Top Trade Ideas - June 12th

Our thoughts and ideas for equities and FX ahead of a week where the S&P 500 is now in a bull market but we have a pivotal FOMC meeting midweek.

Apart from the Russell index making a strong move higher to start last week, the other indices (S&P 500, Nasdaq and Dow Jones) had a fairly tame week, with price staying in a balance after the recent move higher.

There are many bullish technical signals in the markets, one of them being the S&P 500 entering a new bull market after rising 20% off October lows. But there are plenty of bears still calling out for a huge reversal. We prefer not to fight a trend, and the trend is clearly bullish. The only thing we do note about the markets is the comparison with bonds.

Who’s wrong? Who’s right?

Is it stocks, where an advance previously confined to a handful of tech mega-caps showed distinct signs of broadening out this week? A $6 trillion rally hangs in the balance.

Or maybe it’s bonds, where emanations of gloom abound, and bets on Federal Reserve rate cuts are multiplying in a market where volatility is running twice as high as it was just two years ago.

It seems like the Fed meeting this week will be pivotal in deciding the next direction. A further rally or a pullback across the markets? The current market pricing is 72.4% for no hike, so we have based our equity ideas on this outcome with a buy focus. If we get the opposite decision (27.6% for a hike), we will add some short ideas to our Twitter page.

Last week was also fairly tame in G10 FX. The big miss in US initial jobless claims on Thursday was the catalyst for the DXY index to take a leg lower, something that we feel supports a greater move lower this week when considering the potential US Fed meeting outcomes.

The week ahead is packed with events, ranging from the US Fed and CPI inflation to the ECB and BoJ central bank meetings.

As usual, we have 5 equity trades, 3 FX trades and 2 index trades below.