europe is enjoying stronger economic activity when compared to the U.S. – despite less fiscal and monetary stimulus. As the pandemic induced lockdown was much longer in Europe versus the US, the consequent economic “snap-back” is greater. Lastly, the European equity markets are more cyclical in nature whereas the US markets are more technology driven, leading DataTrek to favor the UK over Continental Europe. 

In the U.S., consumer mobility increases are focused in the suburbs, not in major metropolitan cities. Colas extrapolates that unemployment in these cities (New York, Chicago, and Los Angeles) remains a problem as people remain reluctant to return to urban centers. He points to evidence of fewer business conventions, a prolonged drop off in commuter transit volume, and travelers preferring other destinations as chief causes. The issues here, he says, are structural and cannot be remedied by reduced unemployment benefits and Federal Reserve policy changes.  


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