“Hope springs eternal in the human breast.”

— Alexander Pope, An Essay on Man

• The CHF could become the main (only) target as funding currency for the global carry trade.

• Equity markets continue their summer recess - is volatility to come back with a vengeance ahead of the US midterm elections?

• Bond vigilantes will have their eyes on the CPI this week and the Fed next week.

• The long commodity trade is alive and kicking. Stay committed.

From Wikipedia:

What does this have to do with anything relevant to financial markets?

Not a lot.

But still, what a good way to start talking about the Swiss Franc, which now seems to be, de facto, the last funding currency standing in G10-land.

This, mainly since the Treasury has decided, supported by the Bank of Japan (BoJ) / Ministry of Finance (MoF), that the Japanese Yen (JPY) had weakened enough now. And yes, my tongue is firmly out of my cheek here when writing WHO decided.

With this first Yen-related “You Shall Not Pass” on July 31st, soon followed by a second one for Treasury yields on August 19th, markets may reasonably assume that further material JPY weakness will be resisted, “whatever it takes”. And that rather spoils the economics of that oh-so-wonderful carry trade, which as a reminder, borrows in a low-yielding currency, sells it and invests the proceeds in a higher-yielding one. The Japanese Yen - Mexican Peso is (was?) a classical example of that carry trade:

That’s a nearly 3-fold increase in just a bit more than six years!

Hell! It even beats the S&P 500 buy-and-hold return by very wide margin over the past five years:

One feature of the carry trade is, of course, that the “borrowing currency” loses in value (helped by the sales out of the carry trade), or, at a minimum does not appreciate, which would curtail total return.

And hence, since the Treasury yelled their “Yen shall not pass”, this near-mechanic JPY depreciation has been put at risk. After all, we know that central banks can really get their way if they insist enough:

So, with the BoJ finally signalling a higher policy rate on accelerating inflation,

and Switzerland now ‘providing’ by far the cheapest money, courtesy super-easy monetary policy,

the CHF could indeed be the last funding currency standing.

Even better, the CHF is sooooo hopelessly overvalued, which surely will be useful too:

And the Swiss National Bank (SNB) is not expected to hike until mid next year (earliest!), despite some recent upside inflation surprises:

But never forget, hope does indeed spring eternal. Especially, it seems, among those betting against the Swiss Franc. Shorting the CHF has been something of a widowmaker trade over the years

— repeatedly declared overvalued, repeatedly expected to weaken, and repeatedly finding new and imaginative ways of making its detractors look rather silly.

So do we fund in CHF or don’t we?

The CHF has perhaps never looked more attractive as a funding currency — precisely when history tells you that treating CHF weakness as a structural inevitability is extraordinarily dangerous.

Let’s have a look at some other markets now …

Starting with stock markets, we wrote in a The Daily Q edition (02.09.2026 - click here) last week that (equity) markets seemed to be on the brink of breaking down. Here’s the chart of the S&P 500 mini-futures contract:

Well … saved by the bell, so to say! Or Back from the Brink, to follow last week’s thought train.

The index held, for now at least, exactly where it had to, using resistance-turned-support (dashed line) and the 50-day moving average (blueish line) for a bounce.

But follow-through via a new all-time high (ATH), less than one and a half percent away, is needed to keep the bullish argument alive.

Plus an improvement in market breadth, for example via a reacceleration of the advance-decline ratio (red line) on the NYSE would be very helpful too:

The Nasdaq-100 has been a bit of a laggard, but recent support held and the 50-day moving average has been reclaimed:

Though before we get too excited, let’s remember that we are in a US midterm election year and volatility should be picking up right about now:

But it is also fair to say that increased volatility is not necessarily equal to lower equity prices:

In any case it seems that Q4 could be positive for equity returns and in the best case, we may get an opportunity over the next month and a half to pick up those equities at a lower price…

European equities (SXXP) are tagging along the (upward-sloping) 50-day moving average:

In Asia, the Nikkei 225 continues to consolidate within a wide triangle, and may need some more time before establishing a new trend:

Though admittedly, the broader TOPIX index in the same country could be on the verge of a retest to the upside:

Your overweight India trade is not working for now. Neither on an absolute,

nor really from a relative basis:

Nevertheless, it continues to be our working assumption that we are just in a huge, massive digestion period post the massive rally starting in 2020. If true, a resumption of the uptrend should happen in the first half of next year latest:

One emerging market that has suddenly started working well again is Brazil, with the iShares MSCI Brazil ETF (red line) up 15% as the odds for a Bolsonaro win have been increasing:

Turning to fixed income markets, last week’s strong non-farm payroll number did not have an impact of relevance on the US 10-year Treasury yield:

Not even rate hike odds deducted from futures market reacted in a meaningful manner:

So, all the pressure now turns on Warsh the CPI number due later this week:

But, I do not think anybody seriously expects the FOMC to hike this month (or at all before the mid-term election, a period that also includes the 28/10 FOMC meeting).

It is therefore well possible that the bond vigilantes will respond to a no-hike with further upside pressure on yields …

Which in turn could mean the US Dollar may continue to weaken again. Here’s the US Dollar index, suffering under selling pressure over the past few sessions:

But for once, the $ weakness in the DXY is not stemming mostly from the Euro, but rather the Japanese Yen:

As mentioned in the intro to this week’s letter, something possibly has changed in the collective perception towards the JPY of global FX-investors.

Hence, the formula of: Positive view on JPY + CHF only funding currency = Sell CHF/JPY:

A move in excess of six percent in only a few months is massive for currencies, so definitely something seems to be going on.

HOWEVER, before you all rush into selling the Swissy and buying the Ninja, remember that this trade was the widowmaker for decades!

Finally, turning into the commodity complex for a moment, we think it is worth putting a toe or two back into Gold:

Also continue to hold on to your Copper,

or Copper Miner (COPX) position:

We are only at the beginning of this trend …

Also, it seems the US has gone into a “who blinks first” contest with Iran by applying now more of an economic strangle on the country, rather than outright throwing rockets at them (of which they may have few left anyway…). This is of course a contest where the US will have the longer breath, but it will not come without a cost. Hence, the price of crude will likely remain “higher for longer”:

We are living through extremely interesting macro times, where equities have moved to becoming somewhat of a sideshow - at least for the time being. However, if further strong advances fail to come through, I wonder what is going to happen to the wealth effect - especially in the US.

