Equity assets Across the world, they’ve gone into hibernation. There isn’t a single asset class that has received inflows as a sign of confidence ahead of the upcoming rate cut. Volume — the only real confirmation — signals paralysis. And in that context, returns are irrelevant.
To kick off this piece, the first thing worth mentioning is that the entire week traded under a growing conviction of a rate cut in roughly 11 days. The market traded under that narrative, as we can see below.
Last week we noted that this situation was going to bring noise, highlighting how important these probabilities are for trading in the current environment. In fact, you can follow their evolution here.
During the week, we finally got several key macro reports, which drove higher the probability of a cut. Whether you agree with that interpretation or not, this is the macro narrative that’s driving the market today.
Now the question is: is it really driving the market — at least enough to trade in its direction?
Do markets really believe this is the solution to the problems of the real economy? That equity assets are finally going to rise across the board?
Let’s first look at the situation from the perspective of volume in the most representative markets.
Equity Assets:Price and volume. Nothing else matters.
In situations like this, one acts as the controller of the other. We also covered this in the previous article here. Let’s first look at the situation from the perspective of volume in the most representative markets.
SPY: analyzed first from a weekly timeframe, then broken down into the daily
The daily perspective shows how conviction behind the bullish move keeps fading as prices climb. Remember, we’re in a scenario where rates are expected to be cut in 10 days, yet confidence is evaporating. That’s the key read — and it’s what we dig into next.
The confirmation of a top is a process, not a moment. Just like a factory has a production line to deliver a finished product, the market has its own production line aiming for its finished product — in this case, a top.
Information source
Getting reliable information has become a real challenge these days. Finding analytical objectivity and intellectual honesty feels like something from another era, given how mass media has evolved. Fortunately, we still have a global information chain that doesn’t lie: prices.
This is a quick read — I’m asking you to stay with me and focus your attention on how volume shifted this week through an intermarket lens.
Equity Assets: Commodities
Volume collapsed across the board — including gold and silver.
Across countries around the world, volume simply vanished
Let’s look at it by indices — maybe one of them managed to escape this dynamic
Nop! None of them.
By type of company?
No.
By Sector
Surely at least one sector is inspiring confidence!! Nope — not even close.
Equity Assets
A, it should be AAA Bonds…..nop, nothing there
Junk then…neither
Term structure
There has to be at least one part of the curve where investors sought shelter.It’s not an issue tied to uncertainty in any specific part of the curve, nor to the duration profile of a portfolio.This — just like what we saw with gold — is unusual. There’s no panic, there’s uncertainty. If there were real fear, safe havens would’ve seen major inflows.
Of course — it must be the adoption of crypto as the primary currency…
No, that’s not it either.
Equity Assets: Right… that must be it… cash is king and the dollar rules!
Oops… no, not that either.
We talked about the relationship between price and its controller — volume. Well, there’s no confirmation of anything in any asset class. There’s no panic either. The market is simply frozen. Everywhere across the world and across every asset class.
The calm before the storm?
I think so. Yes.
See you next time
Martin