1. Inflation Is Coming. But How Bad Will It Be?
The biggest market-moving data this week will likely be U.S. inflation figures.
Wednesday morning, we get U.S. CPI — consumer inflation numbers.
Thursday, we get U.S. PPI — inflation at the producer level.
With oil prices remaining elevated and bond yields staying stubbornly high, the narrative is that inflation is coming. The big question is: how much and for how long?
Also, very few are asking what’s happening to demand. There could easily be demand destruction happening on the backend.
2. The S&P 500 Is Getting Weird
We track the SPY/RSP ratio closely as a measure of what’s happening between the weighted S&P 500 and the equal-weight S&P 500.
It’s essentially a breadth measure. It tells if a few stocks driving the market, or is the average stock catching a bid?
The ratio is now at its highest level since 2020.
Here’s the more shocking part: prior to 2020, the last time the SPY/RSP ratio was this high was back in 2009.
This calls for caution and a closer look at “average” lagging names versus the hot names.
3. Gold Has a Big Test Ahead
Gold is seeing a solid rally, but it’s now at a key test level: the 200-day moving average. If the price is able to consistently close above the moving average, then it’s possible we could see $5,000 gold.
But keep in mind: if yields continue spiking, the U.S. dollar rises, and an oil keeps on shocking, this could be bad for gold.
There’s a decent rally happening in silver too, but it still needs some work. A break above $70–$71 could be very encouraging. On the downside, $62 could be a decent support zone.
Copper remains a very noisy trade. Tariff noise is causing traders to hoard, but there hasn’t been much news.
4. Japan Isn’t Going Away
USD/JPY had a decent bounce above its 200-day moving average. The yen is being protected by more than just Japan now. The U.S. is saying it will do whatever it takes.
With this, Yen could potentially be starting a move lower. So, more interventions coming?
Yen story shouldn’t be taken lightly because it has the potential to shake things up.
Also, private credit issues continue to prevail. Default rates are rising, and redemptions are still a thing.
Remember: private credit is a very opaque market. You don’t hear about it all the time — only periodically. With earnings from BDCs etc., there’s some colour on it these days again.
5. Canada, Bitcoin & AI
The Canadian dollar has been strengthening against the U.S. dollar over the past month or so. However, it remains weak overall.
Toronto-area housing market: listings are declining.
Bitcoin is having a hard time finding excited buyers. Even the biggest bulls aren’t too bullish on it for now.
And Intel is selling $20 billion of its stock now versus $15 billion before. Why? because AI demand is hot.