"The job of the Fed is to take away the punch bowl just as the party gets going."

— William McChesney Martin, Fed Chairman, 1955

Actually, this week’s letter was going to be called:

Show Me The Money!

and this was going to be the lead picture/gif:

The theme of course was going to be the Wall of (equity) Supply coming to markets over the coming weeks, from high profile IPOs (SpaceX, Anthropic, OpenAI, many other) and capital raising (Google).

And all this, at valuation levels which no clear-, straight-forward thinking investor would ever touch. But, as one of my favourite Substack-Writers and Meme-Creators, Le Shrub, recently wrote:

“The latest Star Wars film, “Mandalorian & Groku”, is now out in the cinemas. Reviews were horrendous but I’m still going to watch it.

Space-X is about to IPO. Valuation is horrendous but investors are still going to buy it.

We know it’s all stupid and we are pretty good at playing along…”

For sure:

Look, as mentioned on several occasions in the past, , and we are trying NOT to be a grumpy old man, shaking his fist at the cloud,

or screaming at the TV,

increased IPO activity has come towards the end of a bull cycle, not at the beginning.

Don’t believe me, dear Jury? Well,

Exhibit 1 - Glencore

Exhibit 2 - Blackstone

Exhibit 3 - More examples of “Success” investing into IPOs

Exhibit 4 - Even more examples of “Success” investing into IPOs

So, why is there such a bad outcome for investing into IPOs? Two main reasons, closely linked to each other:

1. Investment bankers will push companies to go public when the speculative fervour is elevated - like today.

2. Founders will go public when they think their companies may have reached full valuations - like today.

What’s that saying again in Poker? Ah, yes:

"As they say in poker, 'If you've been in the game 30 minutes and you don't know who the patsy is, you're the patsy.'"

— Warren Buffet, 1987 Berkshire Hathaway shareholder letter

This pending flood of IPOs, which is now being ‘reinforced’ by companies which have been retiring equities for years, suddenly become net equity issuers again, such as Google,

or Meta

is one of two major concerns I highlighted earlier this year, not least in NPB’s Q2 investment committee outlook (click here).

The other, second major concern is a passive investing. Without going into details, Friday’s sell-off was a good example of what happens when an index (e.g. S&P 500) gets too one-sided (e.g. Technology), as passive Dollars have been flooding into the same 10 stocks at increasingly massive scales. But that’s a theme for another, dedicated newsletter…

In the meantime, let’s have a look at those last two, fatal trading days of last week, with especially the latter probably being a near-death experience for many over-levered investors.

It seems longer ago than only last week, that we wrote in the Quotedian titled “Chip, Chip, Hooray” (click here) the following:

Sooooo, what will it be? More CHIP, CHIP, Hooray or was that all, folks?

Probably this little GIF out of the Wile E. Coyote universe may be a close parallel of what is happening and may happen:

We were not surprised, as we manifested in a letter to your clients (click here).

However, there was at least one investor which was caught out wrong footed and in his usual spoil-sports manner got upset about it:

Let me try and make a simple drawing for you, Mr DJT:

Of course, Uncle Donald has a point, BUT only in a market not priced to perfection already, which, given the vehement sell-off on Friday it clearly was!

Again, what I did write last week was:

What I can to anyone willing to listen is a hunch, plus a not-so-bold-but-convinced prediction.

The Hunch: There’s more upside.

The Prediction: Volatility is about to increase.

Regarding the latter, here’s the full statement, which you can print and hang on your wall until true:

We only need one AI data-centre build being cancelled to violently shake-out the weaker hands … and given the record leverage, massive call buying and complacency going on, the maybe not so weak hands too.

So, as I often (and recently more it seems more often) like to say:

Right for the wrong reason, but I’ll take it!

Let’s look at some of the damage now … or, maybe, what little damage really has been done …

Whilst the S&P 500 had one of its worst days (-2.64%) in a while,

actually the ratio of up (237) to down (265) stocks was nearly balanced, and five out of eleven sectors actually managed to end up on the day,

leaving us with following where colourful heat map:

As unbelievable as it seems, but the Dow Jones Transport and Utility indices actually close up on the day:

But back to areas where some real damage was done. The Philadelphia Semiconductors index saw its worst drop (-10.26%) since those dark COVID-days:

Of course, we are not all invested into the SOX stocks, but for sure many of us are exposed to the fortunes of the Nasdaq 100 (-4.77%) companies, where the largest distractors reads like the who-is-who of recent bellwhethers:

Should we have known a storm was brewing? Perhaps …

Whilst there is never somebody ringing a bell at the a top, there were signs to take some chips of the table.

For example, has June been a month of “pause & reflection” over the past thirty years:

And if we take into account that we are in a (US) midterm election year, we should have been all the more warned that the difficult period is starting right now. The following chart combines the monthly returns of all election years going right back to the beautiful year of 1970:

Here’s another way to look at this - a direct comparison of June performance in all years versus mid-term years (dashed):

The following chart, which we already looked at last week, but now with the consquential update, was indeed also a “spoiler”:

The following monthly chart of the ratio between the Nasdaq Composite and the S&P 500 indices would become epic, should it indeed turn lower from here:

So this leave us with the questions: Was that it or is there more downside ahead?

Spoiler Alert:

But let’s have a look at some ‘evidence’ anyway …

The VIX spiked, but is below most previous blow-out tops:

Bitcoin, on this occasion a liquidity AND risk-on/risk-off indicator did a good job of giving investors early warning signs, first through a topping out in early May and then a downward acceleration in late in the same month:

Over the weekend, the blood letting stopped, but BTC still moves within the downtrend channel, i.e. not giving a de-warning signal.

The Nasdaq 100, which also smashed its head against that beam of upper trendline resistance, is still 13% and over 30% above its 50- respectively 200-day moving average:

The SOX index, despite its 10% drop on Friday, is still …. oh, never mind…

Looking at a chart of the adults market (S&P 500), a pull-back to 7,000 would kind of make sense:

It’s the confluent zone of midway between the 50- and 200-day moving averages, roughly the 50% Fibonacci correction for the entire April/May up move AND the previous February/March resistance, now turned support.

Ergo, let’s prepare our buying list to be deployed as the S&P 500 pulls back some five percent or so from here…

Finally, a last equity observation before we head over into the fixed income section:

As usual, Mr. Market had sarcastically let the AuMs of the world’s largest hedge fund reach exactly USD1 trillion early on last week:

The increase in passively invested allocated assets as witnessed in the acceleration staring in late 2022 is absolutely impressive.

Also in relative terms to other major ETFs,

and then summing it all up … my word!

Anyway, the party didn’t last long as Friday the punch bowl was taken away for good …

and right now there’s seems to be no booze insight to get it started again …

Quite “au contraire”, if anything, it seems that all party-goers have been order an increased dose of monetary policy rate for the coming months. The Fed has gone from being expected to cut to at least one rate hike by year and (and rising):

Whilst the ECB is expected to hike as soon as this week:

Friday’s NFP number, well above the esteemed (ehem) analysts’ expectations,

was of course one of the main reasons for that rate-path perception shift, as it was responsible for that jump in the entire yield curve:

Here’s what happend to the 10-year US Treasury for example:

The daily chart of the same has turned upwards again, which takes our view that we may drop to 4.20ish before going higher probably off the table in favour of going higher directly:

US CPI is due on Wednesday - that could be a game changer either direction…

What else moved on Friday?