But that is a theme for another week. For now, let’s focus on where the action is happening and that seems to be mainly interest rates and currency markets.

Stay tuned and 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

“Debt management that even appears to follow the political calendar spends the one asset that took two centuries to accumulate: the credibility of the Treasury market. That asset doesn’t regain its value so easily.”

— Stan Druckenmiller, WSJ open-ed August 2026

• After Treasury Secretary Bessent threatened to impose yield curve control to lower the long end of the US interest rate curve, Fed Boss Warsh has now chimed in, threatening to increase the short end. Opposing forces?

• Interest rates are hence currently the clear focus of market participants with confusion abounds.

• Odds of rate hike in September have increased - observing economic data (NFP, CPI) over the next two weeks will be crucial

• Stocks are a bit of a sideshow for the time being and with earnings season largely over, an immediate catalyst for a defining move may not be on the horizon.

• Gold may already be ready for the next upleg and, accordingly, the US Dollar for the next move lower

For all the LEGO theatrics above, the battle is real.

Last week’s You Shall Not Pass!! (click) was about Scott Bessent drawing a line in the sand at the long end of the Treasury curve. Doubling long-dated buybacks — and making rather sure everybody understood he could do more — was not quite Draghi’s whatever it takes, but it certainly rhymed with it.

There is, however, one small complication.

The US Treasury does not set interest rates.

Kevin Warsh does.

And therein lies the potential for what Frankie Goes to Hollywood so helpfully described forty-two (XLII 😉) years ago: when two tribes go to war.

Bessent needs to keep the cost of financing America’s rather impressive debt mountain under control. Warsh needs to preserve monetary credibility and keep inflation expectations anchored. In a perfect world, those objectives coexist happily.

This may not be a perfect world.

And the choreography has already become interesting. Treasury has helped Japan support the yen, reducing the risk that Tokyo might eventually be forced to sell Treasuries in defence of its currency. It has doubled buybacks of 10- to 30-year debt to USD 4 billion per operation. And the next step could involve using some of the Treasury’s vast General Account to finance further purchases.

Draw down the TGA, however, and eventually it needs refilling — most likely through more T-bill issuance.

Conveniently, America is simultaneously creating a potentially enormous new structural buyer of those bills: stablecoins.

So, stripped of the plumbing, the emerging machine looks something like this:

Buy long bonds. Issue short bills. Let stablecoins absorb the bills.

And should all that bill issuance start putting pressure on money-market liquidity, the Fed may eventually find itself involved as well.

Which leaves us with the rather delicious irony at the heart of today’s Quotedian:

Bessent may need Warsh to make Bessent’s policy work.

So much for two independent tribes.

The real question is therefore no longer whether Treasury can knock a few basis points off the 30-year yield.

It is something considerably bigger:

Who actually controls the price of money?

But let’s see what markets are saying about all this - (un)fortunately however, we need to start our weekly tour across the asset class once again with bonds, as that is where all the action is - equities continue to be a sideshow for now.

As a matter of fact, I just had an epiphany when I was thinking about describing Fed Chairman Warsh’ hawkish tone:

Harsh Warsh!

That’s so damn good I was about to change the whole title and intro of the Quotedian - but I am too far passed my deadline already to start from scratch. But, I think it at least deserves a trademark:

HARSH WARSH™

It also deserves a meme!

But I digress.

Yields at the freely traded shortest end of the curve (2y) shot higher on Harsh Warsh™:

The yield curve (10y - 2y) flattened as yields at the short-end rallied more than those at the long-end:

HOWEVER, the long-end still also rallied, pushing the yield on the Tens (10y) right above Bessent’s “you shall not pass” intent of the week before last and to its highest level this cycle:

Global bond yields have been rising this year, with an acceleration visible over the past few months:

No wonder, as fiscal discipline is a thing of the past. Here’s just the US example:

But back to HARSH WARSH™ and his crusade to fight inflation. We have two more important data points before the next Fed meeting on September 16th - this Friday’s non-farm payroll and next week’s CPI (Consumer Price Inflation) reports. Both need to be on the weaker side for the Fed not to hike rates as the market has close to double its odd for a rate hike since Jackson Hole last Friday:

Pre Jackson Hole:

Post Jackson Hole:

For year-end, market-implied possibilities for rate hikes is now back at one and a half:

But, of course, would the Fed no be a first mover. Many other central banks have gone into tightening mode:

Let’s turn to equity markets now, where the S&P 500 after finally breaking out of its multi-week summer trading range, is struggling to make significant progress:

The increased odds for rate hikes this year since Friday’s HARSH WARSH™ speech have exerted some additional pressure on stocks, and odds have increased that the Gap at 7,600 (pointed hand) may get filled over the coming sessions.

The technology-heavy Nasdaq 100 never made it to new all-time highs:

A decisive move above 30k would be helpful to break that pattern of lower highs (red arrow).

Considering the equity market for a moment from a Treasury induced “you shall not pass” yield-curve-control (YCC) moment, suppression of yields is liquidity-boosting and hence bullish for equities.

Let’s take Japanese equities as a case study. The Topix gained 210% or roughly 12% per annum:

Not bad.

BUT, and here’s the BUT, that performance is in Yen terms. If we take a ‘neutral’ currency, such as gold for example, the price return drops to -40% or close to minus five percent per annum:

As we discussed last week, the likely pressure valve for YCC by the treasury is the US Dollar.

European equity markets have also been treading water, but generally have a tad more a bullish “feel” to them then their US cousins:

Unless you focus on France, that is:

We skip Asian markets this week as nothing specific has caught my attention over there.

Let’s move to some sector observation instead and allow me to take a small victory lap:

Over the past two weeks, I have been highlighting the cybersecurity software sector as a potential outperformer. The First Trust Cybersecurity ETF as a proxy for the sector is working well:

But, I am especially happy for one of its main constituents, Crowdstrike (CRWD), which even offered as an excellent entry opportunity a few day before ripping higher:

Admittedly, the recovery of the entire Software sector (proxy; IGV) has been close to miraculous:

Whatever happened to the SaaSapocalypse??

