|
Feb 18
|
|
—
|
SHORT
|
Adam Vincent
Bloomberg
|
Vincent notes that "Europe's previous weakness is lack of exposure to I.T. is now acting as a strength." He highlights that the FTSE 100 ("The Footsie") and European stocks are near record highs because they offer "cyclical, commodity exposure, [and] a strong financial sector." Conversely, "software stocks coming under pressure continues to be a theme" due to fears over AI displacement and CapEx efficacy. Investors are actively rotating capital. They are fleeing the uncertainty of the "AI Displacement" narrative in the US (specifically software/growth) and seeking safety in the "Old Economy" composition of European and UK indices. The lack of tech in Europe protects these indices from the current tech-centric volatility. LONG European/UK Indices (Cyclicals/Financials) and SHORT/AVOID US Software/Growth Tech to play this rotation. A sudden positive shock in AI productivity data or a reversal in US tech sentiment could unwind this rotation rapidly. |
Bloomberg Markets
AI Displacement to Remain a Headwind for US S...
|
|
Feb 17
|
|
—
|
LONG
|
Adam
Market Strategist / Guest
|
"The Warsh case is a high productivity equals low, inflation equals lower rates... looking for these comments today to see if other FOMC officials on board with that view." If the Fed adopts the view that AI/productivity improvements are deflationary, they can cut rates even with strong growth. This "Goldilocks" scenario (Growth + Low Rates) is the ideal environment for equity valuations. LONG US Equities if Fed rhetoric aligns with the productivity thesis. Productivity gains fail to materialize, or inflation remains sticky, forcing rates higher. |
Bloomberg Markets
UK Jobs Data Gives Green Light to March BOE C...
|
|
Feb 11
|
|
—
|
LONG
|
Claudia Sahm
Economist, Federal Reserve Board
|
Sahm notes the -900k/-1M revisions were "not a surprise to the Fed" as preliminary data was known in September. She characterizes the recent January data as "the best possible outcome" with payrolls lifting and unemployment ticking down. The market's fear was that the massive downward revisions indicated the Fed was "behind the curve" on a crashing economy. Sahm clarifies that this is old news and the current data shows stabilization. If the economy is cooling (slowing wages) but not collapsing (positive payrolls), the "Soft Landing" narrative holds. This removes the immediate recession tail-risk, favoring broad equity exposure. LONG. The data supports a Goldilocks scenario where the Fed can cut rates gradually into a stable economy. If the "gradual drift up" in unemployment accelerates into a nonlinear spike (triggering the Sahm Rule for real). |
Bloomberg Markets
What the US Jobs report means for the Fed
|
|
Feb 10
|
|
—
|
LONG
|
Bob Elliott
Substack author, Nonconsensus
|
"It seems the asset markets are driving the real economy these days, not the other way around." This leads to a "jobless expansion favoring companies fed by an ongoing flow of dissaving." If asset markets are driving the real economy, continued strength in asset values (equities) can create a positive feedback loop, encouraging further dissaving and consumption. This environment is generally supportive of broad market indices and growth-oriented companies that benefit from sustained demand and wealth effects. Long broad market ETFs (like SPY) or growth-focused ETFs (like QQQ) to benefit from the positive feedback loop where asset markets drive the real economy, supported by ongoing household dissaving. A significant correction in equity markets would directly undermine the "asset markets driving the real economy" thesis. Unexpectedly aggressive Fed tightening due to persistent inflation could also dampen market sentiment. |
Nonconsensus
Dissaving Drives Decent Demand
|
|
Feb 06
|
|
—
|
LONG
|
Bob Elliott
Substack author, Nonconsensus
|
"Household income growth remains soft... savings rate declines require elevated wealth levels, which are likely to be supported by Easy Street policies ahead." Also, "Job growth is running just above zero and seems to be sticking there." A frozen labor market with soft income growth reduces inflationary pressure from wages, providing the central bank with more room to pursue accommodative "Easy Street policies." These policies (e.g., lower interest rates, liquidity) typically support higher valuations for growth-oriented companies, particularly in the tech sector, by lowering the discount rate on future earnings. Long growth stocks/tech sector on the expectation of continued accommodative monetary policy due to a stagnant labor market and soft income growth, which supports asset valuations. A sudden pickup in inflation (non-wage related), an unexpected hawkish pivot by the central bank despite labor market data, or a significant deterioration in corporate earnings. |
Nonconsensus
Frozen Labor Market Persists
|