The Morning Call
4/1/26
The
Market
Technical
Tuesday in the
charts.
Summary: Tl;dr: Q1 was already hectic, led by AI
disruptions, a private credit crisis, and precious
metals panic, and then came Iran in March. Volatility is up
dramatically in every asset-class with software's slaughter wrecking tech,
dominating equity weakness. A violent hawkish shift in market expectations
pushed rates higher in March as war sent oil higher and gold lower. Bitcoin
outperformed as the dollar was aggressively bid. The month ended on a
positive tone (stocks up, oil down) with 'off-ramp' signals from
Trump and Iran.
'...we love the smell of off-ramps in the morning...'
Note: the
explosive pin action notwithstanding, the S&P remains in a downtrend and
will remain so until it breaks above its last lower higher and its 200
DMA---both converging on ~6625. However, have your Buy List ready.
Tuesday in the
technical stats.
https://www.barchart.com/stocks/momentum
https://www.barchart.com/stocks/market-performance
https://www.barchart.com/stocks/sectors/rankings
https://www.barchart.com/stocks/signals/new-recommendations
The
Wednesday morning opening setup: Futures and bonds jump and oil fell, sending
Brent briefly below $100 a barrel, as the de-escalation/technical/macro led
relief rally continues on hopes of the Middle East conflict reaching an end
soon after Donald Trump said he expects the war in Iran to end in two to
three weeks, and indicated that it was possible that Iran could still reach a
deal with the US during that timeframe. Trump has a national address
tonight at 9pm ET to discuss Iran, but the content is unclear, with
the market is expressing the view that this will be details on a wind-down
rather than an escalation. As of 8:15am ET, S&P Futures were 0.7% higher,
after the cash index posted a near 3% advance on Tuesday, the best end
to a quarter since September 2008. Nasdaq futures jumped 1.1% with all Mag
7 names higher premarket. European stocks jumped 2.6%, alongside a 4.9%
surge in Asian shares. Final Mfg PMIs from the Europe were mixed
(EU, Germany, Italy small beats/UK, France small missed) while Japan/Korea Manf
PMIs were slightly better. Trump is set to address the nation tonight at 9pm
EST and said he expects the war to end in two to three weeks/US would withdraw
once Tehran can no longer obtain nuclear weapons. Otherwise, the US is sending
a third aircraft carrier to the region, Iran said the US “isn’t serious about
diplomacy”, the WSJ reported that the UAE wants to force the Strait of Hormuz
open and is willing to join the fight, and attacks continued on both sides with
Qatar saying Iran struck an oil tanker. Brent fell 5.4% before paring the move
as the Strait of Hormuz remained largely closed and attacks continued
across the Gulf. Traders trimmed bets on tighter monetary policy, sending
two-year Treasury yields three basis points lower to 3.76%.
The longest oversold streak since 2008.
https://talkmarkets.com/article/a-record-scratch-in-the-market-1774982549
Relief rally ends
correction.
Relief
Rally Ends Correction Risk
Summary:
If Trump is declaring mission accomplished, then so are we regarding our stock
market correction call. We will probably lower our recession odds from 35% back
to 20% once we have a better handle on whether the conflict in the Persian Gulf
is actually over. We reserve the right to change our minds as often as the
President does. Nevertheless, we have maintained our 7700 S&P 500 year-end
target and our commitment to our Roaring 2020s base case.
This is nothing more than a technically
oversold rally.
https://www.zerohedge.com/markets/jpm-desk-nothing-more-oversold-tactical-bounce
Summary:
while these were de-escalation developments, the content of the
headlines was not new, particularly given that the Iran headline was
the same reiteration of its demand. Instead what happened is what we warned
would happen 24 hours ago: positioning was so bearish - take CTAs for example
which as we noted had sold $184 billion in global stocks in the last month and
were net short $47 billion in stocks - that any "good news
would guarantee
a rip higher."
Gold’s correction
is technical not fundamental.
Fundamental
Headlines
The
Economy
US
Weekly mortgage
applications dropped 10.4% while purchase applications were down 3.0%.
Month to date retail chain store sales were up
6.9% versus +6.7% in the prior week.
The January Case Shiller home price index fell
01% versus forecasts of -0.2%.
February job
openings (JOLTS) totaled 6.88 million versus predictions of 6.92 million.