An interesting development then is, and I believe this was absolutely NOT the narrative only a few weeks ago, that software stocks (the AI losers) are showing important trend changes versus the semiconductors (the AI winners):

Two more sectors I have highlighted in the past few editions and which I want to reaffirm my bullishness on:

Energy stocks - it is always amazing how a trend starts creating narrative once it gets rolling. Suddenly, every headline seems fossil fuel positive (I know I just create a tonne of green haters). The refiners continue to work exceptionally well:

65% since the beginning of the year and 37% since the war “ended” (wink, wink).

And the other commodity-related equity segment that is working exceptionally well is of course Gold/Silver mining stocks.

The VanEck Gold Miners ETF is one obvious choice to play the upside if you continue to be as bullish as we are on the sector:

And if you want even more bang for your buck, become a client at NPB and enjoy being invested in our Mystery Gold Miners fund (red line):

Gold itself had a small correction over the past 2-3 sessions, post the HARSH WARSH™ hawkish tone last Friday. From a voodoo technical analysis point-of-view, the shiny metal quite precisely retraced 38.2% of its August up move and could be ready to move higher again from here:

With Gold having corrected post the hawkish Jackson Hole speech it is probably safe to assume that the Dollar has performed relatively well:

Indeed! However, here too we may assume that the Dollar corrected a part of its downtrend, which could soon resume.

Finally, let’s finish with a weekly chart on Bitcoin, which when adding a simple 42-week moving average, may just have produced a longer-term buy signal:

The two major actors in the US Treasury market are trying to influence opposite ends of the yield curve — and arguably have opposing objectives. Benign payrolls this week and CPI next week would reduce the pressure on Warsh to hike just yet.

We have strong views across asset classes. This is probably not the moment to write large tickets on them.

Stay adaptive and …. 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

“Paper money eventually returns to its intrinsic value — zero.”

— Voltaire

“The dollar is our currency, but it’s your problem.”

— John Connally

• Mark last week in your calendar. You are living financial history

• The long end has failed (for now) to meaningfully react to the US Treasuries plan to shorten their duration profile

• However, the US Dollar, Gold and Bitcoin DID NOT fail to react

• Stocks are currently the sideshow, but sector performance deviation shows opportunity abound

• Commodities are on the move again, with Ags now joining the party

First things first …. congratulations to the current and all previous U.S. governments for cracking the $40-mark.

$40 TRILLION that is!

Is it then sheer coincidence that last week, at least in my mind, was one of those weeks we (we as in financial market observers) will look back on as a defining moment in financial history.

Whilst many are downplaying Treasury Bessent’s decision to at least double Treasury buybacks at the long-end (10 to 30 year bonds) on Wednesday (read about it here: click), which he then followed up with a verbal tantrum (read about it here: click) the next day.

Should we call it Yield Curve Control (YCC)? Or Fiscal Dominance (FD)? Or even Financial Repression (FR)?

Maybe Probably all of the above.

But for now, let’s call this: Operation Twist and Shout 🤣.

In any case, for those living under a rock too busy to follow financial market happenings, US Treasury secretary Bessent panicked last week, as bond yields at the long-end of the curve, hit their highest levels in decades. Here’s the 30-year Treasury bond yield for example:

Again, maybe I am over-judging the importance of the interaction by Scottie …

… but…

probably not. This was a panic and “you shall not pass”, or even better, “whatever it takes” moment.

It is well above my pay-grade to analyse, let alone understand, what the meaning of all this is.

Was it to allow Fed Chair Kevin Warsh to be more dovish at this week’s Jackson Hole meeting of central bankers?

Perhaps.

Was it to please the Commander-in-Chief, especially ahead of US mid-term elections as 30-mortgage rates are pushing towards new cycle highs?

Also, perhaps.

In any case, what we as good Quotedians do exceptionally well is to listen to the markets, when they speak.

Currently, they are not speaking.

They are YELLING!!!!!!!!

So, let’s start our tour of weekly listening.

Exhibit 1 - the idea to put a top on longer-term yields is failing so far, at least on the 10-year yield, where it took only one day to unwind the yield drop (and then some):

Maybe, just maybe, Scottie’s magic worked on the 30-year??

Meh.

But, what is endlessly more interesting, and telling, is the reaction of other asset classes.

IMHO, and being this week’s subtitle to the Quotedian, i.e. “In Search of the Cleanest Dirty Shirt”, the US Dollar was taken out in the backyard court and shot in the head last Wednesday. Or a bit less dramatic, the debasement trade is fully back on.

So, what could replace the Dollar dominance?

The Renminbi? - Probably not.

The Euro - ya’ kidding?

The Swiss Franc? - Cool, but too small a market

Gold - Ah!

Exhibit 2 - Gold

Or maybe even a cryptocurrency, such as Bitcoin?

Exhibit 3 - Bitcoin

Oh, wow! 20% in three sessions. Definitely something going on there.

And then of course, there is the US Dollar itself.

Exhibit 4 - Dollar Index (DXY)

That Dollar weakness, aka debasement, has been across the entire major currencies board:

I found the following summary from Rabobank to be useful:

If Bessent’s intention was to flatten the yield curve,

and/or take pressure of the Fed to hike rates,

the move was pretty much useless unfruitful.

So, all in all, we have yields that are back to where they were before Bessent’s signalling, but Gold and Bitcoin which are 8% and 20% higher respectively, and the Greenback that trades a percent lower.

In German there’s a saying for such a situation: “Operation gelungen, Patient tot”, which literally translates to “The operation was a success. The patient died.”

We are already way half into this week’s Quotedian and have not spoken about equities yet … shame on me! Or maybe equities were really only the sideshow last week?

Indeed!

Overall, markets were a bi softer last week, but most of that weakness came pre-Bessent:

Whilst the S&P 500 gave back about one and a half percentage point over the past week, sector performance over the same time frame reveals that opportunity to make money on the long-side was at hand:

That’s a >7% delta between best and worst in just one week.

Our rotation theme from tech stocks to everything else, highlighted in our quarterly outlook (click) and again last week (click), continues to work well.

However, we did also highlight last week that we do like the cybersecurity stocks within the tech sector, which hasn’t worked for past five days:

Put differently, and as mentioned in Friday’s QuiCQ (click), Mr. Market has given us another chance to load up on such wonderful stocks as Crowdstrike (CRWD):

What worked well was our call for higher energy stocks, where the SPDR Energy Select ETF hit a new all-time high £(ATH) early last week:

Especially refiners continue to fly:

Are we too late to buy CRAK then? I think as long as the Diesel Crack Spread (grey line) continues to widen, it is not too late:

Is the crack spread about to tighten then and we are too late to buy CRAK?