Currencies! The US Dollar is firmly up versus all other G-10 currencies since Thursday on the back of a sudden outlook of rate hikes i.o. rate cuts:

However, the US Dollar Index itself continues to remain range stuck:

The EUR/USD is heading towards key support zone at 1.1400 again,

whilst the USD/JPY cross is once again at the 160 BoJ/MoF intervention level:

Finally, we are sure the Swiss National Bank doesn’t mind the break-out higher of the Greenback versus the Swissie on this chart:

Cryptocurrencies, as already hinted to via our Bitcoin discussion further up, are having a ‘annus horribilis’, with a lot of the losses coming over the past 30 days:

Finally, if the US Dollar has moved, it is safe to assume that some commodities have been on the move too, as for example Gold:

Gold how now given back all year-to-date games and is exhibiting typical behaviour of a “burst-bubble”. For sure, its time to shine will come again, but not for the very foreseeable future.

Similarly, silver is on the cusp of breaking key support and will probably struggle to show any meaningful absolute returns over the coming months:

With this week’s letter already lengthy enough, I will stop here. Make sure to stay “a jour” with our market thinking in what will be probably a violent volatile week, by signing up to our daily Quotedian, if you have not done so yet:

Join the Daily Quotedian

But just before I let you go, do you not also feel a bit like this?

May the Trend be with You!

André

• Everything in this document is for educational purposes only (FEPO)

• Nothing in this document should be considered investment advice

• Investing real money can be costly; don’t do stupid shit

• Leave politics at the door—markets don’t care.

• Past performance is hopefully no indication of future performance

• The views expressed in this document may differ from the views published by NPB Neue Privat Bank AG

“Exponential rapidly rising or falling markets usually go further than you think, but they do not correct by going sideways.”

— Bob Farrell (Rule #4 out of Bob Farrell’s 10 Rules)

This week’s letter is mainly dedicated to update us on the happenings in markets during the month (May) just gone by, using our usual statistical tables and some longer-term monthly charts. However, just we before we do that, let’s have a quick look at the crazy, crazy rally in tech stocks in general and semiconductor-related companies in particular.

Starting with the broader technology market and using the Nasdaq-100 as its main representative, we note the back-to-back double digit gains in April and March for a nearly 30% advance:

So, how common are back-to-back double-digit gains on the Nasdaq? Turns out, not much:

The chart above shows those moments (shaded areas) of two consecutive months of double digit gains. With the exception of the October/November rally in 2001, these were not bad times to continue to pile on further tech exposure. Even the November/December rally in 1999, so close to that ominous Dotcom-bubble top still had legs for another 30% …

Now, having said that, the following chart of the suggest that maybe it would not be a bad idea to take at least some chips of the table (aka partial profit taking), as the secular bull trend has reached its upper trend channel, coinciding with also the 4th Fibonacci extension (685.4% - not shown) from the 2000-2002 decline:

Now, turning to the semiconductor market and using the Philadelphia Semiconductor index as a proxy, we are in awe about the move that just occurred over the past two months:

Ladies and Gentlemen, that’s close to a doubling in just two months!

Looking at the thirty constituents of the index, we should be not surprised that many have of course done even better than the index itself:

Well, hell, I think many of us would be happy having had just the 10% worst performing in our portfolios!!

So, is it still time to jump on the bandwagon or is it too late to join the party? How much juice is there left in the rally?

Quiet frankly, impossible to know, even if I commit chart crimes by overlaying completely unrelated events such as the Dotcom bubble and burst and the current SOX-rally over each other:

This, at best, is comparable to a snake oil seller pricing his goods to the public …

What I can to anyone willing to listen is a hunch, plus a not-so-bold-but-convinced prediction.

The Hunch: There’s more upside.

The Prediction: Volatility is about to increase.

Regarding the latter, here’s the full statement, which you can print and hang on your wall until true:

Let’s have a look at another, semiconductor-related chart…

South Korea’s KOSPI index has 835 members (aka constituents). However, the two largest positions are more than half of index in terms of weighting:

Both stocks are semiconductor companies, hence the index represents another proxy to this industry.

Now, after an ugly, long-winded bear market of over four years, the KOSPI is now up 270% in a bit over a year and up 70% over the past two months alone!

Surely this must be THE top now soon? A top is likely, but THE top, i am not so sure, given that the KOSPI is only now breaking out against the MSCI World after 37-years of underperformance:

Finally, to finish our already longer-than-planned intro section, a few more ‘stunning’ chip-related charts:

The Roundhill Memory ETF launched on April 2nd (yes, this year) and was up 133% by last Friday:

But maybe even more impressive than that doubling and then some is the growth in AuMs of the ETF:

Starting with around USD20 million in assets, the Fund’s total assets were just shy of USD14 billion(!) by last Friday.

NVIDIA, the poster-child of semiconductor companies and the AI roll-out is boasting an incredible profit margin of 71%!

Staying with NVIDIA, the company stands in a league of its own when it comes to earnings growth and shareholder returns over the last decade, as the following fantastic chart from the equally fantastic Charlie Bilello shows:

We’ve never seen a company scale this fast at this size.

Sooooo, what will it be? More CHIP, CHIP, Hooray or was that all, folks?

Probably this little GIF out of the Wile E. Coyote universe may be a close parallel of what is happening and may happen:

Time now to make a speed round across the cross-asset macro landscape to see what has been happening during the month just finished…

Starting at the top level, global equities were the star performers in May (red), followed by the 60/40 portfolio, whilst commodities made up the back end giving back some of their still massive year-to-date returns (grey):

Shifting into the equity asset class, here are the performances of the most widely followed benchmark indices around the globe:

The previously discussed KOSPI and Nasdaq indices stand out as the top performers in May, whilst Brazil, after a strong rally in the preceding months, has started to correct more meaningfully, mostly based on political shift regarding the upcoming presidential elections. India continues to disappoint.

There’s really nothing to argue with concerning that secular uptrend in the S&P 500, nicely depicted in the monthly chart below:

The S&P 500 closed at a new ATH on Friday, and hence, the monthly candle also ended at its very upper end, which is not bearish as investors continue to crave to be invested:

The same (Friday ATH close) was true for the NASDAQ,

and the Russell 2000 small cap indices:

In Europe, a new ATH was not achieved neither on the broad SXXP,

nor on the narrower SXXE:

Though both indices are close to reaching those new ATH targets and are looking substantially more constructive now thanks to a late-month rally.

In Asia, Japan’s Nikkei index …. well, check for yourself:

In China, Mainland stocks (CSI300),

seem to do better than their Hong Kong comrades:

India continues in its sideway consolidation/correction:

Moving into global sector performance, we note the higher beta indices (tech, consumer discretionary) leading, whilst the more defensive stuff (consumer staples, utilities, energy) is lagging:

Our proprietary aReS™ asset allocation model continues to overweight technology and industrials,

whereas Bloomberg’s RRG function really only likes technology (and some consumer discretionary):

Financials (XLF) look unhealthy in relative terms (vs SPY),

but that’s a story for another day…

The following table looks at the May performances of some of the more popular investment themes over time:

Probably worthwhile noting the massive rebound in Cybersecurity stocks, after the software-related SaaSMagedon sell-off early in the year. Here’s the First Trust Cybersecurity ETF (CIBR) as a proxy for this market segment:

The software sector itself, in the follows proxied via the iShares Expanded Tech-Software ETF (IGV), has also rebounded noticeably, leaving us with two investment ‘wisdoms’:

1. Classical Bear Traps exist

2. In investment mafs, 37% down is not equal to 37% up (aka Volatility Gremlins)

Ok, time for a quick glance on the best performing stocks on a year-to-date basis on both side of the pond and check how they have fared over the past month.

