Trump rejected Iran's seven-day plan to reopen the Strait of Hormuz on Friday (26 Sep). This has sent WTI crude 3% higher this morning, meaning the war premium is coming back on. It has also fed straight into rate expectations: 10Y at 5.23%, the highest since July 2007, and 30Y at 5.53%, the highest since 2004. Both Gold and Silver are sharply lower this morning, moving against rising yields but less as geopolitical hedges.
What concerns my discretionary bias this week is the spike in MOVE (bond volatility index). In the past two years, nearly every spike in MOVE has been followed by an equities selloff (see the chart in the SPY section). However, right now, stocks still look resilient, although led by a narrow leadership of Semis and tech megacaps.
The only narrative explanation for the equities optimism is that the recent bond yields are following robust economic growth rather than just Federal deficit or inflation concerns. The jury is still out on this one. If equities were to wobble, the next 10 trading sessions are the seasonally most likely period to do so before the year-end.
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Disclaimer
This newsletter is intended for educational purposes only. Any information or analysis in this note does not constitute an offer to sell or a solicitation of an offer to buy any securities.
Nothing in this note is intended to be investment advice, nor should it be relied upon to make investment decisions. Any opinions, analyses, or probabilities expressed in this note are those of the author as of the note's date of publication and are subject to change without notice.