I do not think so either:

• Refining capacity has been knocked out/disrupted. Ukrainian attacks have hit Russian refineries, Russia has suspended diesel/gasoline exports, and the Iran/Hormuz conflict has reduced Middle Eastern refinery output and product exports.

• Diesel inventories are extremely low. U.S. distillate stocks are around their lowest seasonal level in roughly 30 years, while Europe and Asia are competing for increasingly scarce barrels.

• Demand isn’t disappearing. Diesel demand from trucking, agriculture, industry and construction is relatively inelastic. So even though crude has eased, diesel prices haven’t.

• The remaining refineries are already running flat-out. U.S. refineries have been above 95% utilization for 11+ weeks, the longest such stretch in more than 25 years. There simply isn’t much spare refining capacity available to arbitrage the spread away.

As we are nearly talking commodities anyway now, let’s steer into that asset class, but not before highlighting the healthcare sector first.

The sector was on the (up) move already pre-last week’s mega-announcement by Moderna (MRNA - see chart below) and Merck, regarding a skin cancer vaccine:

The SPDR Healthcare (see chart below) and the iShares Global Healthcare ETFs were both already clogging in new ATHs and have since the announcement accelerated further to the upside:

For those who want to “play” the health care rally with a high octane bet, I continue to like the ARKG:

Yes, I know it has doubled since April, but zooming out on the chart provides context:

So, moving into the commodity section, we note that the Bloomberg Commodity index (BCOM) is pushing towards new cycle highs again:

Whilst oil is of course a big part of the index, I find it interesting the agricultural commodities have after long absence now joined the (bull) party too:

These are the commodities in the ‘Ags’ subindex:

Whilst it is possible to invest into these individually via Futures and/or nearly all of them also via individual commodity ETFs, there is one ETF, the Invesco DB Agriculture ETF, which imperfectly tracks the sub-index:

But, I actually prefer to go via an agriculture business equity ETF, not least, because of its fantastic ticker (MOO):

These are the top positions and their weighting in the fund:

Finally, also commodity-related, our Mystery Fund pick (red line) for the rare earth segment, first presented a few months ago, continues to work very well:

Want to know which fund it is? Easy. Become a client of ours 😉

So, are witnessing a form of yield curve control in the US? Is fiscal dominance taking over? Will it lead eventually to financial repression?

I think the answer to all three questions is a big, fat yes. Or three of them.

For now, however, to remain politically correct polite, let’s call it Operation Twist and Shout, not least as the shouting continues this beautiful Monday:

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

“Never short a dull market.”

— Wall Street Adage

Chrüsimüsi is one of those wonderfully useful Swiss-German words that does not translate particularly elegantly. It describes a mishmash, jumble, muddle — a collection of things thrown together without any obvious order or common thread.

Which, conveniently, is also a pretty accurate description of this week’s Quotedian. No overarching thesis. Just a handful of charts that caught my eye — some important, some curious, some possibly contradictory. In other words: a proper market Chrüsimüsi.

Hence, without further ado, let’s start our CHRÜSIMÜSI — The Swiss art of making sense of a mess.

• Given the absence of any exogenous shock (read: Trump social media feed post), equities should be able to drift higher into early September

• The rally is broadening, with a rotation from tech stocks to (nearly) everything else is taking place

• Bond yields are pushing higher, which eventually could unsettle equity investors

• We remain USD bears, but also see a trading opportunity in the EUR/USD

• Gold (and silver) have possibly found a bottom

Our Quote-of-the-Week suggests to “never short a dull market” … and the S&P 500 proved that once again to be true on two fractal levels. The first was that dull (well, maybe frustrating is a better word than dull in this case) period (red box) from early June to Augst 4th, when the market finally broker higher:

Now, we had a mini-fractal of this over the past two weeks (blue zone). Let’s zoom in on that via the hourly (60 minutes) chart:

Hence, it seems that the patch of least resistance is to the upside, which is further underlined by market breadth.

For example has the S&P 500 equal-weight index being clogging in new all-time high (ATH) after new ATH on a nearly daily basis since early August:

The advance-decline summation ratio has long been confirming the break-out in the S&P 500:

The key chart is probably the following one, showing that “the rest of the market”, i.e. the S&P 500 minus the Mag 7 (grey), has been able to disengage itself from those seven dominant stocks (red) of the past few years:

Given the elevated weighting of those seven stocks in the Nasdaq-100, it is then no surprise that the normal, cap-weighted version of that index has not done a new ATH yet:

However, I think the equal-weight version (QQQE) of the index is the tell of what’s gonna happen next:

And finally, the new ATHs in US small cap stocks is more prove that the economic/business cycle expansion is real:

But new highs are not a US market exclusive. Here’s the STOXX 600 Europe index:

In Asia, Japan’s tech-heavy Nikkei 225 has not reached new ATHs:

However, the broader Topix Index (>1,600 members) has done so after only a mild set-back:

This demonstrates two things: a) that the Summer “correction”, was not only in the US, but in markets around the world, driven by higher-beta, higher-momentum tech stocks, and b) that the rally is broadening.

Another chart highlighting the momentum-crash witnessed in July is the one of Korea’s KOSPI - despite being up 25% from its July 30th lows, it is still down by about the same percentage since the top in late June:

Moving to sector observations, Bloomberg’s RRG (Relative Rotation Graph) is another beautiful way of demonstrating the shift away from tech only to nearly everything else:

Especially industrial

and financial stocks

look very interesting here.

But not everything is to be hated about the tech sector now. I especially like the Cybersecurity sector and we have started building a position in the First Trust Cybersecurity ETF to selected portfolios over the past few sessions:

For investors looking for more direct, single name exposure we are looking at our all-time favourite Crowdstrike (CRWD),

but also higher octane names such as Rubrik,

or Cloudflare:

Amongst industrial stocks, we are looking at the Aerospace & Defence sector again, with several names (BA/, NEU, SAAB, KTOS, UMAC, others) currently under review.

Rolls Royce continues to be on our NPB Focus List of stocks (where it is has been since initiation of the list back in June 2023):

And we just added Kratos again after the 66% correction:

One last sector I would suggest to keep in mind, and we’ll use this as a segue into the bond section of this letter, is energy stocks. Both, the setup in the US focused SPDR Energy Select ETF (XLE),

AND the more global exposed iShares Global Energy ETF (IXC),

look very promising.

