- English
Aside from a market that has priced in a mild recession and sentiment is shot, here are a few things catching my eye:
- China firing up – Alibaba and Baidu killing earnings expectations, some positive feel on China outlook- both stocks up 14%, watch the HK50 – can the cash market build on the goodwill? I like it higher in the short-term.
- US retailer earnings – Macy's, Dollar Tree are flying…arresting some fears from what we saw from Walmart and Target’s earnings call.
- Month-end flows – big moves lower this month in US equities, we now see rebalancing from pension funds to get weights back in line with client mandates – US investment banks saying they are seeing the biggest inflows into US equity funds since March 2020
- High yield credit working like a dream – spreads are coming in large – the corporate bond market is 4x the size of the equity market and EQUITY ALWAYS FOLLOWS CREDIT. We offer the HYG ETF, you can see this rallying hard.
- Crude up big and breaking out – not sure how much of a positive this is as it raises inflation expectations but one for all the radars…feels like this could start to trend here..
- US 30-year mortgage rates are sliding – last week they were 5.25%, now they’re 5.1%
- Rate hikes have been priced out – again, not sure that is a true positive as we need the Fed to impact inflation and the fact the data flow has been soft is why hikes have been priced out – for context of 4 May the market was pricing a terminal fed funds (the highest point the Fed are expected to take the fed funds rate in this cycle) of 3.11%, now this is 2.51%
The month-end flow is the big factor and if you look at volumes in S&P 500 futures they are poor, all sounds like artificial flow – reeks of a bear market rally (BMR) – and as we know with BMR’s trade them, but don’t trust them!
SpotCrude daily chart
(Source: TradingView - Past performance is not indicative of future performance.)
NAS100 daily chart
(Source: TradingView - Past performance is not indicative of future performance.)
HK50 daily chart
(Source: TradingView - Past performance is not indicative of future performance.)
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