GLOBAL CENTRAL BANK LIQUIDITY is on the RISE ↗️
YOU MUST UNDERSTAND THIS! ...I'll explain it at the end!
Now that S&P has breached the IRON CURTAIN @ 4,200, you'll start to HEAR, SEE, and FEEL the bear market narrative begin to shift from "we need new lows" to "We need to retest 3,800." Eventually, the pullback will come when we least expect it, so beware of the chase; when the crowd gets greedy, it's time for a massive pullback, and that pullback will get bought up. Until then, the Shorts will get squeezed like toothpaste while the economy absorbs rate hikes like a crackhead taking gunfire on Fenylanl.
No Fear
Volatility is getting crushed! No one has the balls to bet against a strengthing economy, the AI revolution, and Stronger than feared Market fundamentals.
There's no argument, Technology is in a bull market, and the AI bubble hasn't even started. Everyone is praying for a pullback, so I believe pullbacks will be bought, given everything else remains equal.
Crypto is QUIET ! This is where you wanna get bullish
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Economic Activity
Pockets of strength and pockets of weakness
The Economy is clearly reflecting a rolling recession. Services and labor remain stronger than expected ( driven by fiscal policy), while manufacturing & goods remain in recession territory and worsening in some segments.
Business Activity
NO signs of Inflation
The ISM report reflects an increase in production and employment while prices and new orders decline. When productivity increases, supply-side inflation subsides. However, manufacturing remains in recession. Where does it bottom?
Inflation
Prices are falling
Average single-family home price growth is back to pre-pandemic levels. Obviously, it's falling faster in different regions of the country, but overall, prices are falling.
Manufacturing Prices continue to fall, reflecting no evidence for "stagflation."
No Wage Inflation...
JobsJob openings did tick up, although the trend points lower. The economy is still expanding but at a slower pace. No recession signals yet.
The Unemployment rate finally ticked up, but well within the range of a strong labor market. The real worry should come above 4%.
The Labor market is much stronger than anyone would have guessed (FISCAL POLICY). Yes, it's slowing but at a very slow rate. SOFT LANDING?
Macro Forces
The Macro Forces have tightened investment conditions, likely in response to a stronger-than-expected economy.
10y Bond YieldsI was completely wrong about the market "struggling when yields rise." But that just reflects how much more resilient the market is than I thought. Ultimately the trend of rates is lower, and that remains intact.
US DollarThe dollar strengthened in response to both debt ceiling uncertainty and rising yields. I expect it to trade sideways in the short term and ultimately trade lower as debt ceiling resolution "uncertainty" becomes a "certainty."
Crude OilManufacturing Activity tends to lead oil prices, and the current ISM is signaling sub $60-$50 oil soon. I also hear that Geopolitical forces will likely collapse the price of oil. Saudi wants to gain market share against Russia, and the only way to do that is by increasing production, ultimately lowering inflation expectations!
Global LiquidityThis is all you need to know: markets move off global liquidity, and we just kickstarted a new cycle. The path may be bumpy, but the overall direction is clearly HIGHER.
Closing Thoughts
Liquidity is everything when it comes to macroAs China, Japan, and other countries try to restart their economies, global liquidity will continue to rise, which acts as a buffer against the global manufacturing recession. That liquidity bleeds into U.S. asset markets and, to some degree, the economy, which also acts as a buffer.- Domestically, the inflation reduction act, infrastructure bill, and chips act, act as a buffer against recession.
The Market is simply pricing out a deep recession, pricing in a softer landing and a softer Fed (due to softer inflation and banking risk). We see no bid on the VIX, while the bond market does the Fed's job by increasing & decreasing the cost of capital when needed (the macroeconomic data). Market dynamics are balancing themselves while the Fed comes closer to confirming a pause.The BULL MARKET is on, and the fastest horse in the race hasn't even started.Your Macro StrategistJeremy Fielder
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