Luckily, the energy sector is one an investor can play with varying degrees of intensity (read: volatility):

Turning to fixed income, respectively rate markets, last week has all been about (or not) the hopelessly lagging (and manipulated) US inflation numbers in the form of the CPI (Consumer Price Index) and the PPI (Producer Price Index).

On balance, both numbers were at the lower end of expectations and this coupled with an already soft NFP (non-farm payroll) number the week before, has led the Citi Economic Surprise index

AND the Citi Inflation Surprise index

for the US drop quite precipitously.

This has provoked investors/speculators to reduce their bets on the number of rate hikes still to come this year to below one:

So, we ask the question: is bad news (softer jobs market, less inflation/growth) equal to good news (no hikes) then?

Perhaps.

BUT, the market had already anticipated that inflation ‘calming’, with inflation swap rates, especially at the very short end, trading lower for the past few weeks:

However, nominal yields, mostly failed to head lower on the ‘good’ news out of the inflation camp. Here’s the US 10-year Treasury Yield:

Has the bond vigilantes’ focus then maybe shifted from inflation to debt?

Likely, as the national debt has now increased $3.7 trillion in 13 months, fast approaching $40 trillion:

Just like last week we were able to watch the Sun’s total eclipse ‘live’, we can probably witness the US National Debt hitting the $40 Trillion level today or tomorrow ‘live’ too (click here):

The Long-Bond (30 years), which saw its yield hover around the 1% level at the beginning of the decade is now at 5.26 and pushing higher:

Maybe there will be some short-term relief (yields sell-off, bond price rally) from the extreme position out of the speculators camp, where both, large (hedge funds) and small (retail investors) speculators are still vastly underweight bonds:

But then again, this would likely only be a short-term rally (weeks to months) and an opportunity to reduce a bit further on long duration fixed income exposure.

European yields, below proxied via the 10-Year German Bund, are also pushing higher again:

Recent skirmishes within the “Union” (big fat inverted commas there) regarding the handling of waves of illegal immigration in the Spanish enclave of Ceuta, including one country (Italy) ‘lifting’ the Schengen agreement with another country (Spain), just shows on how shaky grounds everything stands.

But the real test for European cross-border love may come in Q2 of next year, when the French are to be holding national elections. As it looks today, it will be a stand-off between the far left and the far right - pick your poison …

In that context, time has probably come to dust off our old German-French 10-year yield spread chart:

Ha! Already back at the highest levels of the past years - seems we’re not the only smart cookies in the room …

Finally, despite (or amid?) that the Bank of Japan is trying to keep bond yields in checkers by keeping the policy rate artificially low,

yields at the long end are stampeding higher again:

Zooming in on the 10-year JGB, we note a renewed jump higher in today’s session:

Whilst nominal GDP disappointed earlier today, it is probably that jump in the GDP Deflator to 2.6% that made yields scream higher:

Now, let’s stay in (on) Japan, but switch to foreign exchange markets, where the nation’s currency seems again to be pressure valve of bad monetary decisions by the BoJ. Nearly gone is the intervention effect from two weeks ago:

Surprisingly so, or not, has the EUR/JPY recovered nearly fully from the Treasury induced selling slump:

Hence, maybe there is a trading opportunity here. If you:

1. are EUR negative because of the upcoming French election

2. are positive JPY due to cheapness and favourable currency intervention

3. and like to position yourself aligned with the Soros/Druckenmiller line of thinking (as Bessent used to work for them)

then a short EUR, long JPY might be a position for you. Here’s the longer-term chart of that currency pair for you again:

Apart from that, we remain stubbornly in the bear camp. Not least because the Greenback has fallen quickly back into its old trading range after only a brief excursion,

but also because the long-term (monthly) momentum indicator seems to be rolling over (lower):

Not completely unrelated to a weakening US Dollar, does Gold seemed to have found a (or the?) bottom:

Still no rush to run after the price, but probably is the buy-on-dips or a put-selling strategy the right approach going forward. This view is further emboldened by the upturning of the Silver/Gold ratio, with a rising ratio bullish for precious metal prices in general:

Back to the Gold chart for a moment, where we note that the 50-day moving average (MA) has been reclaimed. Next stop is the 200-day MA, which by the way is still rising…

Last but not least, and ignoring fingernail-biting volatility, our long copper trade is still working well, with the red metal printing a new ATH only a few sessions ago:

As outlined in the TL;DR section, given the absence any exogenous shock (read: Trump social media feed post), equities should be able to drift higher into early September, when political life in the US restarts and mid-term elections move into focus.

For now, the equity rally is broadening and we see interesting opportunities in the industrial (Aerospace & Defense) and Cybersecurity sector.

The bond vigilantes could create a headache for equity investors if rates are pushed much higher on the back of increasing debt loads.

In currency markets, we remain firmly in the bearish US Dollar camp and see a trading opportunity (short) in the EUR/JPY.

We consider going long gold again, but probably through option strategies rather than just outright long the shiny metal.

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

«Krise ist ein produktiver Zustand. Man muss ihr nur den Beigeschmack der Katastrophe nehmen.»

Crisis is a productive state. You need only strip it of its aftertaste of catastrophe.

— Max Frisch

In 2001, launching a private bank was a spectacularly bad idea.

The Nasdaq was down 60% and still falling. Nobody wanted equities. Nobody wanted advice. The industry consensus was consolidate or die, and there were slides to prove it.

NPB Neue Privat Bank AG opened its doors anyway. Twenty-five years ago today.

For the record, the timing was not merely unfashionable — it was, on the numbers, dreadful. On 7 August 2001 the MSCI World already sat 24.9% below its March 2000 peak, and it had another 32% to fall before finding a floor in March 2003. A floor it reached, with immaculate comic timing, in the same month as SARS and the invasion of Iraq.

What followed:

• 2001 — Dot-com bust, 9/11

• 2007–09 — Lehman, Global Financial Crisis

• 2011 — Euro sovereign debt crisis

• 2015 — SNB removes the EUR/CHF floor

• 2015–22 — Negative interest rates

• 2020 — Global pandemic

• 2022 — Russia invades Ukraine; 60/40 stops working

• 2023 — A 167-year-old neighbour disappears over a weekend

• 2024–26 — Tariffs, and the next “unprecedented” event

And yet. Rebase the MSCI World to 100 on the day we opened, and it it is up 631% today, or 8.29% a year, compounded for a quarter of a century, starting from a hole a quarter deep.

