The Morning Call
6/16/26
The
Market
Technical
Monday in the
charts.
Summary:
The Iran peace deal/MOU signing (and optimism about the Strait)
pushed oil prices notably and concomitant with that bond yields fell, stocks
rose, the dollar dipped, and bitcoin and gold surged. Anthropic's bad
weekend saw dispersion increase across the AI ecosystem as SPCX
took off. The trifecta of oil, bonds, and stocks all moved together at the
open last night but since then there has been a notable divergence with
stocks outperforming and bonds underperforming... the broad market was bulled
up by the peace deal optimism with Nasdaq massively outperforming. US equities
faded off their highs after Europe closed. Small Caps closed below
their opening levels on the day (but all the majors were higher). The
last hour saw some significant profit-taking...
Monday 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
Five things to
consider when thinking about the current pin action.
https://www.carsongroup.com/insights/blog/five-things-to-think-about/
A warning from
Goldman.
Summary:
Top Goldman Sachs trader, Lee Coppersmith, says in his latest note that the
bank has recently started to see signs of investors taking their foot
slightly off the gas pedal as it relates to the AI trade. Some of that
seems like simple exhaustion after an extraordinary run.Some
reflects growing discomfort around the recent buildup
of leverage, concentration, and positioning. And some is probably the
market beginning to recognize there may be underpriced cyclicality
outside of AI - particularly if we get a real resolution on the Iran
front, lower oil, and some easing in rates pressure. That said, Coppersmith
reassures that they have not seen any signs of a broad rejection of the
AI story. One thing to keep on the radar is Gold…The metal is on
pace for its second worst monthly performance outside of the March
drawdown. CTA positioning in Gold has collapsed toward the 1st
percentile on a 1yr lookback, ETF holdings have fallen by roughly -870k ounces,
and put-call skew has now risen to nearly decade highs on downside demand. Upside
here could be an interesting way to express a more dovish macro view.
The gold powder
keg.
https://www.zerohedge.com/the-market-ear/gold-powder-keg
Tuesday morning
setup. US futures are flat, pausing after a three-day rally with investors
shifting their focus to this week's FOMC meeting, Kevin Warsh's first, which
begins today. As of 8:00am ET, S&P futures are up 0.1% after surging 2% on
Monday; and Nasdaq futures gain 0.3%, as SpaceX continued to surge, rising
11% overnight and on track for a more than 50% jump since going
public, and briefly surpassing Microsoft's market value in afterhours
trading. Pre-market, most of the Mag 7 names are lower; TSLA (-1.7%) and
NVDA (-0.6%) are among the laggards. The dollar slipped and Treasuries rose
with bond yields 1-3bp lower and the 10Y trading 4.44%. West Texas Intermediate
crude fell 3% to $78 a barrel as Goldman and Morgan Stanley cut
their oil price forecasts. Base metals are also lower, while gold and
silver both rose 0.7% this morning. Overnight, the main macro headline was BoJ
(policy rate to 1% with the tapering plan unchanged; a bit hawkish tone in the
statement; 15yr JGB added 8.5bp) and China data releases (Retail Sales and FAI
both missed; HSI -1.4%). US economic data calendar includes weekly ADP
employment change (8:15am), May import/export price indexes, June NY Fed
services business activity and May housing starts/building permits (8:30am)
Fundamental
Headlines
The
Economy
US
May
housing starts declined 15.4% versus expectations of down 6.0%; building permits
were off 0.7% versus -0.6%.
https://www.zerohedge.com/markets/us-housing-starts-collapsed-may-lowest-covid
May
industrial production rose 0.1% versus estimates of +0.3%; capacity utilization
was 76.2%, in line.
https://bonddad.blogspot.com/2026/06/goods-production-sector-of-economy.html
The June housing
index came in a 35 versus predictions of 36.
International
The Q1 EU labor cost index was up 3.2% versus consensus
of up 3.3%; the June economic sentiment index was 3.2 versus 3.3.
May Chinese YoY industrial
production was up 4.5% versus projections of 4.3%; May
YoY retail sales were down 0.6% versus 0.0%; May YoY fixed asset investments fell
4.1% versus -2.0%; the May unemployment rate was 5.1% versus 5.2%.
The
June German economic sentiment index was 10.5 versus forecasts of -6.0; the June current conditions index was -81.0 versus -78.0.
Other
Small business employment and business cycle
prospects.
https://econbrowser.com/archives/2026/06/small-firm-employment-and-business-cycle-prospects
Myths about the K shaped economy.