Starting with the US:

And following up with Europe:

I am not sure I may have mentioned this already once (or twice, or thrice or a million times), but…

Alright, let’s correlate over into fixed income markets, where May has treated bonds a tad better than one might suspect:

Probably the largest ‘surprise’, at least to me, is the relative resilience of treasury bonds which by nature are most exposed to duration risk. Didn’t inflation tick higher and the long-end of the curve move up in May? Well, yes, at least during three-quarters of the month, however by May 19th the US 10-year treasury topped out and started moving lower, be it on inflation expectations already baked in now, or confidence regarding the end of the war being near, or more likely a bit of both and then some other factors too:

On the long-term (monthly) chart, the same 10-year Treasury yield looks like this:

To me, the risks continue to lie towards the upper side, with exceeding 4.56 on a monthly basis being the first confirmation and “run for the trenches” with a close above 4.70. But this will take time and a lot of “intermediary” scenarios could play out in the meantime. Just keep your focus tilted upwards …

The curve (10y-2y) has been flattening a tad since February and currently lies on top of some apparently important pivot point:

European rates in the meantime witnessed an even larger intra-month reversal, with rates closing lower than they had opened at the beginning of May:

On the longer-term chart of the Bund yield, just as for its US Treasury cousin, the path of least resistance seems to be to the upside … eventually!

Are Japanese Bonds (JGBs) leading the way for global bonds? Checking in on the chart below, JGBs (red) hit their lowest in 2016 already. As US (grey) and German (dark grey) government bonds hit new absolute lows during the COVID period in 2019/2020, JGB’s actually saw a marginally higher low (red arrow):

Recently, JGB yields have accelerated to the upside:

Will global (developed) bond yields (e.g. US, Europe) see a similar acceleration in a not too distant future?

To finish off the rates section, just a quick glance at credit spreads from two different angles.

First, via Credit Default Swap (CDS) rates:

And then via the Moody’s BAA minus AAA indices:

Both are signalling no immediate stress, but also no meaningful carry for taking on more risk.

Surfing over into sea of the international currency market, here’s the performance table of non-US Dollar currencies versus the US Dollar during May:

So, in other words, the Yen lost 1.7% versus the Greenback, whilst the New Zealand Dollar was a major winner.

The US Dollar Index itself remains range stuck:

Looking at the same chart on a monthly candle chart,

it “feels” like the DXY should head lower eventually, but feelings are not a valid investment strategy:

Similar as with the bond market, the most interesting currency chart comes out of the Land of the Rising Sun (yes, Japan):

Interesting, because the MoF/BoJ seems to have put a clear lid on the currency pair at 160 and knocks down the exchange rate every time it approaches that level. However, it seems the market is out to test the country’s currency managers resolve, but rapidly rebounding after an initial sell-off.

Cryptocurrencies are NOT having a good year, and May didn’t help at all:

Finally, flourishing over into the eternal garden of commodities (see, there must be a poet in me somewhere deep, deep inside), May has mainly been about mean reversion:

Precious metals, grains, livestock and energy all gave back some of their YTD gains. Only industrial metals continued to build on already existing positive performance, whilst softs continued to … eh….. well… soften!

Regarding Gold, we have been saying that for months now that the bubble has erstwhile burst, and a longer period of price consilidation will be necessary before a new upleg can be considered. This has served well to anyone listening to us:

And let me repost this chart from a few weeks back:

One trade that likely has switched from long to at least neutral, probably short though, is crude:

Unless a true, full-blown resurgence of kinetic activity, which for us is now a lower probability scenario, the price of black gold is likely to fall lower over the coming weeks to months. However, do not confuse the upcoming period of relative calm as “that was it!” from a geopolitical point of view. We continue to move within a multi-polar world, where conflicts are smaller but more often, but eventually (and unfortunately) lead into a wider, much more violent conflict.

On that happy note, one last quick glance on our long copper idea, with which some volatility, is seemingly starting to get some traction:

Here’s the longer-term (monthly) view of the same:

And finally, for completeness purpose, here are some other commodity futures movers during May:

Without any further ado, it is time to bid farewell (no worries, for this week only).

Remember that there will be no intra-week, daily updates this week, but we will be back in old freshness (oxymoron-alarm!) and reinforced next week!

André

• Everything in this document is for educational purposes only (FEPO)

• Nothing in this document should be considered investment advice

• Investing real money can be costly; don’t do stupid shit

• Leave politics at the door—markets don’t care.

• Past performance is hopefully no indication of future performance

• The views expressed in this document may differ from the views published by NPB Neue Privat Bank AG

"We must all suffer one of two things: the pain of discipline or the pain of regret."

— Jim Rohn

No, not all markets were closed yesterday in celebration of Whit Monday/Pentecost/Pfingsten, so while equities and bonds steamed higher, what were you doing?

But fret and regret not, that’s why you have your favourite cross-asset newsletter fresh, crisp and ready in your Inbox this early Tuesday morning!

And in case you want to have condensed but exceptional market insights on a nearly daily basis, do not forget to sign up to The Quotedian - Daily Edition, formerly known as The QuiCQ:

Let me in!

On to some market observations, starting with equities …

The US stock market, hereby proxied via the S&P 500, has been up for eight consecutive weeks:

That’s quite an impressive pace on the weekly chart,

looking even more impressive on the daily version of the same:

The Naysayers (aka bears) will immediately point out however, that the S&P 500 did not make a new high last week and that last candle could even be interpreted as a trend-reversing shooting star candlestick. The bulls in turn will retort that, yes but, the equal-weight version of the index (RSP) made a new all-time high on Friday, which is very bullish:

I concur with that latter interpretation and firmly believe that the burden of the prove lies with the bears here.

Some follow-through would of course be great, but given the further upswing during Monday’s shortened futures trading session, it seems likely we will get just that:

The tech-stock heavy Nasdaq 100 has done of course even better,

but even that 30% rally was dwarfed by that insane 70%-plus rally on the Philadelphia Semiconductor index:

By all means, earnings have been supportive to the stock market advances, as the following chart of EPS on the S&P 500 shows:

However, as the following fantastic chart from the equally fantastic folks at Yardeni Research shows, analysts may be over extrapolating earnings a tad:

Nevertheless, for the time being, the rally could continue as sentiment is not frothy,

and previous bouts of strength like the one just witnessed brought above average returns over the following 12-months:

Even European stocks are now showing signs of life, with the STOXX 600 Europe index on the verge (verge=0.35%) of making a new all-time high (ATH):

Germany’s DAX only needs 31 index points (or 0.12%) to reach a new ATH and officially break out of its 12-month lethargy:

Even Switzerland’s SMI is showing signs of life again:

In Asia, Japan’s Nikkei is leaving everything else behind in the dust:

Sector performance-wise, technology stocks continued to dominate over the past few days, whilst energy-related stocks have been coming down on the back of lower oil and gas prices:

In our two (US & Europe) leaderboards of year-to-date performances, winners largely continue to be winners, or as I like to say: strength begets strength.

