The Current "Macro Brew" And Its Late-Year Implications

Suffice to say that these days some of the "normal," if not reliable, market indicators don't carry the oomph they otherwise would were it not for the turmoil in the Middle East... You've noticed that we haven't been boring you of late with our technical analyses (videos)... Not that they don't matter, but, again, in times like these a headline can kill a high-probability setup in the blink of eye, or faster than a tick on a chart.

That said, tomorrows jobs report matters.

As I've expressed herein, we're constructive on equities right here, as political and economic risk strongly supports the notion that the Strait will be open sooner than later... That's unambiguously bullish for equities initially... Although, as I type, chip stocks are getting hammered on a handful of reports that question the durability of the AI driven bonanza  -- the Nasdaq 100 Index is down 1.24% this morning, which is dragging the S&P 500 down 0.23%, while the Dow is up 580 points... Of course that's rotation, explained by yet another glimmer of hope this morning that peace is on the horizon.

As for us, our core allocation reads (albeit slightly) green this morning, as we're diversified in a manner that captures said glimmer of hope enough to offset the hit we're taking on our tech exposure.

Back to tomorrow's jobs report:

Suffice to say that it has the potential to throw some cold water on our positive-resolution-will-lift-stocks thesis, but not in the way you might think... Meaning, if the jobs number is really good, and the Hormuz news says smooth sailing to come, there's a chance that yields could actually rise in response.

Now that's not necessarily supported by, for example, this morning's action... Yields are declining on that Hormuz glimmer of hope -- inspired by an attendant drop in oil prices... I.e., for a good jobs number, alongside Hormuz optimism, to push yields higher (and potentially stocks lower), it'll have to be exceptionally good. 

Bottom line: This is just a potential heads up, I actually wouldn't lose any sleep over it either way, at this juncture... Tomorrow's jobs number -- whether it's good or bad short-term for equities -- wouldn't shake us lose from our short-term thesis.

It's beyond the very short-term -- later this year -- that has our focus, as I've been frequently pointing out herein.

BCA's Marko Papic shares our concerns:

"Bears will fold like lawn chairs this summer as traffic returns to Hormuz, allowing markets to overcome seasonal malaise. But we are starting to see how the expansion ends. A macro brew of global central bank tightening due to stickier-than-expected inflation, negative second derivative in AI capex, and surging supply of equities due to Monster IPOs. Expect a blow-off rally until midterms, uncertainty after, calamity in 2027."

Stay tuned...