The Dips Are Not Getting Bought Today: 3-Minutes MLIV
Speakers
Mark Cudmore
— Executive Editor, Bloomberg Live / Macro Strategist
Summary
Mark Cudmore analyzes a nearly 10% plunge in Korean stocks, highlighting the absence of dip-buying as a bearish signal for further downside in a leveraged AI bubble. He also discusses potential yield relief in European bonds as war-driven inflation fades.
- Korean KOSPI fell nearly 10% with tepid bounces, signaling more selling ahead.
- Retail leverage and AI CapEx bubble dynamics raise risks of a cascading selloff.
- Cudmore sees a volatile end-game for the bubble, with potential 15-20% drawdowns.
- He has been bearish on Korean equities since mid-May.
- Fading war-linked inflation may bring relief to European bond yields.
- ECB and BOE rate support is viewed as too marginal to halt the equity rout.
- A final bubble rally remains possible if lower yields revive dip-buying.
Ideas
Korean equities face further sharp selloff.
Korean equities are in a leveraged AI Capex bubble with extreme retail participation. Today's selloff saw no meaningful bounces, signaling depleted dip-buying ammunition. This change in price action suggests more downside ahead, with possible 15-20% drawdowns as the volatile end-game of the bubble plays out.
Bonds rally as war inflationary impulse ends.
The war-related inflationary impulse appears to be ending as a peace deal looks likely. This should bring some relief on the yield side, potentially allowing European bonds to rally, even though the move may be marginal for equity markets.
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