The G shaped economy.
https://www.advisorperspectives.com/commentaries/2026/06/14/g-shaped-economy
Three reasons why the price of oil may have
bottomed despite the deal.
https://mishtalk.com/economics/three-reasons-the-price-of-oil-may-have-bottomed-despite-a-deal/
The US
takeover of global energy flows.
https://www.zerohedge.com/geopolitical/hormuz-houston-us-takeover-global-energy-flows-ramps
Iran
Trump’s Iran deal has all the hallmarks of
defeat.
Summary: A deal to reopen the Strait of Hormuz is set for
signature, with Donald Trump congratulating himself on making peace with Iran,
but critics argue this is not a peace deal that brings stability to the region.
The terms of the Memorandum of Understanding have not been published, but
reactions from Iranians and Israelis suggest that the US may not be in a
substantially better negotiating position than it was before the start of
hostilities. The deal is expected to include requirements such as an end to
hostilities, reopening the Strait of Hormuz, a restart of nuclear negotiations,
and the release of frozen Iranian funds, but it may not address other issues
such as Iran's support for terrorist proxies in the region.
Monetary
Policy
The new Fed chair effect.
Inflation
Last week’s Treasury auction and what it says
about inflation expectations.
Grocery inflation.
https://www.zerohedge.com/commodities/timing-next-grocery-inflation-surge-revealed-bofa
Summary:
Blended average of wage, diesel & commodity trends (mostly driven by
diesel fuel cost up 60% y/y in May) imply the Food at Home CPI could accelerate to 8%+ starting in
4Q. We see sales upside at Food Retailers given the industry
has historically passed on price increases and comps correlate strongly with
food inflation.
AI
The AI investment boom cannot sustain rapid
growth.
https://research.berenberg.com/report/C9FE03AE407DDED3C1A8FBD62611D991?cs=5
Investing
The only bear case left is extinction.
(3)
The Only Bear Case Left Is Extinction - by Quoth the Raven
Don’t be surprised
if SpaceX shares fizzle.
Diversification is
becoming harder to achieve.
https://www.principalam.com/us/insights/equities/rethinking-diversification-ai-driven-world
Traders missing
lingering policy risks.
Summary:
A model developed by Jim Paulsen shows that elevated crude prices and bond
market volatility will soon start to slow economic momentum, which may hinder
the S&P 500 Index. The policy pressures index, which measures the impact of
higher oil prices, 10-year Treasury yields, and the dollar, is near its highest
level since 2025, and its lagged effect is expected to slow overall US economic
momentum.The inverse correlation between the Citigroup Economic Surprise Index
and the policy pressures index signals that the stock market advance may be
hindered, with traders potentially caught off guard by the slowing economic
momentum.
But it is not all doom and gloom---the
outlook for Q2 earnings.
https://talkmarkets.com/article/earnings-outlook-brightens-as-estimates-keep-rising-1781331637
JP Morgan now
tactically bullish.
https://www.zerohedge.com/markets/jpmorgan-traders-flip-back-tactically-bullish
Summary:
We would like to return to the Tech and Cyclical barbell but
stay nimble on the rate-sensitive or Hormuz reopening trades: stay long
in the global AI theme with heavier weight on US vs. Asia. We do think
the initial “everything rally” should benefit Airlines, Housing and
Retail but historical patterns reflect that the rally could be
short-lived and more vulnerable to the shifting headline volatility. We like
a tactical long in Financials into the July earnings season and expect
it to catch up with the broader Cyclicals, as strong fundamental growth remains
intact.Risk: That said, the historical pattern suggests
that “everything rally” can fade into concentrated leadership following the
initial impulse, so we continue to favor Tech and maintain a tactical long
in Financials. The main risk remains bond volatility driven by
hawkish growth/inflation data and central bank messaging. Additionally,
volatility in the Semis space amid the rising usage of leveraged ETFs
could present pullback risk in Semis.
Futures funding
rates explode.
https://www.zerohedge.com/markets/theres-lot-stock-leverage-exposed-correlation-shock
Summary:
Demand for equity leverage keeps climbing, pressuring funding rates, as
the market becomes increasingly exposed to a sudden move higher in
correlation. Rising markets always create extra demand for juiced returns.
This time is little different, except in the magnitude of leverage being
extended. In option land we have seen an explosion in the volume of long
call positions as traders chase upside. We are also seeing dealers
offering a record amount of leveraged exposure to stocks via futures
and total return swaps.Equity inventory on their balance sheet has risen to
a high of $223 billion. The Iran peace deal has allowed animal spirits to
revive. But I agree with Mark Cudmore’s earlier sentiment
that risk-reward is still poor.
News on Stocks in Our Portfolios
What
I am reading today
The role of luck
in your life.
https://ritholtz.com/2026/06/recognize-the-role-of-luck-in-your-life-and-career/
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