Tuesday Target | 2/52
Liquidity: Stress, Correlation, and Opportunity
Markets have been running on easy money since COVID, but that’s changing. The Fed has been pulling cash out of the system for over a year, and now the cracks are starting to show. Bank reserves are dropping, short-term rates are spiking, repo facility usage is creeping up, and a stronger dollar is adding to the strain—signs that the system is under more pressure. It’s not a crisis—but when money gets tight, markets usually correlate.
The unprepared will shrug off losses as just on paper, while the sharp-eyed will position themselves on the other side of those trades. Then again, why bother? In the long-run, we all know bailouts will take center stage.
To cut through the noise, here’s the minimum you need to know to get a feel for what’s cooking:
When Hedge Funds Turn Bearish
A pivot in professional investor sentiment is underway, with hedge funds turning net short on US equities at a remarkable pace. This move may signal a turning point. Financing spreads have collapsed rapidly, suggesting that leveraged buyers are pulling back. While the retail crowd may still be frolicking, the caution of the big players often points to choppier times ahead.
America’s Mounting Debt
The U.S. is piling on debt as foreign ownership of Treasury and corporate debt balloons. While the exorbitant privilege of being the world's reserve currency provides some protection, the growing reliance on foreign capital may backfire. In the long run, a greater need to attract new buyers through higher yields or a weaker dollar could reshape capital flows and alter the currency and interest rate landscape.
Rate-Cut Hopes On Ice
Stronger-than-expected data in key service sectors are boosting inflation and raising concerns that rate cuts won't come as quickly as expected. Indeed, renewed price pressures may leave central bankers with little room for easing. If services inflation continues to rise, the desired monetary easing may remain out of reach, reinforcing the case for a more prudent approach to equities in the near term.
Get Rich Overnight with Options? Yeah Right...
TUESDAY TARGET: We entered the lofty AI quantum play IonQ at 42, focusing on consolidation. It quickly moved toward the last wave's extension but is now retracing pre-market. We view it as a range-bound opportunity, as dilution is expected to play a major role in the coming months.
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Please note, all content is for educational purposes and isn't personalized for individual portfolios or financial advice. Curious about putting any of these ideas into action? Juri von Randow is here to offer guidance or connect you with the right resources.