The path there was less dignified than the destination. Roughly one trading day in four since 2001 has been spent more than 20% below the previous high. Fewer than one in ten was spent at a new one.

Which is rather the point. The best entry points always feel wrong at the time — and so, for the most part, does everything in between. That is precisely why clients keep someone on the other end of the telephone.

Almost everything about this business has changed in twenty-five years. Trading moved from voice to screen, research from paper to inbox, compliance from a drawer to a department. The machines became very good indeed at telling us what has already happened.

Three things at NPB have not changed.

Trust. Some of our client relationships are older than some of our employees. That is not a marketing line; it is a balance sheet built over twenty-five years, and one bad decision from being spent.

Competence. Data is abundant and free. Knowing what to ignore is neither.

Excellence. Or, as we put it rather less modestly in-house: a five-star, Four Seasons-like level of service. Because private banking, like hospitality, is a people's business — anticipate, don't react, and never make the client explain themselves twice.

Independent in 2001. Independent today. Still in Zurich. Still doing the unfashionable thing: knowing our clients, thinking for ourselves, and being accountable for both.

To our clients, our partners, our external asset managers, and every colleague past and present — thank you.

I am immensely proud to be part of the family!

Twenty-five years of your trust is not a milestone we treat lightly. The next twenty-five start tomorrow morning.

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

"When you combine ignorance and leverage, you get some pretty interesting results."

— Warren Buffett

“Summer Wind” is a poignant musical metaphor about a fleeting summer romance and a love lost to the changing seasons, famously recorded by Frank Sinatra in 1966. The lyrics use the warm breeze as a symbol for an unpredictable, fickle force that first brings two lovers together and later calls one away.

No, I have not gone completely mad or become even more romantic after a much too short break in lovely Puglia.

Rather, “Summer Wind” has been circling in my head as a reminder of how quickly things can be carried into our lives by one gust—only to be swept away again by the next.

The exorbitant returns of Leopold Aschenbrenner’s Situational Awareness fund, for example …

I know. Naughty.

But after a lengthy career spent studying markets—and behavioural finance in particular—there is something depressingly familiar about the story. A previously obscure fund produces spectacular returns, attracts an equally spectacular amount of capital and attention, and then loses 67% in a single month as excessive leverage turns against it. Click here to read up on the details, or use the infographic below for an easy explanation.

Been there, seen that. The names change; the wind does not.

Nor did I choose the Buffett quote solely for its wit. It also seemed appropriate in light of some recent “action” by the investment vehicle he built.

Back in early June, Alphabet announced an $80 billion equity-capital raise, including a $10 billion private placement to Berkshire Hathaway. Apparently, even the house of Buffett—now run by Greg Abel—was not entirely immune to a brief attack of AI FOMO.

As my friend Le Shrub suggests on his fantastic Substack, we may therefore have witnessed both a Buffett Meme Top™ and a Situational Meme Bottom™:

Actually, Le Shrub is not technically my friend, as he does not know me. But should he ever wish to rectify that unfortunate oversight, I remain open to discussions.

In any case, make sure to check out his Substack—and subscribe—here:

Reminiscences of a Shrub Operator

A live book on Investing

By Le Shrub

And so, after that lengthy introduction, and with the month of July just having concluded, it is time for our usual end-of-month issue of the Quotedian, looking at monthly and year-to-date statistic and throwing in one or the other chart along the way.

Off we go!

Equities

Going against the playbook, where stocks are usually up in (all years AND mid-term election years),

July of 2026 was one of those months where the exception confirms the rule 😉:

It has to be pointed out, however, that, with the exception of the KOSPI (now officially a MEME market), losses were muted, and some markets even eked out gains.

Checking in on year-to-date returns, we note that early investors into the KOSPI are still up 50%+ this year, despite July’s nearly 20% drop:

Japan, Italy and World Champions Spain are also on top of the leaderboard, whilst India and Mainland China continue to make up the tail end.

The monthly chart of the S&P 500 reveals the ‘pause’ the index has been in for the past two months:

However, a close-up look via the daily chart reveals that our investment ‘strategy’ from early June is still VERY valid:

Going back to the monthly chart of the S&P 500, but this time in its equal-weight version, we note an interesting trend developing:

This is a clear sign that the current bull cycle is broadening (and ageing).

European stocks (SXXP) printed an encouraging new ATH in July:

This is further confirming our thesis laid out in NPB’s latest Quarterly Investment Outlook (click here), where we see a rotation away from the largest US growth stocks into other parts of the market, such as European equities.

I wonder, then, whether our high-beta-to-high-quality theme is also working?

Indeed!!

Back to international equities where our home turf market, Switzerland, gets a special mention,

as does the UK’s Footsie,

which once again is scratching against the 11k resistance on hopes (also once again) that a new government will provide a miracle (it won’t).

In Asia, Japan’s Nikkei 225 saw its first meaningful reversal since March, and this before the recent events of the BoJ/MoF under the ‘guidance’ of US Treasury secretary Bessent started rattling at the largest carry trade the Milky Way has ever seen by intervening on currency markets (buying the Yen):

We will discuss this JPY carry-trade thingy on another occasion (and a bit further below in the currency section), but do not underestimate the importance of these developments. After all, investing in the Japanese Yen —> Mexican Peso carry trade has been more profitable than investing in the S&P 500 over the past five years:

Further in Asia, the performance jaw between China Mainland (red) and Hong Kong (grey) stocks is closing:

India’s equity market (BSE 500) is trying to exit its two-year- old bear market,

whilst the KOSPI has become rather uninvestable:

Open only to casino-goers and remember: “There’s no crying at the casino”!

Equity Sectors

Given the major reversals observed in some parts of the technology sector, specifically the semiconductor part (see KOSPI above and SOX below), the wonder is not that global tech stocks showed the weakest performance but rather that they were down about three percent only:

The semiconductor sector, hereby proxied via the Philadelphia Semiconductor Index (aka SOX), lost 20% on its own, in a massive reversal:

Yet, global tech stocks are still the second-best-performing sector, up over 20% and right behind our beloved energy sector:

Talking of energy and as a segue into the fixed income & interest rates space, have you ever noted the correlation between bonds (TLT - grey) and energy stocks (XLE - inverted - red)?