The US list shows many stocks building on their already hefty gains, with the exception of some of the AI infrastructure stocks (e.g. Vertiv, Quanta) which faced some profit taking:

European YTD champions also continued to push higher:

Looking at the European list a bit longer, older semesters such as me, which have the Dotcom scares to show we were there, will probably have tears in their eyes, seeing some of the old champions standing in the ring again.

Exhibit 1 - Nokia

However, let’s contextualise this:

Exhibit 2 - Infineon:

At least here we are break-even again if we bought at the top in 2000:

If you wait long enough, everything comes round. Even Rocky XXXVI …

One more on the story-telling equity side before we go over to the mafs-based fixed income part …

I already mentioned this in a late afternoon QuiCQ last Friday (click here), but in case you missed it, a short repeat:

Space stocks have been all the rage over the past twelve months - here we use an ETF as a proxy:

As I mentioned in that Friday post, in past bubbles rallies, it was a reliable “the top is near” indicator when suddenly everybody started talking about space-related equity investments - like, the craze of all madness, if you know what I mean.

However, this time I was ready to pronounce the four most expensive words in investing (This Time It’s Different), as, after all, we have that SpaceX IPO and AI-datacenters in space and all that stuff.

However, just as I was going to pronounce those fatal words,

The Economist came to save me and jinxed it all with their famous contrarian magazine cover:

All bets on space are …. OFFFF!

And speaking of SpaceX, with the market cap estimate for the IPO at USD1.75 trillion and revenues (read: revenues, not profit) of USD19 billion, we get a price-to-sales ratio of approximately 100x.

Difficult not to find anything cheaper than that …

Anyway, let’s use another equity sector to hurl us into the bond section of this week’s letter…

The Energy sector (XLE) versus 20+ Year T-Bonds (TLT) has broken out to new all-time highs, whereas historically, that ratio has moved closely with the U.S. 30-year yield:

When energy stocks outperform long bonds, capital is moving toward real assets, inflationary cash flows, and companies tied to the physical economy.

At the same time, it’s moving away from duration in the bond market.

If this relationship holds, buying energy stocks may remain one of the best ways to express a bearish view on bonds – without touching the bond market at all.

In any case, the US 30-year Treasury yields last week reached its highest since Q2/2007, which was before the GFC unraveled:

In the meantime, yields have come down a tad (below the 10-year treasury yield chart), but overall the pressure seems to remain to the upside:

This is of course not only an inflation story, albeit the Fed has lost a lot of credibility, with inflation above its self-proclaimed two percent target rate for 64 months now:

Economic growth in the US is probably stronger than suspected, a possibility we already highlighted in our 2026 outlook in the very early days of January. The Citigroup Economic Surprise index has been stampeding higher recently:

The New York Fed’s weekly economic index is showing that real GDP is growing 3.0% y/y as of the week of May 15 (chart).

The latest Atlanta Fed GDPNow estimate for Q2-2026 is 4.3% q/q saar (chart). Capital spending is leading the way. Consumer spending is up solidly at 2.9%.

Unemployment is not really an issue,

and the US PMI rose to 55.3 in May, it’s highest reading since May 2022:

And if it is up to Semiconductors stocks, those Flash PMIs still have further to rise …

Hence, all-in-all, that upside pressure on the long-end of the curve is likely to remain for now:

And even at the short end (2y) have rates been rising and hence, our long-standing chart titled “Fed follows Rates” continues to hold true:

Of course, all truth being told, and in a small defence for the Fed, 2-year yields are set daily (or every tick as a matter of fact), whilst the FOMC sits together only every six weeks or so.

German yields have been dropping like a stone, including yesterday Pentecote-day, which is a strong signal from the bond market that it thinks the Iran conflict is truly over:

To finish the bond section, just a quick glance at credit spreads, which are NOT signalling any sign of distress whatsoever:

In currency markets over the past five days, nothing really (unless you take a specific interest in the South Korean Won or the South African Rand):

Which only leaves us to look at commodity markets, where oil seems finally to be coming lower now,

agreeing with the conclusions of German Bund traders discussed further up.

** Update as per Tuesday morning, 06:55:

Oil is a tad higher this morning as, despite persistence that a peace agreement is about to be signed, US attacks on two Iranian ships, followed by (protocol) retaliation by Iran on US planes put (limited) upside pressure on the price of black gold again:

Nevertheless, all other parts of the market are screaming that they believe an agreement is around the corner and these last minute operations are quite typical ahead of peace documents being signed. After all, a Supertanker, which had been stuck for three months, apparently crossed the Strait of Hormuz this morning.

And via the fine folks at Rabobank we hear to rumour that Al Arabiya, a news channel, claims that it obtained a copy of the draft memorandum of understanding that reportedly has the support of both sides. Provision of the MOU are said to include:

• Extension of the ceasefire for 60 days

• Reopening the Strait of Hormuz to international navigation, guaranteeing free passage of commercial vessels and oil tankers without additional transit fees, with the Iranian side committing to take the necessary technical and security measures to ensure safety of navigation, including the removal of mines.

• Enabling Iran to resume sale and export of oil.

• Continuation of negotiations over Iran’s nuclear program with the aim of reaching a long-term understanding.

• US to ease restrictions on Iranian ports and grant specific sanctions waivers for Iran.

• Ending military operations on all regional fronts, including Lebanon.

• Freedom of navigation to be restored in Hormuz over a period of 30 days, with maritime traffic set to return to pre-war levels by the end of the 30 day period.

• Nuclear issues to be negotiated over 60 days.

• Some Iranian frozen assets to be released during the first phase of implementation.

Onwards …

Our copper-bull trade also seems to be starting to work again after a little ‘artistic’ pause:

So, remember, Money Never Sleeps …

… but above all: LUNCH IS FOR WIMPS!

May the Trend be with You!

André

• Everything in this document is for educational purposes only (FEPO)

• Nothing in this document should be considered investment advice

• Investing real money can be costly; don’t do stupid shit

• Leave politics at the door—markets don’t care.

• Past performance is hopefully no indication of future performance

• The views expressed in this document may differ from the views published by NPB Neue Privat Bank AG

“With the markets now all but ignoring the economy, I’d note that the economy has never been more immediately reflective of the market prices.”

— Peter Atwater

Similar as in the 1998 blockbuster movie “Armageddon”, a major threat is heading towards our planet of financial market. However, unlike in the movie, not one, but two massive asteroids are heading towards us, both threatening to change the current path of “numbers go up”. Let’s nickname those asteroids PI (passive investing) and IPO (initial public offerings). Both, PI and IPO deserve their own weekly Quotedians, however, given I have just been disconnected from markets due to a long weekend away, we will focus this week’s letter on a brief “where we stand” update, and will follow up in the coming weeks with dedicated letters to IP and separately IPO. But, as a little teaser on the latter, consider the following chart, which without any further comment gives away already quite a lot:

And as a second teaser (careful: spoiler alert), here’s what happened last week with the Philadelphia semiconductor index (SOX) after the largest chip-maker (Cerebras Systems) went public on Thursday:

But onwards with our casual Sunday afternoon market observations, where we start this week with the bond market as it matters for all the rest. A lot.

