Katy Kaminski

Long-term bonds are showing buying pressure despite recent upward yield movements, suggesting that inflation concerns might be conflated and making long-term bonds an attractive positive setup right now.

The AI theme had some hesitation earlier this summer but now has momentum and increased trend signals, and that AI capital spending enthusiasm could continue.

Trends changed substantially after geopolitical risk arrived, but commodities remain a key driver of trends, particularly base metals and energies. Although the trade has been volatile, equities and energies have been the best trends this year.

Trends changed substantially after geopolitical risk arrived, but commodities remain a key driver of trends, particularly base metals and energies. Although the trade has been volatile, equities and energies have been the best trends this year.

U.S. equity markets have continued to trend higher, supported by resilient U.S. growth, solid earnings and ongoing enthusiasm for AI capital spending. Prices are accelerating particularly in the U.S., and despite higher energy prices and a Fed on hold, investors are willing to see through those risks and keep buying.

Today's market action shows tech and chip stocks are resilient despite geopolitical oil shock. This pattern suggests the current move is an oil shock, not a growth shock, meaning the AI trade still has legs and why there hasn't been a bigger pullback in that sector.

Speaker notes Asia has taken an 8-10% drawdown and that China, "which does not have the inflation concerns you would see in Japan or Australia," could present "buying opportunities." As a major oil importer, China benefits disproportionately from lower oil prices, easing inflationary pressures. Its relative macroeconomic stance (less concern about inflation) allows it more policy flexibility compared to other regional economies now facing an oil shock. Direction is LONG as it is a relative value play within Asia, poised to benefit more from the ceasefire's deflationary impact and recent slightly better data. China's domestic economic troubles outweigh the benefit of lower commodity prices; the ceasefire fails.

Kaminski states the US dollar is the only asset acting as a safe haven in this conflict, unlike last year, and its strength is supported by the pricing out of Fed rate cuts. In an environment of geopolitical risk and a Fed on hold, the dollar offers stability and yield relative to other currencies. The dollar is likely to remain strong as long as the conflict persists and the Fed's stance remains hawkish relative to expectations. A sudden, dovish pivot from the Fed or a rapid de-escalation in the Middle East.