February retail
sales rose 0.6% versus consensus of +0.5%; ex
autos, they were up 0.5% versus +0.3%.
https://www.zerohedge.com/personal-finance/us-retail-sales-jumped-most-8-months-february
The
March ADP employment report showed job growth of 62,000 versus expectations of
40,000.
The
March Chicago PMI came in at 52.8 versus estimates of 55.0.
The
March consumer confidence index was 91.8 versus projections of 88.0.
International
The Q1 Japanese
large manufacturers index was reported at 17 versus forecasts of 16; the large
nonmanufacturers index was 36 versus 33; the small manufacturers index was 7,
in line.
The February EU
unemployment rate was 6.2% versus predictions of 6.1%.
The March Japanese
manufacturing PMI was 51.6 versus consensus of 51.4; the March Chinese manufacturing
PMI was 50.8 versus 51.6; the March German manufacturing PMI was 52.2 versus
51.7; the March EU manufacturing PMI as 51.6 versus 51.4; the March UK manufacturing
PMI was 51.0 versus 51.4.
Other
War. What is it good for?
https://alhambrapartners.com/weekly-market-pulse-war-what-is-it-good-for/?src=news
Iran
Overnight news.
Fiscal
Policy
Washington ignores the US’s fiscal cliff.
https://www.axios.com/2026/03/22/washington-ignores-americas-fiscal-cliff
The $39 trillion debt bomb.
https://www.foxnews.com/opinion/americas-39-trillion-debt-bomb-could-be-more-painful-than-you-think
Counterpoint.
All the authors
agree that the US government spending is wasteful and growing; the difference
is that the former believes that it is a problem that will only become worse,
the latter that it will become a problem when the Market determines that it is
a problem---although he skips over what may be its current impact on inflation
and the dollar (see below).
Inflation
A new framework for the neutral rate warns of
inflation.
https://www.zerohedge.com/markets/new-framework-neutral-rate-warns-inflation
Summary: While the nominal neutral
gap (the difference between the 10y1m OIS rate and the terminal rate) has
fallen, the real neutral gap, deflating the rates by the 10-year and
shorter-dated inflation swaps respectively, is widening. In real terms then, the Fed is expected to get further below the
neutral rate. Intuitively, that points to a fanning of inflation pressures;
that’s the case empirically as well, with rises in the gap often preceding
rises in price growth by about 3-6 months.
Recession
From inflation shock to demand destruction.
https://www.zerohedge.com/markets/inflation-shock-demand-destruction-follow-troops-not-tweets
Summary:
The worst
outcome for central bankers right now would be a significant rise in
survey-based inflation expectations in the face of weaker growth
dynamics. Thus far, the reaction we have seen is how
you’d expect any central banker to respond – respect the fact that conditions
have changed and stand ready and willing to fight any sustained move higher in
core inflation. Front-end policy rate expectations have responded in kind,
pricing in almost 3 rate hikes from the ECB and BOE by year-end and no further
cuts from the Fed. But the hit to growth muddies this picture – damage to risk
appetite, the feedback loop from tightening financial conditions and the
non-linearity associated with a prolonged move higher in energy prices means
that aggressively tightening monetary policy may exacerbate financial
stress in the economy, with highly uncertain second round effects. In
sum, I expect demand destruction to happen in both scenarios should this war
continue for much longer…either from central banks that are forced to hike
rates assertively to challenge spiraling inflation expectations…or from a large
hit to growth from a persistent energy price shock.
There is only one circuit breaker to this crisis: rapid de-escalation.
The
Financial System
Private lenders delay reckoning with payment
concessions.
The
Dollar
The dollar is dying in real time.
https://talkmarkets.com/article/the-dollar-is-dying-in-real-time-in-3-charts-1774981231
Investing
How the stock market
performs after a correction.
https://awealthofcommonsense.com/2026/03/how-the-stock-market-performs-after-a-correction/
Are investors too
complacent?
https://www.morningstar.com/markets/markets-brief-are-markets-too-complacent
The bond market is
starting to push back against Powell’s benign inflation views.
https://www.capitalspectator.com/bond-market-starting-to-push-back-on-powells-inflation-view/
News on Stocks in Our Portfolios
What
I am reading today
Doubting
the forecast.
https://humbledollar.com/2026/03/doubt-the-forecast/
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