Market Reversals as Rate-Cut Expectations Rise

Trading Trends

Following yesterday's selling of bonds, stocks, gold, and crypto, the market saw a reversal today. As the dollar dipped, almost everything else, excluding crude, rallied. This shift was attributed to a modest increase in rate-cut expectations.

Stock Market Developments

The 'Trump Trade' saw a resurgence in stocks today, reaching its highest point in this cycle. The Dow, however, lagged, marking its 4th consecutive day of decline. The S&P and Small Caps managed to secure small gains, while Nasdaq outperformed.

Shorted Stocks and Memes

Today also saw a squeeze in memes and most shorted stocks, leading to significant pressure on hedge funds, which underperformed considerably. This has been a challenging year for hedge funds.

Surge in TSLA Stock

In other equity news, TSLA stock saw a massive 21% surge ($145BN) today following last night's earnings. This surge explains why hedge funds were under significant pressure today. Tesla and Exxon represent the two largest short positions among hedge funds.

Treasuries and the Dollar Index

Treasuries were mixed across the curve today, with the long-end outperforming (30Y -5bps, 2Y -1bp). The whole curve is still holding above 4.00%. The dollar index experienced a decline today.

Gold and Silver

Gold saw gains today, erasing most of yesterday's loss. This moved it to a new 'real' (inflation-adjusted) high since January 1980. Silver also saw an acceleration following headlines about the Russia central bank.

Palladium and Bitcoin

Palladium broke out of its recent range today, reaching its highest point since December 2023. After yesterday's dramatic inflows into BTC ETFs, which saw BTC prices fall, Bitcoin rallied back above $68,000 today.

Oil Prices and USA Sovereign Risk

Oil prices fluctuated today, ending slightly in the red. Finally, USA sovereign risk is on the rise again, now at one-year highs. This could be the ultimate hedge for a 'sweep' in the election, regardless of which way it goes.

Bottom Line

The market saw a reversal today following yesterday's selling of various assets. This shift was attributed to a modest increase in rate-cut expectations. The 'Trump Trade' saw a resurgence in stocks, reaching its highest point in this cycle. However, the Dow lagged for the 4th consecutive day. The S&P and Small Caps managed to secure small gains, while Nasdaq outperformed. What are your thoughts on these market trends? Share this article with your friends and sign up for the Daily Briefing, which is every day at 6pm.