The livestream today broke down how short term equity positioning, credit spreads, and interest rate volatility are all pointing to the same regime, one WHERE inflation risk is higher than recession risk and a tactical pullback is in play.
Main takeaways from the macro playbook section:
Short term positioning in equities is too aggressive while the tape confirms it: Monday sold off with zero mean reversion into the close, the overnight and London sessions failed to bid, and the cash open could not attract buyers. That sequence of liquidity provision failing at every session handoff is the signal, and the takeaway is a pullback this week is live even though the bigger picture is not bearish.
Credit spreads are at cycle lows while thirty year yields sit at highs, WHICH tells you inflation risk is higher than recession risk. If recession were the dominant risk, spreads would be widening and yields falling, so the real tail is a 2022 style regime where rates and spreads rise together, and the tripwires are crude, core CPI, and the inflation data.
Rising net interest payments relative to GDP mechanically push bond yields higher: the government pays out more, holders spend those coupons back into GDP, and the Treasury issues more supply to fund it. That feedback loop, confirmed by government outlays accelerating into July, is WHY the bear steepening in the curve keeps running.
The three greatest risks to equities remain interest rate volatility rising on inflation, the carry trade unwinding while foreigners sit max long AI stocks, and unflushed leverage in semis. Positioning there has not capitulated, everyone rejustified the fundamentals and bought the dip, so SMH is the decision point between another down leg and a higher low back to all time highs.
You can find the free recording on the Equity Positioning Playbook here in the YouTube video:
There is no livestream tomorrow. The next breakdown comes as a report on the site instead.
