With markets getting close to oversold, everyone's hedged and global CTAs massively net sellers, there is some dry powder if the TACO trade finally takes place
Source: Goldman Sachs, RBC
Could we see more pain?
Yes, on the surface, the S&P 500 looks nearly oversold, but underneath, the situation looks different with only 11% of SPX constituents being oversold. Source: TME, Bloomberg, GS
The sp500 technical picture remains pretty much the same: not pretty
We’re now well below the 200-day, with the 21-day crossing below it, a “light” death cross. RSI is at its most oversold levels since the Liberation Day panic, so a bounce is possible. But beware of the "catching a falling knife" strategy - very often a risky one. Source: TME, LSEG Workspace
Trump just posted that France refused to let U.S. planes loaded with military supplies for Israel fly over French territory.
He said hashtag#France has been "VERY UNHELPFUL" with the Iran war. "The U.S.A. will REMEMBER!!!" NATO is having a moment... Source: Mario Nawfal Truth Social
Saudi oil export through Yanbu West Terminal are skyrocketing. The next target for Iran?
The Houthis’ involvement adds a second maritime pressure point in the Red Sea, with the ability to threaten Saudi Arabia’s Yanbu export hub and disrupt traffic through the Bab al-Mandeb. This puts ~5 mbd of Saudi bypass capacity at risk, potentially adding around $20/bbl to oil prices, writes JPM's Kaneva. Workarounds exist, but longer routes could extend Asia shipping times by up to 40 days and require 130+ additional tanker voyages. Source. JP Morgan, RBC, TME
European bond markets are having one of their worst months in a decade.
Italy's 10-yr yield hit 4.14% - highest since mid-2024. France's touched 3.9% - highest since 2009. Spain's at 3.7% - highest since 2023. The last time Eurozone borrowing costs moved this fast was in the 2022 energy crisis. The difference is that one cost €651 billion to contain. Source: FT, Nic @nicrypto
Fixed Income: Are markets starting to price in “growth fear” (instead of inflation fear”) ?
•A notable bid to bonds on Friday (decoupling from the correlation-one with oil and stocks) suggests inflation fears are ebbing, and attention is shifting to growth concerns. Monday market action gives the same message… •5Y5Y inflation swaps signal the ongoing decline in medium-term inflation... Source: Bloomberg, www.zerohedge.com
Midterm years have been notoriously weak for the stock market. But year three of the Presidential cycle has been extremely strong…
Source: Bespoke
