A Tale of a Textbook Turnaround Setup

TL;DR

The market is reacting to last week's worse-than-expected inflation data, resulting in a bounce in assets like Bitcoin and Ethereum, as well as a recovery rally in stocks.

Transcript

hi everyone welcome to the real vision daily briefing i'm maggie lake and here with me today is tony greer editor of the morning navigator newsletter hi tony how are you today i'm doing okay we had an interesting day as we watched it a decline in u.s housing starts a softness there gas prices finally cooling off at the pump and we had u.s stocks ta... Read More

Key Insights

• 📼 The bounce in assets like Bitcoin and Ethereum suggests a recovery rally in the risk complex.
• 😀 Portfolio managers are facing career risk and redemptions, prompting a retracement rally in the market.
• 🫢 Natural gas supply remains tight in the US, with potential spread equalization between the US and Europe.

Questions & Answers

Q: How is the market reacting to last week's inflation data?

The market has bounced back, with assets like Bitcoin and Ethereum leading the recovery rally. The inflation data caught the market off guard, as market-based inflation gauges had priced in a near depression or recession.

Q: Why are portfolio managers facing career risk and redemptions?

Portfolio managers may have blown their brains out by shorting the market and now need to make up for losses. This has led to a retracement rally, with portfolio managers looking for sectors that are still performing well this year, such as natural resources and energy.

Q: How does the natural gas market look in the US and Europe?

Natural gas supply remains tight in the US, with spreads between the US and Europe potentially equalizing due to factors like the opening of the Freeport terminal. Europe continues to draw on storage and faces potential pressure on supply if European natural gas prices rise significantly.

Q: What is the outlook for earnings season?

Earnings season is never easy, but with the market already washed out and experiencing a recovery rally, there may be buying opportunities for companies that come in lower after earnings. Portfolio managers and retail investors may be driving this turnaround in the market.

Summary & Key Takeaways

• US housing starts decline, gas prices cool off, and stocks experience a strong rally.

• Market-based inflation gauges like break-evens and the yield curve have gotten ahead of themselves, pricing in a near depression or recession, but worse-than-expected inflation data caught the market off guard.

• Portfolio managers may have blown their brains out and are now facing career risk, redemptions, and the need to make up for losses. This could lead to a retracement rally.

• The natural resources and energy sectors are the only ones still in the green this year, making them a potential focus for portfolio managers looking to make up for losses.