1. Is Demand Destruction Finally Showing Up?
U.S. core and headline PPI came in lower than expected.
Now, the narrative is being built that inflation could potentially remain tame even with oil prices relatively higher, war, supply chain issues, etc.
Maybe it’s time to ask something we’ve been asking for a few months at this point: Is there demand destruction happening? We think it’s very possible.
2. “Nothing Can Go Wrong” Is Back
As we’ve said before, “nothing can go wrong” sentiment is extremely prevalent, and it’s actually scary.
Last night, there were headlines saying KOSPI is back in a bull market. We suggest you go look at the chart. Tell us what you see.
The S&P 500 is itching to go higher.
More on the SPY/RSP ratio:
- 10-year performance: SPY up 317%, RSP up 213%.
- 1-year performance: SPY up ~22%, RSP up 20.40%.
- YTD performance: SPY up 14.6%, RSP up 16.90%.
Notice anything? Near-term, money seems to be moving toward average names versus the big names.
3. Gold Is Testing a Major Level
Gold is testing its 200-day moving average.
Remember: a sustained move above it could be encouraging.
If there’s a rejection, gold has the potential to come back and test $4,100–$4,000 again. If that breaks, gold could drop a bit more.
Long term — 5–10 years out — the lower gold goes, if it does, the better opportunity it becomes. Also, there’s a very good case for having some allocation to gold over the long term. The yellow precious metal shouldn’t be ignored.
4. Yen Could Cause a Panic
With the yen getting closer to 160, the noise is getting louder about whether there will be another intervention.
The Wall Street Journal is wondering whether this happens.
Goldman Sachs is saying Japan’s $1 trillion in reserves gives it a lot of room to intervene.
We seriously think what’s happening with the yen could cause panic overnight. One day, we might wake up and hear all about wild swings in the financial world.
Remember: It’s all fun and games until something breaks. Volatility and interventions can certainly have consequences. The yen carry trade is big. We saw an episode of this in August 2024.
5. Bitcoin Still Can’t Find Buyers
Bitcoin continues to test its 50-day moving average. It’s having a hard time finding buyers.
Oil is selling off a little this morning. But one post or soundbite can change the direction.
Still no tariff news on copper.
Yields are falling a little on the “encouraging” inflation numbers.