Global yields (10y) are pushing higher,

as the Iran conflict and subsequent ongoing closure of the Strait of Hormuz (SoH) is pushing up inflation expectations:

As proxy for all other markets, the spread (bottom clip) between expected 10-year yields in 10-years (red) and the current 10-year yield (grey) is at one of its widest of the past 10 years:

So, what has been lifting inflation expectations so much? Definitely as much consumer as producer price inflation numbers in the US out last week, however much government tries to manipulate those numbers:

The truth, and nothing but the truth, is that US consumer price inflation (CPI) has now not ‘traded’ at or below the Fed’s self-declared inflation target of two percent for over five years now:

Five years ago is of course also when the secular bond bull (yield bear) market ended:

And closing in on the above chart, it now seems that bond yields are now ready for the next upleg, nicely on time with our call for a Q2/Q3 break higher in yields:

The week before last there was also a strong payrolls (employment) report in the US, further reducing the case for the Fed to cut interest rates any time soon:

And then there is of course that tiny issue with the little Strait somewhere in the Middle East:

Of course it is difficult to get reliable sources on the number of Tanker crossing the SoH, and indeed some say the number is higher than that shown in the graph above. But those same sources also say that nearly all of them are ‘flying’ under the Chinese flag…

At least one person in the US is getting increasingly nervous:

But then, maybe and just maybe, and you may call me crazy for even suggesting that, we should not take too serious a dude who posts also stuff as this:

In any case, and using this as a segue into the equity section, bond volatility (MOVE - grey) has been increasing:

And stocks (SPX - red) have started to react on Friday to that uptick in the MOVE (now inverted - grey):

A pause on the S&P 500 would definitely not be untimely, after an epic nearly 20% run in just one and a half months, which pushed the RSI (lower clip) to its most overbought reading in over a year:

If a consolidation/correction does indeed ensue, it could be more meaningful on the ‘normal’ market cap weight version of the S&P 500 (SPY - grey), which has been strongly outperforming the equal-weight version (RSP - red) not only since the most recent market bottom back in late March,

but also since the 2022 bear market ended late that year:

This outperformance of the biggest weight stocks in the S&P 500 is of course also depicted in the ratio of the Magnificent 7 (MAGS) to the Impressive 493 (XMAG):

Similarly, should, and as you can see we emphasise should, a correction/consolidation ensue, then momentum stocks may get hit hard. Friday’s nearly three percent drop in the iShares MSCI USA Momentum ETF would be only a small pre-taste of what could happen:

But the chart above also serves as a powerful reminder on how persistent strong trends can be. Consider this, the RSI on the MTUM EFT went into overbought territory (>70) on April 14th. The index added another nearly 14 percent until Thursday’s all-time high (ATH), with the RSI just becoming ‘richer’:

However, when comparing the momentum factor to a minimum volatility factor on the US stock market, as the fantastic chart below from Alpine shows, it is easy to get dizzy (and ‘cautious’ on momentum stocks):

Maybe time to listen to that U2 ‘Vertigo’ track?

And here’s another ‘external’ statistic worth sharing. The table below from Yardeni Research show the S&P 500 end of year targets of many well-know firms across Wall Street:

To note: 1) Yardeni themselves are the most constructive (+11%) and the average forecast is now only 2.7% away from Friday’s close…FWIW

In Europe, dizziness or vertigo are less of an issue, mildly put, as stocks have not gone anywhere since the beginning of the year:

Here’s a YTD performance overview of some of Europe’s more important local markets:

Overall a mixed and sad picture, with the post-ceasefire divergence between US (red) and European (grey) stocks continuing:

Let’s speed things up a bit and hurry over into the equity sector section. While Energy stocks continue to be the best performing sector on a global level,

momentum in Technology stocks has been so strong over the past weeks that this sector was catapulted to the top spot in our relative strength tournament:

One interesting sector observation, and maybe an early warning sign to the overall market, has been the recent underperformance of discretionary to staples stocks:

Finally, to complete the equity section, our usual look at the best performing stocks in the US and Europe on a year-to-date basis and how they have performed over the past week.

Starting with the US leaderboard, we note that the two highest flying Ikarus stocks have seen a small correction (small in the context of their preceding gains), but most stocks continued to drive up north:

This overall positive picture also prevails for the European “Top of the Pops” list:

In foreign exchange (currency) markets, the US Dollar suddenly has shown firmness against every other currency in the expanded table below, bar one (non-tradable) exception:

We Sherlock Homes-like then conclude that the US Dollar Index (DXY) should also have moved higher over the past week:

Geniuses, aren’t we?!

The EUR/USD upside breakout (red, dotted) failed and we are now dropping back towards key support at 1.14:

One central bank (SNB) will be happy to see their currency a bit less strong,

whilst another (BOJ) quite au-contraire:

In the commodity space, oil (Brent) refuses to trade lower and is this morning (18.5.) trading less than 5% away from its highest close this cycle so far:

In the US (and elsewhere) strategic reserves are being deployed again:

Surprisingly enough though, are oil rigs not being reopened aggressively:

Our long Copper trade worked well last week … until it stopped doing so during Friday’s higher yields induced sell-off:

Which does not make complete sense, so re-entry at 6.20 be worth a try.

And as highlighted over the past few weeks, we do not expect Gold to be a strong performance contributor (or detractor) over the coming period:

For this week, the most important issues to watch are Nvidia’s earnings numbers (Wed, after market close), the FOMC Minutes and the UK CPI (both Wednesday), and US Flash PMIs (Thursday).

This week will be interesting to see whether the uptrend in stocks continues (30%) or if we get a sideways consolidation (20%) or outright corrective price action (50%).

Bond prices are likely to continue to push lower (yields higher) if equities correct in an orderly fashion.

Other than that … May the Trend be with You!

André

• Everything in this document is for educational purposes only (FEPO)

• Nothing in this document should be considered investment advice

• Investing real money can be costly; don’t do stupid shit

• Leave politics at the door—markets don’t care.

• Past performance is hopefully no indication of future performance

• The views expressed in this document may differ from the views published by NPB Neue Privat Bank AG

“It isn't the mountains ahead to climb that wear you out; it's the pebble in your shoe.”

— Muhammad Ali

Uff. Wow. Incredible. Unbelievable. Gargantuan. Unstoppable.

To infinity and beyond:

Since April 8th, most equity markets have been on a tear, not least the S&P 500 depicted above. True panic buying seems to be at hand, and for the older semesters amongst us, we have 30-year flashbacks to the late 90ies, where stocks ripped higher over years. Maybe it is time to dig out and update that good old Dow 10,000 hat:

The rut has been even more relentless for the Nasdaq, up nearly 30% over the past month:

But, if we are indeed reliving Dotcom bubble of the late 90ies, let’s call it the Roaring 20’, how much more space is there left to the upside? If we align the release of the first web-browser in 1994 (anyone remember Netscape?) with the release of ChatGPT in 2022 …

… stocks will still more than double from here!

If that is not bullish enough for you, maybe let’s do the same comparison for the Nasdaq 100:

Any FOMO symptoms hitting you yet?

