LOCKED Quick Video: Reflexivity Strikes
We wanted to send you a quick 30min video, outlining our thoughts and hopefully help provide a structural framework to approach markets over the next few weeks.
August 6, 2024
We wanted to send you a quick 30min video, outlining our thoughts and hopefully help provide a structural framework to approach markets over the next few weeks.
In the middle of last month, we outlined how we believed we were on the cusp of a transition from the reflexive boom in US assets and the economy, which had dominated investment flows for the last decade, to a bust (“US Assets: The Unwind” 18th July).
Earlier this week, we sent you a piece explaining that the labour market remains very finely balanced with hiring definitively slowing and yet, for now, no signs of layoffs (“Employment: Risk Rising But…” 30th July). Fast forward to today’s Challenger Jobs Report, and we have a perfect representation of this de facto standoff with total layoffs continuing to fall but at the same time, according to the survey, “hiring at the lowest point in over a decade”.
This week is jammed packed with enough news to set the tone for markets for the next few months…
We rarely send flash updates. However, we’ve been concerned that we were heading into heightened volatility and risk. That moment has arrived, and now is the time to start preparing your portfolio for what could be a huge thematic change.
We just sent you a piece outlining the possibility that we stand on the cusp of a significant regime change (MI2 Chart point: Nice or Nasty Revisited”. At its core, it outlined a scenario in which rate cuts led by lower inflation drive the dollar lower, triggering a massive growth/value rotation across all markets.
In this week’s CPI piece, we wrote that “the base effects become more acute next month, so we could be a month too early” in terms of our expectations for a bounce. Annoyingly, that appears to be the case, so we apologise. The good news is that the resulting market moves suggest we could be on the cusp of something significant.