Some things to consider: - the sofr curve is now pricing in implied growth of less than 60bp in 2025 (consensus is at 1.7%) - if data this week is bad, but not consistent with a recession, then you could get a near-term rebound - however, war risk premia is likely to rise (US and Israeli sources suggest a Monday attack) and the Fed (a la comments from Alan Goolsbee) seems to be pushing back against extrapolating from one data point - I’d argue that the trend of data in labor market is quite weak and supports a Sep cut of 50 bp (currently priced in) — in fact the market is currently pricing in 4.6 cuts (25bp) by December - US eco revisions are going to move lower (consensus at 1.7% for 2025…) and that will drop eps estimates. A stock price is comprised of the metric and a multiple — in this case the metric will fall, but with rates also falling, the multiple can expand — my hunch is that high growth names that aren’t so cyclically exposed will outperform (kind of like mag7 vs the rest)
i trade rates all the time, if i were to keep both zt and zn, could have done 5-6x instead of 3x booked. rate is ahead of the fed by miles, like last year expected 6 rate cut this year. consumers run out of money, p/e would contract. outperform is a relative term, i wouldn’t buy any dip at this moment. i feel a circuit breaker event is on the horizon. keep the money until holiday rally and trade small during next few months is my view.
It really depends on where we clear risk. All the bad positioning in mid-24 (April through end of July) is going to have to reset. The question is how quickly will it do that.
Most likely, it’s a matter of getting time and motivation to do it. Also I’m superstitious regarding revealing the nuances of it all. Whether it will be duplicated and fails to work after a bit since algos can be designed to arbitrage it. I may just show the balance in real time change instead of the full screen shot.
Just got the memo for the coming week. This week's range: 5200 - 5400 Not sure what that means exactly. Are we going down first then up? Or up then down? Anyway, good luck.
if USD/JPY is stable careful with shorts. Thesis for War trade, flight into USD. Oil rises and inflation rises.