In today’s Global Macro Update I analyzed the major assets/markets I’m watching into month end. In the below video I highlight these correlations but it’s the same theme I’ve been mentioning this summer - that we have to watch for a pivot away from the Economy Accelerating and good Growth (which we have had in the economy for the last 8-9months) - with rising inflation….and transitioning to a picture of Growth Slowing in the back half of 2021 and inflation peaking and/or falling or at least remaining “sticky” or elevated.
This most likely creates a STAFLATIONARY environment.
Stagflation is typically no bueno for stocks - with the best place to hide out in long BIG CAP Tech, while small caps low liquidity gets wrecked!
We are also in the middle of an earnings season…around 45 of the 500 companies have reported, and this could be a positive earnings season relative to the prior covid comps so this factor may be a bull case for growth remaining ok - we shall see into August.
Also before I post today’s video, I’m watching the BOND market as usual for the real tell on where the market and economy is heading.
In the front end, US treasuries 2 yr yields broke out in June with a flattening of the yield curve - some of which the positioning needed to be unwound with everyone pilled into steepeners, and withthe inflation peaking theme, that squeezed shorts in the long end.
However from here if we see 2yr yields begin to break back down below trend at 19bps (the .19 level) then this would be another signal of growth starting to slow.
Similarly, we saw the 10yr start to sniff out this possible growth slowing and inflation coming in theme in June with the yield on 10s broke 1.50% making new lower lows this weak down at 1.13%….If 10s continue to fall in yield from here that is more of the same growth slowing signal.
All in all, the markets are starting to show signs of a global macro shift. And honestly I’d like to see a market regime change and more volatility return to the macro landscape - it just creates more trading opportunities and the potential for bigger gains both intraday day trading and on our core positions and swing trades.
Enjoy the video below - hope it helps contextualize more of what I’ve been writing about.
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Here’s todays Macro Video Update….
Enjoy - talk to some of you in the AM.
JJ
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