Clearly, we are in the midst of another global megaproject, but ‘recent’ previous experiences pale in comparison, even inflation-adjusted:

To be sure, whilst earnings usually beat analysts’ estimates, this quarter (red) is rather standing out:

However, this fantastic chart from Apollo’s CIO Torsten Slok shows how those EPS gains are increasingly concentrated, i.e. coming from a few, outstanding companies:

Now, having said that, ‘things’ are getting rather wonky here. Not only because the Philadelphia Semiconductor Index, more affectionately know as the SOX, is up 65% in just a bit over a month,

but also the overall size of market has become somewhat … surrealistic:

More irrational exuberance “to infinity and beyond” signs … option call volume has exploded, showing a certain speculative fervour:

Quality (red) is left in the dust by speculative Momentum (grey) buyers:

And if we add even more froth to the mix, such as high beta momentum (dark grey) or unprofitable tech (dark red) stocks it gets really silly:

But let’s keep a positive spin on this and look for ‘stuff’ that may be due for a decent catch-up rally. For example, the KraneShares CSI China Internet ETF (KWEB) has been “left for dead” behind:

Albeit, all truth being told, the broader Chinese technology sector, here proxied via the Invesco China Technology ETF (CQQQ) has been keeping up with its US counterpart:

Speaking about “Left for Dead”, European stocks seem to be the big losers out of this Iran conflict. Check out this chart which I showed in a popular LinkedIn post (click here) on Friday:

What’s pulling European stocks lower? Curiously, more defensive sectors such as retailers, health care and utilities amongst others:

Surprisingly enough, defense stocks have not been helping either:

And as we are talking individual stocks, let’s have our usual weekly look at the best performing stocks year-to-date in the US (SPX) and Europe (SXXP) and see how they have fared over the past five trading session.

A little note of caution … the rightmost column in the table below is really only the percentage performance over the past week, not YTD or past 12 months!

Weekly returns for the top performing European stocks this year were a bit more normal, unless you are Prysmian or Hochtief or ACS …

Meanwhile, in the wonderful world of interest rates, bond yields continue to be stubbornly elevated. Starting with a look at the US 10-year US Treasury yield, we note that at 4.40ish the yield continues to move within our predefined triangle pattern, which is usually a trend-continuation pattern and where we expect a break out over the coming three to six months:

Albeit, at 3%-ish nominally lower, European rates, as usual proxied via the German 10-year Bund yield, have already broken out to the upside:

The political upheaval happening in the UK at the moment is fully expressing itself in the countries long-term (30Y) Gilt yields, which now have the lamentable distinction of being the highest out of the G-10 neighbourhood:

At 5.63 this morning, the 30-year Gilt yield is at a level not seen since Summer of 1998. That’s a long time ago:

Surprisingly though, is the UK’s Credit Default Swap (CDS) rate far from being the highest:

Speaking of CDS rates, here’s one country that has seen its CDS nearly double before calming down again:

But back to bond yields, where in Japan the upside pressure on JGB yields continues to be relentless:

From a monetary poilicy point of view, only the ECB and the BoJ are expected to maybe move at their respective next meetings:

Moving over into the currency space, we note that the US Dollar has continued to lose ground versus other major currencies:

Thought the EUR/USD cross remains largely range-bound, it ‘feels’ like an upside breakout attempt may lay ahead in the coming weeks:

For the Bank of Japan and the USD/JPY rate it seems that “third time's a charm”, as the third intervention by the MoF finallly seems to have brought Yen-short speculators to their knees:

And speaking of the JPY, over a 12-month horizon, that currency is weaker against nearly every other currency,

which could partially explain the renaissance of the Japanese economy, not least expressed in the stock market:

Finally, just a quick glance at the cryptocurrency space, where Bitcoin seems to be quietly moving higher:

Over to commodities, where oil is exposed to the “wax on, wax off”, sorry the “war on, war off” seesaw:

Homer comes to mind here:

Gold’s direction is clearly unclear here, my best guess remains for a multi-month, wide trading range:

The only thing I would observe how Gold behaves during the Xi-Trump meeting later this week. Not a forecast, but it could be interesting to see if China tries to further undermine the US Dollar’s global hegemony, as they had on May 2nd by refusing to adhere to US sanctions on Iran. Watch this space…

One metal I do really like here is Copper. The chart looks very constructive on the short term,

as much as on the longer-term:

A good way to ‘play’ the highe copper price continues to be via the Global X Copper ETF:

Whilst it is up meaningfully already since the clear break higher in August of last year, it has not followed the underlying’s metal recent rise to new all-time highs.

• Whilst Earnings Per Share (EPS) have been soaring this earnings season, certain segments of the market seem to be getting a bit ahead of themselves

• However, always remember: THE TREND IS YOUR FRIEND UNTIL THE END RIGHT AT THE BEND

• Nevertheless, look for ‘laggards’ instead of piling to heavily in already strongly advanced stocks

• Bond yields remain stubbornly high, which keeps the Fed from cutting and may force the ECB to hike

• The US Dollar should resume its downtrend again soon

• Gold’s moment to shine is over for the time being, consider purchasing the break in the red metal and associated copper stocks.

With all that out of the way, May the Trend be with You

AND

To infinity and beyond!!

André

• Everything in this document is for educational purposes only (FEPO)

• Nothing in this document should be considered investment advice

• Investing real money can be costly; don’t do stupid shit

• Leave politics at the door—markets don’t care.

• Past performance is hopefully no indication of future performance

• The views expressed in this document may differ from the views published by NPB Neue Privat Bank AG

"The market can stay irrational longer than you can stay solvent."

— A. Gary Shilling

• After a ‘gradual’ decline in March, Stocks have rebounded strongly in April

• European equity markets have started to lag the US market again

• Technology stocks are breaking out versus the broader market

• Global bond yields remain elevated, signalling inflation fears

• The US Dollar continues range bound, but its overall lack of strength maintains the bearish outlook for the greenback

• Commodities have been mostly about energy this year, but watch the ags too

Of course, the old Wall street adage is: "Stocks take the stair steps up and the elevator down”, but the most recent experience has been precisely the opposite. But don’t take my word for it - check it out for yourself with the example of the S&P 500:

As a matter of fact, in the case of the Nasdaq 100, it has been the best (calendar) monthly performance since the hey-days of the Dotcom bubble:

Is this normal? No.

Can it continue? Totally.

There are several ‘things’ suggesting that "Something is rotten in the state of Denmark", but this shall be a theme rant for another day. Today’s focus is, not least motivated due to one of my rare absences from markets given a brief “vacation” last week, on our usual end of month (April) reporting, with the statistical tables, monthly bar charts, and casual observations.

Hence, with just one further ado, please note that all data is downloaded on Saturday, May 2nd 2026. Many markets were closed on May 1st, but not all. Hence, YTD data is until May 2 and 1-month data is April 2 until May 2. Little difference really, but just so you know.

Now, let’s dive right in!

Looking at the top level, commodities continue to shoot out the lights on a year-to-date (YTD) basis:

But on a monthly time frame, equities were the real star performers, bringing us back to the inverted “stairs down, elevator up” framework:

Now let us get a bit more granular on those different asset classes above, excluding Global 60/40, but including Global Currency markets and starting with equities.

On the next graph, we look at 1-month returns (red) of some of the most closely watched global benchmark indices and put them in context of YTD returns (grey):

Yes, there is one index that stands out against all others, which is Korea’s KOSPI. As the daily candle graph shows, here it was elevator down and rocket ship up….

The combination of a new law that makes capital repatriation into the country highly attractive, together with the fact that the top 3 stocks,

which happen to be at the forefront of the AI build-out, make up nearly 50% of the index, has led to this massive rally this year.

