The Q - Daily Edition
TACO Tuesday
"Our enemies are innovative and resourceful, and so are we. They never stop thinking about new ways to harm our country and our people, and neither do we."
— George W. Bush, August 5, 2004
If you went to bed Sunday night watching WTI blast through $119 per barrel and Dow futures crater 900 points, you woke up to a completely different tape. All because Donald Trump decided to TACO out — or, to use his own terminology: “The war is very complete, pretty much.”
Pretty much. Kind of. Sort of. Almost.
At his first press conference since launching Operation Epic Fury, held naturally at his Doral golf resort, Trump served up a buffet of contradictions that would make even the most seasoned macro trader’s head spin:
“We could call it a tremendous success right now” — but also: “we’re going to go further.”
“Everything they have is gone, including their leadership” — which then became “two levels of leadership are gone.”
Iranian ships sunk: 46 in his speech, 50 at the presser, 51 minutes later. Inflation, it seems, extends beyond CPI.
The whole thing? Just a “little excursion.”
George W. Bush at least had the decency to land on an aircraft carrier in a flight suit before his “Mission Accomplished” moment in 2003. Trump did his from behind a podium at a golf club. With no flight suit. But hey — at least the banner would have been more honest: “Mission Accomplished — Kind Of...”
A major doubt just rose in me … let’s poll it:
Anyway, with all this confusion, where Trump wants to declare victory and keep fighting simultaneously, markets want to rally on peace and hedge for escalation simultaneously and Oil wants to be at $90 and $120 simultaneously, it is probably a good idea to look at some chart and try finding a needle or two in the haystack.
Here’s that nearly USD40 roundtrip in less than 24-hours on the price of crude oil (Brent) for example:
Of course, in the bigger scheme of things, Brent is still up 55% since early January and at its highest level in three years:
Equity markets continue to largely ignore that massively higher cost to the overall economy, with US markets close to flat on a year-to-date basis:
The weakest element on the table above, the Nasdaq, is actually UP in March so far, i.e. UP since the war in Iran broke out …
European stocks (SXXP), which are far worse off in expectation of higher energy prices, saw an important rebound yesterday:
German stocks, also saw a reversal at what I would suggest was a key support zone:
Bond yields in the meantime are NOT ignoring the danger of higher energy prices, with US Treasury yields signalling Stagflation, rather than flight to safety:
There might be temporary relief since Trump’s words (note: no action) last night, but I would keep a close eye on this and also Break-evens:
The US Dollar, a tad weaker since last night, continues to be the big winner since the outbreak of war:
But actually shows limited gains, if any at all, since the beginning of the year:
I live my investment life by several mantras, two of the most important (which are actually book titles) being:
Triumph of the Optimist (when I get too bearish)
Being right or making money (when I get too emotional)
There are many more, but a third one which is simply too often ignored is:
Price Leads Narrative
Don’t believe me? Just explain me then why oil stocks (below measured via several ETF proxies), have been going up weeks before the oil price did and months before the war broke out…
G7 Energy Ministers virtual meeting this morning — coordinated strategic reserve release likely on the table
Oil — does Brent hold sub-$95 or do we retest $100? Every Trump tweet/Truth Social post is a volatility event
Strait of Hormuz — Iran’s IRGC called Trump’s comments “nonsense” and warned tankers to “be very careful.” Classic.
European equities — will Europe play catch-up with the US reversal or price in continued Hormuz risk? Energy vs. everything else.
Bonds — 10Y at ~4.14%. Stagflation fear vs. flight to safety. Watch breakevens.
May the Trend be with you!
André
Everything in this document is for educational purposes only (FEPO)
Nothing in this document should be considered investment advice
Investing real money can be costly; don’t do stupid shit
Leave politics at the door—markets don’t care.
Past performance is hopefully no indication of future performance
The views expressed in this document may differ from the views published by NPB Neue Privat Bank AG