The disinflation trade held up this week, and US equities again rose to new highs. The S&P 500 briefly topped 7,800, as softer CPI and PPI data extended a dovish repricing.
The AI trade also chugged along. CoreWeave rallied after quarterly results showing revenue more than doubling and backlogged demand growing. Intel upsized its equity offering to $20bn. It marks two weeks of Nasdaq outperformance relative to the S&P 500, its first notable stretch since the tides changed in late June. Energy sectors led as the Iran conflict remains unresolved, while consumer-facing areas lagged after the retail sales miss.
Rates followed the inflation data lower. September hike odds fell, while the opposite was true for the BOJ after reports from Japan.
That’s the short recap of the week. No need for much more to be said.
Let’s get into the guide to trades moving markets, where things stand, and where they may be heading.
“Right Tail Risks”
“Largely On Hold”
“Summary of House Views”
Right Tail Risks
Despite the lingering question among investors of “what could go wrong?”, equities continue higher. As we look at the equity backdrop, the remainder of August looks constructive, and the risks may instead be on the right tail. We see few macro hurdles until the end of the month, while several supporting fundamentals have returned to the market, so we look towards a new index trade for the coming weeks.