Are energy stocks the new bonds?

Fixed Income / Rates

The following performance table leaves no doubt that July has been very difficult for fixed-income investors:

The following chart is one of the most popular ones going around social financial media right now:

The iShares 20+ Year Treasury Bond ETF (aka TLT), often used as a proxy for longer-duration (US) bonds, sits right on top of its very long-term support. Many are shouting for a break, with only a few calling it a generational buying opportunity. The truth is, the long-side is the low risk trade right now, as it is easy to place a close-by stop loss.

However, it is to be kept in mind that most bond investors do not trade bonds, but rather invest into them and largely follow a “buy and maintain” strategy.

As regular readers of the Quotedian know, we have been calling for a secular rates bull market (bond bear market) for a long time and we have been patiently waiting for the break-out to happen in the last third of the consolidation apex during Q2 or Q3 of this year:

And there we go!

The only thing that holds me back a bit right now, is that all of a sudden, everyone and his grandmother are now bearish on bonds. And indeed, CFTC data confirms that large speculators (hedge funds & co) are extremely unexposed to 30-year bonds, whilst commercial hedgers are very exposed (i.e. not hedged):

Be mindful of a decent counter-trend rally for bonds over the coming weeks.

What lead to this rally in the long-end of the bond market and a steepening in the yield curve last week? The Fed of course! The FOMC’s decision not to hike rates, coupled with less hawkish-than-expected comments from new Fed Boss Warsh, got the bond market very worried. Here’s the yield curve steepening witnessed (30y - 3m):

So, is Kevin Warsh already a “lame dove” and no better than his predecessors in inflation fighting?

…OR…

has he cleverly handed over the long-end of the curve to the so-called bond vigilantes, which now have tightened for him, without him having to touch the Fed Fund rate (which Uncle Donald would not appreciate, to say the least)??

Whether this is indeed his game plan or he’s just as ignorant as his predecessors, bond volatility (MOVE) will be higher going forward, not lower:

Credit spreads continue to be very compressed:

However, I continue to have a close eye on the widening int the CCC segment (light brown):

AI overspending continues to be one worry to the markret, which has been expressed in the credit default swap rate of Oracle for a while now and which we have also discussed in this space:

However, the pick up in the CDS rate of NVDA is a new observation:

At <80, this is not a signal that the company is about to go bankrupt, but the doubling of the spread in less than a month is smoke to something…

Currencies (FX)

During July, most DM currencies gained territory versus the US Dollar:

However, on a year-to-date basis, only ‘other’ Dollar currencies beat the greenback:

The Dollar Index (DXY) has fallen back into its trade range:

I find the following chart of 10-month rolling returns of the DXY interesting (and very cycle-ish):

But, of course, the talk “du jour” is currently the JPY, where the Japanese Ministry of Finance has been intervening on currency markets, supported by the US Treasury, in order to bolster the Yen:

For now, it seems to be working - but so seemed on other occasions (pointed hands) …

Is this chart becoming our playbook again now (after it failed in 2024)?

Looking at the recovery of the EUR/USD, one rule in technical analysis says that if your support was broken,

but then prices move above it again, you simply didn’t draw a thick enough line:

Commodities

In commodities, July was a fractal of what has been going on since the beginning of the year - a good time for energy commodities, a less good time for precious metals:

On individual commodity futures, monthly performance volatility continues to be astonishing, reminding me of something that Jesse Livermore probably said, “There are no permanent winners, only permanent lessons”:

Here’s the YTD performance table for completeness purpose:

Gold is still deflating its bubble:

Whilst silver has been more successful with that process:

Finally, our copper long continues to work well, albeit at the cost of a very high volatility to be stomached…

So, in conclusion, as always, markets will continue to surprise us. New themes will arrive on the next summer wind; old certainties will quietly disappear with the one after.

That’s all for this week … 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 mind should be allowed some relaxation, that it may return to its work all the better for the rest.”

— Seneca

Not a TL;DR, but a short note that this is the last Quotedian before a hopefully well-deserved summer break. We should be back around mid-August, depending on markets and/or Trump’s social media feed …

This week, as promised in our previous Quotedian (“The Show Must Go On”), the Quotedian will look at some of the highlights out of NPB’s Q3 2026 outlook, which has been freshly published this morning.

You can find the full documents in the pressroom on our website:

NPB's Pressroom

Or, have a look at the executive summary in our video here:

But, in any case, all the fun is in the charts, of which I will share my favourite ones below - please enjoy and if you enjoy, please like!

Let’s start with the chart of the quarter, which set as a reminder that back in 2000, software stocks topped out several months before hardware stocks did, and nearly a year before the overall market (S&P) rolled over:

Very similar, given the current sky-high earnings expectations on semiconductor stocks for example,

it should not never be forgotten that actual and forward earnings tipped lower months (!) after stocks had turned lower:

The Strait of Hormuz (SoH) and its on-off-on-off re-opeing is of course also a topic discussed:

As is the upcoming US midterm election:

where the ‘hot’ season is about to start:

The main theme, also used as ‘hook’ for the entire Q3 Outlook, is an expected rotation taking place amongst asset classes but especially amongst equities:

One rotation we have been observing for example is the one from ‘The Mag 7’ into ‘The other 493’:

Other areas we are observing for possible further rotation is for example the one from US to Rest of the World stocks:

Or, the possible rotation from high-growth, non-profitable tech stocks into safer, high-free cash flow producing companies:

In the fixed income space, we note that the Fed has been allowing CPI to run above its own two percent target for nearly six years now:

And the danger of a second inflationary wave being clear and present (despite yesterday’s lower-than-expected reading):

Newly wed Fed president Warsh insists on his inflation-fighting message, which other countries seem to be already applying:

We further look at longer-term bond yields, noting that US 10-year Treasuries are pushing hard on the upper resistance level:

And then there are of course the JGBs …

We highlight the tightness of credit spreads …

but also mark the widening of the CCC-segment as “to be observed”:

In the magic realm of currency markets we cannot stop being stunned about the US Dollar correlation between Trump’s first He(grey) and his second term (red):

Hence, we had to admit that our negative outlook for the US Dollar is wrong has been paused:

And finally, in the commodity section, we discuss the bursting of the gold bubble,

but also how seasonal tailwinds may lead to a short- to medium-term recovery rally:

What better way then to present you with the (top-level) asset allocation decisions to square the circle?

