Celebrating the Absence of Bad News
The Week Ahead - Volume 133
Goooood morning from sunny England,
We are closing in on 100 days since Trump took office. What a ride…
Last week felt like a market collectively deciding that if you say "peace” and “deal” enough times, it must be true.
Equities surged (SPX +4.6%, NDX +6.4%) on nothing concrete: no concrete China talks, no signed deals, no Powell firing (never was going to happen). Just a series of rhetorical olive branches thrown at markets whose participants seem eager to catch them.
Congratulations to everyone who bought the tariff detente story at face value. For the rest of the pack, it’s still a case of trust, but verify... and hedge.
I am net long with an S&P futures short on with a 5600 stop, though it seems more than likely to get stopped. I am still cautious. The S&P 500 has now retraced about 50% of the post-February collapse, but this looks and feels like a typical bear market rally. Short-term relief, but the tariff uncertainty remains unresolved. Today, I would say there’s a 55.55% chance of trading 5555 on SPX… But, here’s a poll…
Positioning is cleaner, but not overly confident. HFs are lighter, but LOs bought a bit, which is undeniably a positive sign. Prime broker data shows gross remains stubbornly high, so re-grossing is not really a possibility here. Systematics remain short US equities. I have heard mixed comments regarding retail flow, but the highly respected Retail Radar from JPM claims the following:
Happy to sit on the EUR/USD long shared last week. Flows should continue to flow out of the US as the US exceptionalism trade quietens down (yes, there are other markets than US).
I am still holding the GC 3100/3200 July call spread. I believe the recent dip will be bought despite the crowded positioning. Saying that, I’d expect positioning got cleaner on the pukes last week, but positioning data is not yet showing that.
TMT has led the bounce in equities, but beats aren’t being rewarded THAT much. See GOOGL last week.. Busy week across the board… Earnings - 40% of SPX market cap reporting this week. NFP Friday, JOLTs Tuesday and both ADP and ISM come on Wednesday.
New position: JXN - Jackson Financial
I opened a long position last week in JXN at 3% weight.
Long story short… This is a company that I have liked for some time. Small and not my usual name, perhaps. But the company is financially strong with plenty of cash and robust cash generation. The market has ignored that strength as it was too focused on policy cancellations (lapse rates). While concerns about lapse rates have continued to dominate the conversation since last earnings, the market is underappreciating the benefit that higher interest rates are providing to the company’s balance sheet.
Price target $90 (for now…)
Given the rapid pace of change and constant flow of headlines, I'll be increasing my posting on here for paid subscribers. Look for more regular/daily updates from me in the coming weeks.