To The Moon

This may be the most contrarian piece of information you’ll see this year. $Gold - main 2612(GCmain)$ $SPDR Gold ETF(GLD)$ looks expensive. Bonds look cheap. Interestingly, both have actually been a losing position this year, with gold down -4% YTD and long-term treasuries down -11%. The difference is one is nearing the end of a prolonged bear market, and the other is just beginning. The most contrarian trade right now would be short gold vs long bonds. But just because something is contrarian doesn’t mean it’s right. The rest of the elements need to fall into place. Coming from a starting point of valuation-extremes like that on display in the chart above certainly sets the scene, stimulates the imagi

Learnings and conclusions from this week’s charts: The $S&P 500(.SPX)$ remains in a healthy uptrend. (but the equal-weighted S&P500 has seen a major correction) The key driver of pain in the SPXEW is rising rates. The Equity Risk Premium has fallen to generational lows. Small Caps seeing heavily crowded shorts (short squeeze potential?) Overall, the overarching trend remains up for stocks, but rising rates have inflicted severe pain on rate sensitive sectors. Continue to monitor downside risks for stocks as the cycle progresses, but also upside risk in small caps + other sectors… 1. Happy New Month!  The S&P500 closed September down slightly (-0.5% m/m), but is still up +11.8% YTD (+12.8% including dividends). Zooming out, the ind

The market setup is getting more nuanced. It’s no longer just about whether risk assets are bullish or bearish. Rates, the dollar, positioning and valuation are starting to matter more. 💵 1. US Dollar I’m watching for upside risk in the dollar. Technical momentum, sentiment, positioning, macro conditions and Treasury yields are becoming more supportive, while policy shifts and geopolitical risks could add another layer of volatility. 🇺🇸 2. US Treasuries The contrarian bullish case remains compelling: • Cheap valuations • Extremely bearish sentiment • Crowded positioning But for now, it stays on watch as macro headwinds remain and the technical picture becomes increasingly fragile. 🌎 3. EM Fixed Income Still neutral. Higher inflation and rates create downside risk for EM sovereign bonds, wh

The big question for bonds is laid out plain and simple in this week’s chart. The question = is this 1920? or 1967? 1920: US 10-year treasury yields poked their head above the long-term average, peaked shortly after, and then declined. 1967: US 10-year treasury yields broke above the long-term average and just kept going, peaking in the mid-double-digits. Here’s why I think it’s worth probing: I see so many people arguing, with conviction, that this is the 1970’s all over again. The simplistic pattern recognition approach of: X happened back then, so it will happen again now. But if you’re going to argue for a repeat of history, why not 1920? (…also, what if the answer is neither?) What if yields just stay around this level, they don’t surge higher like the 1970’s, and they don’t peak at a

📊 This Week’s Market Takeaways The stock market may have gone through a “stealth correction” without a headline-level selloff. Here’s what stood out 👇 1️⃣ The equal-weight $S&P 500(.SPX)$ is down more than 5% from its peak. The weakness underneath the index has been much deeper than the headline $SPY suggests. 2️⃣ Breadth has been beaten down. Participation has weakened, while traders have been raising cash and becoming more defensive. 3️⃣ Momentum is coming back. 🚀 Momentum stocks are starting to regain strength, while profit margins continue pushing higher. 4️⃣ Valuations remain a concern. ⚠️ Several valuation measures are still historically elevated, leaving less room for disappointment. 5️⃣ The reset may be doing some work. A stealth cor

$S&P 500(.SPX)$ $SPDR S&P 500 ETF Trust(SPY)$ $NASDAQ 100(NDX)$ $Invesco QQQ(QQQ)$ $Dow Jones(.DJI)$ $iShares Russell 2000 ETF(IWM)$ $Gold - main 2612(GCmain)$ Back at the start of the year I shared what I thought would be the 10 most important charts to watch for global multi-asset investors in the year ahead. In this note I have updated the charts +provided fresh comments. 1. From Tightening to Tailwinds: despite all the geopolitical events this year, global growth has proven remarkab

This week we’re looking at how the global capex boom is driving bond yields higher (+clues on the next steps for bonds). The chart below shows the 5-year annualized growth of Capital Expenditures by global listed companies vs the global average 10-year government bond yield. There is a strong link between the two, and I’ll explain why. But first, what’s up with that big disconnect in 2007-2011? (because sometimes the exception helps explain the rule…) That particular period saw a couple of things happen: first, capex during that period was heavily driven by the commodity sectors, and commodity prices were surging (e.g. crude oil prices going up 2-3x); which put the brakes on growth —just as central banks had aggressively tightened monetary policy… and then of course came the global financi

$S&P 500(.SPX)$ $SPDR S&P 500 ETF Trust(SPY)$ $NASDAQ 100(NDX)$ $Invesco QQQ(QQQ)$ $Dow Jones(.DJI)$ $iShares Russell 2000 ETF(IWM)$ Learnings and conclusions from this week’s charts: Tech stock ETF flows recently reached record highs. Foreign flows into US stocks are surging (record highs). CEO confidence, ISM PMIs, and freight data are turning up. Margin debt indicators are sounding a clear risk warning signal. Much of the index are heading into a buyback blackout window. Overall, there is a lot of good news on the earnings and ec

Global ex-US Equities $S&P 500(.SPX)$ $SPDR S&P 500 ETF Trust(SPY)$ $NASDAQ 100(NDX)$ $Invesco QQQ(QQQ)$ $Dow Jones(.DJI)$ $iShares Russell 2000 ETF(IWM)$ I wanted to share this topic from a recent Weekly Macro Themes report because it answers a few key questions, raises a couple more, and helps put into context today’s Fed rate hike decision. Firstly, on that note, in case you missed it, the US Federal Reserve just hiked rates +25bps to 4% — as I noted last week, this is exactly what they should be doing, and we probably will see m

Here’s how I’m currently seeing Macro & Markets: 🌎 Global ex-US Equities Still bullish on global ex-US equities, both outright and relative to the US. Valuations remain attractive, technicals are constructive, and the macro backdrop is supportive. Global equity gains have also started to broaden beyond the US, with Asia Pacific among the stronger regions recently. 🇺🇸 US Small Caps I remain bullish on US small caps. The valuation gap versus large caps and bonds remains attractive, while macro fundamentals are improving. Positioning and sentiment also remain relatively contrarian, which creates an interesting setup if the technical picture continues to improve. ⚖️ Global / Small / Value vs US / Large / Growth This is becoming one of the more interesting relative-value themes. I continue