But let’s get back to Western markets before turning back to Asian equities. In the US, we already noticed the “Stair Down, Elevator Up” on the S&P 500. On the monthly candle chart, this looks as follows:

Astonishing.

It is worth noting that since the “Iran bottom”, the normal, cap-weight version of the S&P 500 (grey) has caught up with equal-weight version (red), which had been outperforming since the beginning of the year:

This of course means that the Mag 7 stocks are at it again:

Indeed.

The Philadelphia Semiconductor Index (SOX) seem to be flying to another planet:

If we scroll back to our Global Benchmarks performance table, we note quite a few European markets (e.g. CAC40, DAX, SMI, others) in the bottom half to bottom third of that league table.

Not completely to everyone’s surprise, are the higher energy costs since the onset of the Iran conflict impacting European stocks (SXXP - red) more than their US counterparts (SPX - grey):

In that context, Thomas Henry Huxley’s “The great tragedy of science — the slaying of a beautiful hypothesis by an ugly fact” quote comes to mind, as our patriotic Europe will outperform the US theory starts falling apart:

This imbalance of the impact of energy prices is not only expressed in the Europe/US stock performance ratio, but also in volatility, where European vol has been substantially higher than US vol since the outbreak of the war:

The broad STOXX 600 Europe index saw its last new all-time high (ATH) in February and has been struggling since:

Big part of the ‘blame’ goes on the German DAX, which has made no net progress in nearly a year now:

But it wouldn’t be fair to blame the German stock market only, as their most immediate neighbours to the West, have not helped the European stock market for over two years now:

Turning to Asian markets again, Japan’s Nikkei has been strong:

HOWEVER, there is a clear divergence between Nikkei (grey) and the broader Topix (red) index, which we need to keep an eye on:

India’s stock market (BSE500) continues in its 18-month old bear market:

Turning to sector performance for a short moment, Energy was flat in April, but continues to be the clear leader YTD:

Technology has seen a meaningful rebound, and on a relative basis (XLK/SPY) we could argue that tech stocks are just breaking out of a 26 year base formation versus the broader market:

Finally, please find below the best performing stock YTD in Europe and the US and how they have fared over the past month.

Starting with the US Top 25, I would paraphrase Mark Twain by saying “Reports of my Tech’s death has been greatly exaggerated.”

With only a few exceptions, all companies above are included in the massive AI build-out, which maybe we should be starting to call “Roman Roads 2.0” or “The Second Electrification”…

In Europe, the list also has an AI build-out tilt, though a lot of energy and energy infrastructure is thrown into the mix too:

Time to turn to fixed income markets and their performance. It comes at no surprise that the equity-sensitive segment (High Yield) of the bond market is to be found at the top of the performance table, while the duration-sensitive instruments (Treasuries) are rather towards the bottom:

Bond yields refused to come down meaningfully during the strongest moments of the equity rally and have now turned higher again. Here’s the 10-Year US Treasury yield chart:

And here the same maturity on the German yield chart as a proxy for European rates:

Japan’s JGB yields are ‘quietly’ pushing higher again on all time frames:

All these higher bond yields are of course because bond investors are expecting a higher level of inflation - transitory or not …

We continue to watch this chart closely:

In the credit spread space, it seems investors have decided to look beyond the private credit rumblings and the AI (over)spending:

In currency markets, the USD is not fulfilling its usual safe haven function during times of kinetic warfare:

The greenback lost ground against all other developed market currencies on the above chart and shows only selective and little strength versus a few on a year-to-date basis.

The Dollar Index remains quite precisely stuck in the middle of its trading range:

Nothing to write home about on the EUR/USD chart:

The most interesting FX chart to follow continues to be the USD/JPY chart, where the MoF (Ministry of Finance) has intervened for at least a third time at 160 to strengthen the Yen, this time with a noteworthy level of success:

In cryptocurrency markets the tone seems to have shifted in May (inline with the risk-on observed in equities), though some work is still needed to get rid of those negative year-to-date returns:

The Bitcoin chart is definitely starting to look more constructive:

And finally, let’s move into those molecule performance charts, starting with the 40,000 feet view:

The laggard sector of the past years, energy, is now back with a vengeance.

Breaking that chart down to the next level, and looking at some of the more popular commodity futures, one cannot stop wondering why stocks in general and consumer stocks in particular are not trading lower:

I mean, gasoline, gasoil, heating oil all substantially more expensive as are some basic food stocks such as soybeans or wheat.

Also, I give you another try to guess which direction those inflation numbers will be heading the next few months at least …

Here’s a chart of fuel prices (unleaded and diesel) in the US:

Looking into other corners of the commodity market, precious metals, lead by gold, suddenly don’t look THAT bullish anymore:

This reinforces my view that we might be in for one of those multi-month to multi-year periods of “sideness”:

On the other hand, I continue to like copper, but only buy a clear break of 6.20:

And I would also keep on eye on some of the ‘Ags’:

No squaring of circles this week, as I promised I will keep my ire and rant about markets for a later letter 😉.

In the meantime, remember this week’s Quote from the top of this letter:

“The market can stay irrational longer than you can stay solvent.”

— A. Gary Shilling

May the Trend be with You!

André

• Everything in this document is for educational purposes only (FEPO)

• Nothing in this document should be considered investment advice

• Investing real money can be costly; don’t do stupid shit

• Leave politics at the door—markets don’t care.

• Past performance is hopefully no indication of future performance

• The views expressed in this document may differ from the views published by NPB Neue Privat Bank AG

“The Spice must flow.”

— The Spacing Guild, Dune Universe

In Frank Herbert’s 1965 sci-fi classic Dune, the entire galactic empire runs on a single substance: a spice called melange, found on exactly one desert planet, Arrakis. The spice lets the Guild Navigators fold space and travel between stars. No spice, no travel. No travel, no trade. No trade, no empire. Hence the book’s most quoted line, repeated like a mantra by everyone from emperors to smugglers: “The spice must flow.”

Now squint a little. Replace Arrakis with the Persian Gulf, melange with crude and LNG, and the Spacing Guild’s monopoly with a 21-mile-wide strait flanked by a bruised and bothered Iran — and welcome to 2026. Roughly a fifth of the world’s oil and a quarter of seaborne LNG squeeze through the Strait of Hormuz every single day. Close it, choke it, or merely threaten it, and the cascade is brutal: energy → nitrogen fertilizer (no natural gas, no Haber-Bosch) → food. As we’ve been banging the drum in these pages: you can’t print molecules. And you certainly can’t reroute them around a closed chokepoint with a press release.

News on Friday that the SoH is fully open again,

made markets continue their mad hatter rally of the past two weeks. But between having some doubt about the quality of the rally and new headlines flowing over the weekend, such as this

or this

can the rally continue from here.

Let’s have a look …

The S&P 500 bottomed on March 30, and really never looked back!

Whatever happened to “stocks take the stairsteps up, and the elevator down”. Quite the reverse is true on the above chart!

As a matter of fact, according to the following table from Bloomberg, this was the second fastest recovery (from RSI <30 oversold to RSI >70 overbought) since 1950:

Similarly, CNN’s Greed and Fear indicator moved from Extreme Fear/Fear to Greed in a record short time:

Albeit the AAII Bull/Bear survey was still in net negative territory last week, but given the strong rally on Thursday and Friday (the indicator is published on Thursday pre-market opening) it has probably also moved into net positive territory in the meantime:

Clearly, a short squeeze has taken place, with CTA’s (trend followers) buying $86bn of global equities according to Goldman Sachs (GS), top 5 all-time!

