To The Moon

Markets run on disagreement. Every trade needs a buyer and a seller, each quietly convinced the other has it wrong; a market where nobody argues has very little to say for itself. The real story in this week's sentiment data is the agreement: cross-market dispersion, the measure of how differently investors are positioned across the ten markets we track, has collapsed from the 62nd percentile of its history a month ago to the 1st today, and has sat there all week. The ten local conversations that usually make up our investment universe have merged into one. The subject is easy to reconstruct from the past month's two exhibits. The first is the US-Iran standoff, where efforts to reopen the Strait of Hormuz keep diplomats busy without yet making them successful. The second is the bond market

Cap-weighting is but imperialism in financial markets. The bigger you become, the more capital you command; the more capital you command, the bigger you become. Over the past few years, that logic has turned technology from a mere province of the market into its imperial capital, with AI installed as king and the rest of the sector serving as its court. Yet concentration is not the only way systems lose sight of their original purpose. Self-reinforcing dynamics have a habit of taking on a life of their own. What begins as a means to an end can gradually become an end in itself. Capital behaves this way. Governments do too. The means we choose often dictate the ends we achieve. The problem with conflicts of choice is that, eventually, the means become the ends. The U.S. entered the conflict

The Iran conflict, also known as Two Guys, a Supreme Leader, and an Oil Shock, is now in its seventh month at the top of Wall Street’s box office. What started as an oil story has spread to inflation and, last week, monetary policy, with the Fed raising rates for the first time since 2023. Investors, meanwhile, are jonesing for peace like a kid who’s been made to wait too long for Christmas. Last week’s FOMC meeting had been preceded by an aggressive sell-off in Treasuries, pushing the 10-year yield above 5%, the highest since 2007. Bond investors were effectively threatening the Central Bank with Fedpocalypse if it failed to raise rates by giving us a preview of what markets might look like if they concluded that the Fed, and Kevin Warsh in particular, was no longer independent. Even a ra

For several weeks, bond investors had been pricing the risk that the Fed was falling behind inflation again. Last week, that concern finally reached equity investors, overwhelming even their enthusiasm for AI. Oil and gas prices rose as renewed hostilities in the Gulf and continued attacks on Russian energy infrastructure revived inflation concerns, while investors parsed employment, consumer-price and producer-price data ahead of this week’s FOMC meeting. As always, macro data is generous with its hints but cheap on specifics. Still, the releases largely pointed in the same direction: inflation is proving less cooperative than central bankers would prefer. Whether the Fed responds with sufficient urgency is this week’s big question. That uncertainty helps explain why aggregate sentiment a

For the past few weeks, the global sovereign bond market has been repeating the same message to governments and equity investors, each of whom had found separate but equally expensive reasons to ignore it. To governments, the message is that fiscal indulgence now carries a higher term premium. To equity investors, the message is that subjective AI valuations now carry a higher risk premium. Trust and faith remain available, but neither is offered at last year’s price. Investor sentiment moved away from the bearish concentration of a month ago without moving into anything that looks like broad conviction. Five of the ten markets we track were bearish a month ago; only China remains there now, as investors in that market appear unconvinced that additional stimulus is imminent. Positive readi

With the second-quarter earnings season drawing to a close, investors’ attention will swing back from corporate results to the macroeconomic and geopolitical front. That puts monetary policy, trade tensions, and the conflict with Iran back on the front page. Last week’s secondary sanctions on Iran and its economic supporters were an insult to Swiss cheese and another display of the US administration’s preferred foreign-policy doctrine: speak loudly, carry a small stick, and hope nobody notices. China noticed. Beijing threatened to retaliate if the secondary sanctions were applied to Chinese companies, especially its banks. The White House, for now, stopped short of targeting either. With China’s President due to visit the US on September 24, it seems even trade tensions have diaries. Senti

This week investors will focus on two stages sitting 2,000 miles apart. At Jackson Hole, central bankers will explain how firmly they intend to control events they are still trying to understand. In California, Nvidia will report how quickly it is building the infrastructure for a future everyone already claims to understand. Monetary policy and AI will compete for investors’ attention, with supporting roles for Hormuz and US-Canada trade negotiations. The common thread is anticipation. The ECB and BoJ are being priced for September rate increases, while US investors have reduced the odds of a Fed hike. Nvidia’s earnings, the US-Canada trade deal and Hormuz, meanwhile, show what happens when hope has gilded its own lily and become expectation. The policy divergence matters because investor

It's the inflation, stupid. Three decades on, the slogan needed an updating: the University of Michigan reported American consumers in a deepening funk last week, with the sentiment index falling to 51 from 55.2, expectations for business conditions dropping double digits over both horizons, and only 8% of consumers now expecting their incomes to outrun inflation, down from 18% in December 2024. A household budget does not need a recession to become pessimistic; sometimes $4 gasoline is enough. And yet the same week, in the same country, presumably including many of the same people, the US equity market set another record high. Surveys measure stated concern; markets measure funded conviction. Last week offered a powerful reminder that sentiment is an appetite, not an opinion. Markets have

Investor sentiment spent the past month doing what confidence usually does when it has read the agenda and not yet seen the meeting minutes: it moved away from balance, but without the courtesy of declaring a single culprit. The aggregate ROOF score is now negative at -0.43, down from neutral one month ago, while the past week was little changed at the aggregate level. That distinction matters. This is not a fresh panic. It is a slower withdrawal of willingness to finance uncertainty, with the past few days offering no confirmation that the deterioration has extended, but also no persuasive evidence that it has been repaired. Investors have not slammed the door. They have simply stopped holding it open. The week ahead gives them several reasons to keep their hand on the handle. Negotiation

Last week, AI edged back ahead of Hormuz in a contest for pole risk position that has changed leaders several times since February 28. The Strait pivoted back towards the negotiating table instead of the battlefield while AI claimed its first (youngest?) victim in the hedge fund Situational Awareness. The handover was neat: one risk resumed diplomatic theatre just as the other produced yet another example of the consequences of hubris. The Hormuz supply shock is like cat hair: you just can’t get rid of it. Negotiations have lowered its claim on the front page, not removed its claim on portfolios. In blithe defiance of some very real evidence out there that we still had reason for concern, rampant optimism, fueled by money, ego, and a maddening fingers-in-the-ears-can’t-hear-you-lalala deni