A bizarre surge in exports (came out of nowhere) sent Q1 GDP jumping to 2.0% this morning (in its 3rd look), and that is very much not what the market was looking for.
Rate-hike expectations soared with markets now pricing in a 50% or so chance of 2 more rate-hikes by year-end…
Source: Bloomberg
Equities swung wildly as the rotation back to value from growth (Small Caps outperforming Nasdaq) stirred…
Gold was pummeled down near $1900 – another lower high and lower low…
Treasury yields soared, with the short-end underperforming…
Which sparked a serious flattening in the yield curve (deeper inversion), erasing almost all of the SVB steepning…
Finally, the dollar rallied on the hawkish reaction in rates…
Nomura’s Charlie McElligott asked yesterday (reflecting oin the equity market meltup) – So what would it take to blow this thing out?
His answer may well be worth paying attention to this morning…
Just spitballing…
Perhaps what is required (easier said than done!) is a proper “Correlation 1” event where the current dispersion wave reverses, especially if Grosses keep growing – potentially requiring some sort of AI crunch from the Long side (earnings expectations mania overshoots reality? – seems too early for that just yet)…
…or maybe from the Short-side, where US economic data does indeed see that aforementioned “animal spirits” trade and actually reaccelerates to such an extent that markets either begin adding-in fresh terminal rate…
…OR where heavily-short economically sensitives begin trading “early cycle” and get grabbed-into / painfully.squeezed.
No one was expecting that kind of ‘animal spirits’ growth? And The Fed can’t stand for that.
Tyler Durden
Thu, 06/29/2023 – 09:15