GS models another ~$70bn of buying over the next 5 sessions (assuming a flat tape).

We increased equity exposure to our managed portfolios a few weeks ago, as economic-sensitive indices such as the Dow Jones Transportation index,

or the Philadelphia Semiconductor index,

hit new ATHs already on April 8th.

So, what’s not to like about this rally then? For starter, breadth has been ok-ish, but in contrast to the underlying index (S&P500 below) failed to reach a new all-time high, creating a possible negative divergence to the index:

Here’s another measurement showing that breadth has not been great in this recent rally:

And then there are these signs, which may be less important from a tactical point of view, but increasingly bolster our suspicion that an end to the 17-year bull market (in the US) may be coming to a halt.

Exhibit 1 - IPOs

I firmly believe that the market top will be in on T+1 after the SpaceX IPO, which should be somewhere between June and July. But in the meantime, evidence mounts:

Exhibit 2 - AI craze

Last week, a woolen-shoe making company, Allbirds, announced that they will sell all of their core-business, supposedly including sheep et al. (week Dad-joke, I know), to re-focus on AI GPU-leasing, rebranded as NewBird AI. This is what the share price did:

Of course, the company is desperate to do anything, having seen its share price drop 99% since its IPO in 2021:

But for now, this ‘move’ reminds me a lot of Kodak’s, a once Nifty-Fifty company, intent to relaunch their glory days by refocusing their business on crypto-bla-bla-bla back in 2020:

In any case, signs of speculative fervour are plentiful and whilst we continue to slightly overweight allocation to equities, we continue to have an eye on that exit door and continue to position less ‘beta’.

In markets outside the US, the recovery in European markets has also been impressive, albeit the SXXP has not yet reached a new ATH*:

* Regional differences apply.

For example, whilst Germany’s Dax still needs to rally 3% to reach a new ATH,

Spain’s IBEX is only about a quarter of a percentage point away from reaching that feat:

And Italy’s FTSE MIB index is even already three percent above the previous ATH:

Moving over to fixed income markets, I find it intriguing, given the rally in equities how bond yields have resisted to move meaningfully lower:

The following chart illustrates that disconnect between US10YT yields (red, inverted) to the S&P 500 (grey):

Back in the old days, it was (bond) yields, that were right, with stocks eventually giving in …

European yields, proxied via the 10-year German Bund, are refusing to come lower:

Which means the interest rate differential between European and US yields (grey line) is rising, increasing upside pressure on the EUR/USD cross (red line):

The US Dollar Index itself continues to trade in its wide trading range,

and it is noteworthy that during the last USD-rally the RSI was unable to rise above 60, which can be interpreted as a sign of underlying weakness:

In commodity markets, where oil is still dominated by headlines, such as for example this morning,

it is probably better to be minimally exposed OR focus on the longer-term trend (which is UP for the commodity complex).

One area to closely keep an eye on are agricultural commodities. With Fertilizer prices refusing to come lower,

‘aggs’ such as Wheat

or Corn

are probably trading too low.

As proxy trade, consider the Invesco DB Agriculture ETF:

• Equity markets are very short term somewhat overstretched, but should continue to do well into the early summer months.

• Longer-term, we fear the 16 year bull market may be coming to an end.

• However, a equity market top is not an event, rather a process.

• Continue to underweight bonds as yields are refusing to head lower.

• The US Dollar is likely to weaken further.

• Look for more upside in the agriculture commodity space

That’s all for this week - May the Trend be with You!

• Everything in this document is for educational purposes only (FEPO)

• Nothing in this document should be considered investment advice

• Investing real money can be costly; don’t do stupid shit

• Leave politics at the door—markets don’t care.

• Past performance is hopefully no indication of future performance

• The views expressed in this document may differ from the views published by NPB Neue Privat Bank AG

“For a successful technology, reality must take precedence over public relations, for Nature cannot be fooled.”

— Richard Feynman

This week’s Quotedian has a somewhat special format, as I will be showing you some of the key charts just published in Q2 outlook and its accompanying chart book. If you’d like a copy of either or both, do not hesitate to send me a personalised email to ahuwiler@npb-bank.ch with your request.

No other TL;DR than the above this week, so let’s dive right into our deliberations!

This is part of our executive summary:

• Is this the easiest or the most difficult outlook the NPB Investment Committee had to put together? A bit of both. The Strait of Hormuz crisis has triggered a near-complete reset across markets, providing plenty to write about and plenty of fog to navigate. With information overload and uncertainty still elevated, markets have turned to trading the headlines.

• We therefore take a step back to analyse the bigger picture, which has shifted materially over the past 20 months - and dramatically so over the past six weeks. All without losing sight of shorter-term allocations.

• As we outlined in our previous outlook “Age of Empires”, the world has entered an era of multipolarity where resources are hoarded, not sold. And as US President Trump has just discovered, unlike in crises of the past three decades, you cannot print yourself out of trouble when the problem is physical, not financial - “You can’t print molecules”!

There is already a first investment implication from this, which we show in our “Chart of the Quarter”:

And if you wonder how I created the Cap Heavy / Cap Light indices to create the ratio in the chart above, you already know I believe in LdV’s SITUS:

Hence, the proxy for the capital light segment is or are simply information technology stocks. For the capital heavy index I equal-weighted following four sectors into an index:

• Energy

• Materials

• Industrials

• Utilities

Now, completely independently but not by coincidence, please check the top four ranked sectors on our aReS proprietary model:

Exactly!

Next our outlook went to ask the question whether with slowing growth,

and like rising inflation,

STAGFLATION is a true threat.

And we also discuss the upcoming mid-term election, now only some six months away, and for the Republicans to lose:

In the equity section, we discuss the difficult start to the year for equity markets,

and the increased volatility,

which is quite typical for the mid-term year in the US presidential cycle (see 2022 and 2026 above).

We observe that from a cyclical,

AND a secular point of view,

global stocks remain in an uptrend.

Plus, we also conclude that chances for the trend of Global stocks ex-US outperforming US stocks have increased, as we see a pattern of high lows and higher highs in the ratio between the two:

We also confirm our overweight of Emerging Market equities,

and highlight Brazilian stocks, which even after a massive 80%-plus rally since early 2025 are still not expensive in DM and EM comparison:

In the fixed income section, we wonder how that “Reservoir Dog”-like no one trusts no one between the main actors will end:

We show that US 10-year yields are for now continuing to follow the (technical analysis) script, which does not allow rates to break out either side of the triangle and next quarter earliest:

Also, we set a reminder that nobody should forget Japanese yields, as they continue to move higher and possible threaten the largest carry-trade this universe has known:

We deliberate whether the widening in spread (and recent reversal) really takes into consideration all private credit woes,

as some anecdotal evidence would suggest not:

In the currency section we express our view that it will be able to uphold following chart,

as the greenback has been disappointingly ‘not strong’ during the six weeks or so of the Iran conflict:

The following chart carries a bold statement regarding a possible EUR/USD target IF the dashed red-line breaks:

And in the final section, we put the current commodities rally into historic context comparing them with equities:

And to round off our “Ages of Empire” and “You Can’t Print Molecules” themes, we highlight the following two charts: