Torsten Slok

Iran-related supply disruptions through the Strait of Hormuz and Bab el-Mandeb are still a significant background risk. Inventories of marine fuel, jet fuel, fertilizer, and helium are critically low, and the lack of tanker traffic means a jump risk in oil and energy prices could materialize at any time. The oil market appears to be underpricing this risk, especially with no sign of a deal and the clock ticking on inventory depletion.

The U.S. economy is holding up very well with strong GDP, consumer spending, and CapEx, supported by the AI boom, creating a positive economic outlook that will continue to drive the market narrative forward.

Hyperscalers are issuing so much corporate debt to fund AI capex that it is crowding out demand for U.S. Treasuries, putting upward pressure on yields and making AI a prominent factor in bond markets.

Torsten Slok explicitly stated "SOFTWARE LOOKS QUITE JUICY" in the context of credit yields. He implied that software credit offers attractive all-in yields due to temporarily higher base rates and spreads, making it an appealing investment opportunity. LONG because the sector is viewed as having juicy returns, likely in credit instruments related to software companies. A prolonged energy shock or deterioration in software sector fundamentals could reduce the attractiveness of these yields.

Speaker stated that $14T in investment grade bond supply is creating upward pressure on yields and spreads, but current all-in yields in credit (IG and parts of HY) look "quite juicy". Massive supply technically elevates rates and spreads, but if oil prices decline and the economy slows, these higher yields present an attractive entry point for yield-seeking investors. Attractive yields justify a LONG view on credit bonds as a source of income, contingent on favorable macro developments. Persistent high oil prices or stronger-than-expected economic growth could sustain upward pressure on yields and widen spreads further, diminishing attractiveness.

European Natural Gas prices are up ~80% in 48 hours. The DAX is down ~4%, Italian equities down ~5%. Europe is heavily dependent on imported LNG (specifically Qatar). Europe faces a "2022 Volume 2" energy shock. Unlike the US, Europe lacks domestic energy production and AI/Tech giants to offset the drag. This is a pure stagflationary hit to the Eurozone economy. SHORT European Equities (Broad Europe, Germany, Italy). Fiscal intervention by EU governments to subsidize energy costs.

European Natural Gas prices are up ~80% in 48 hours. The DAX is down ~4%, Italian equities down ~5%. Europe is heavily dependent on imported LNG (specifically Qatar). Europe faces a "2022 Volume 2" energy shock. Unlike the US, Europe lacks domestic energy production and AI/Tech giants to offset the drag. This is a pure stagflationary hit to the Eurozone economy. SHORT European Equities (Broad Europe, Germany, Italy). Fiscal intervention by EU governments to subsidize energy costs.

European Natural Gas prices are up ~80% in 48 hours. The DAX is down ~4%, Italian equities down ~5%. Europe is heavily dependent on imported LNG (specifically Qatar). Europe faces a "2022 Volume 2" energy shock. Unlike the US, Europe lacks domestic energy production and AI/Tech giants to offset the drag. This is a pure stagflationary hit to the Eurozone economy. SHORT European Equities (Broad Europe, Germany, Italy). Fiscal intervention by EU governments to subsidize energy costs.