So, as they say: “That’s all folks!”. Make sure to enjoy your summer, make sure to keep updated via our sister-publication The Quotedian - Daily Edition (aka QuiCQ) but above all:

Make sure that the trend will be with you!

André

“Time you enjoy wasting is not wasted time.”

— Marthe Troly-Curtin,

• 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 trick is to say nothing when there is nothing to say.”

— John Kenneth Galbraith

Dear Fellows of the Readership,

Unfortunately there will be no weekly issue of the Quotedian this week as the agenda of yours truly is fully absorbed by preparing, holding and then producing the output of NPB’s Quarterly Investment Committee.

However, your favourite cross-asset market newsletter will return next week, showcasing the most important charts and conclusions from our Q3 outlook.

If you really cannot wait that long to hear from us, make sure to be signed up to our (nearly) daily letter, which may see two to three updates this week:

Sign me up to the Daily Quotedian

Have a great week, and 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

“You must go on. I can’t go on. I’ll go on.”

— Samuel Beckett, The Unnamable

It is time for the end-of-month/quarter issue of the Quotedian and even though I am physically and equipment-wise strongly constrained this week …

… THE SHOW MUST GO ON!!

So, please forgive me for making this issue mainly one full of stats and maybe some charts, but for sure very little of my usual blabbering, as typing is truly a burden given my current setup. But maybe, you are actually quite happy about that?! 🤬

Whatever the case, let me give you the link to Queen’s formidable “The Show must go on” 1991 hit, which is the perfect accompanying listen whilst you ‘read’ through the rest of the document:

So, hand on heart, who would have thought that equities (MSCI World TR USD) will see their best quarterly returns since 2020 and their third-best outcome in a decade?

Here are the monthly returns of some of the most popular equity benchmarks around the globe:

And here are the quarterly returns of the same:

That ascent in the monthly chart of the KOSPI feels unprecedented:

However, the June candle suggests that things are getting a little too wonky.

In terms of sector performance, and starting with the quarterly perspective, tech, probably led by the AI-cohort, continues to outshine everything else.

Energy stocks, the laggards, warrant a special mention. It is all good and right that a MoU has been found and we hope that the peacefire (no typo) will hold up beyond the two days after US mid-term elections….

At least, the Strait of Hormuz traffic lights seem to have switched to green again:

But, if anything, the temporary closure of the SoH has shown the fragility of energy (and other) supply chains, which begs two rhetorical questions:

1. Will net oil importing countries increase or decrease their strategic energy reserves over the coming months to years?

2. Will alternative energy infrastructure routes be built or are we fine now that the SoH is fully open again?

I don’t know about you, but I will be looking at these energy assets on further price weakness…

But back to the nicer, shinier, less-contaminating world of tech stocks, where of course semiconductors currently stand out, just having produced their best quarterly performance … EVER:

Looking at some of the popular investment themes, well, most of them were apparently not so popular in June:

However, it is important to never lose the long-term perspective and your conviction about a trend/theme:

Talking of which, was June the month to pick up on the Lag 7 stocks?

Factor performance shows that growth and momentum continue to lead, but US small cap is raising its hand to get attention too now:

Finally, here’s our usual list of stocks which you should have bought at the beginning of the year. But you know what, before you call me a smartarse, you could even still have bought them only at the beginning of June, having all the benefit of 20/20 hindsight, and still outperformed the market handsomely … on the month and year-to-date!!!

Here’s the US list:

And here the European one:

The quarter just ended has been pretty nice to bond markets, especially from a credit risk point of view:

June largely reflects the quarterly picture:

On the US 10-year Treasury yield we are still waiting for that break higher out of the multi-year consolidation triangle:

Whilst still likely, a pull-back lower first remains a high probability scenario.

Turning to currency markets, the pain-trade for the US Dollar is now clear, and it was to the upside, as the Greenback strengthened against nearly every other currency in June:

The US Dollar Index (DXY) seems to have broken out of its range for good:

But the US Dollar strength was especially felt in commodities, which also coincided with a temporary reversal in our “Age of Empires” trade:

Which leads us to that burst bubble that is Gold:

You will ask, should I buy this after the correction down to the first Fibanocci retracement point?

To which I answer: Would you buy or sell this?

Unfortunately, I need to cut short here, but hope that some of these stats and graphs were still useful.

As useful, stay tuned for new issues of The Quotedian - Weekly and Daily edition coming to a theatre near you soon.

Take care out there and 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 strongest of all warriors are these two — Time and Patience.”

— Leo Tolstoy

Two major events dominated markets (and the press) during the week just gone by:

FIRST

Earlier this week, Trump signed the US-Iran MoU (Memorandum of Understanding) in Versailles. It’s not really a treaty, but the parallel with the one signed by Germany there on June 28, 1919, is notable. Back in 1919, French Marshal Ferdinand Foch, the Supreme Allied Commander during World War I, made the prophetic statement, that

“This is not a peace. It is an armistice for twenty years,”

because he saw it as too lenient on the loser of that war.

Hhhhmmm….

As the fine folks at RaboResearch suggested in a note yesterday:

“This MoU is also lenient on Iran, who thinks it won, and again doesn’t look like peace, just an armistice for 20 weeks – which ends two days after the US midterm elections. Indeed, even as Trump was touting the importance of the deal to avoid “economic catastrophe,” he underlined he’ll bomb Iran again if they don’t honour it.”

Second

So it happened that we were all wrong - Warsh turned out to be indeed a Hawk dressed up as a Dove …

I already covered this in last Thursday’s “The Q - Daily Edition” (click here), but here’s once again a short rundown of the most important (and immediate) observations:

• The statement was notably shorter than in previous meetings, acknowledged elevated inflation, and described growth as solid, supported by strong productivity and capital investment.

• The median 2026 PCE inflation forecast rose to 3.6% from 2.7% in March, while growth was revised down to 2.2%. The dot plot turned more hawkish, with nine officials projecting at least one rate hike this year.

• Warsh did not submit his own rate projection.

• Warsh unequivocally reaffirmed Fed independence and stressed his commitment to restoring price stability, with inflation the dominant concern.

• Chair Warsh’s press conference also reinforced his reform agenda, including reviews of Fed communications, balance sheet policy, the use and reliability of existing data sources, productivity and labor market dynamics, and the Fed’s inflation framework.

Whilst overall it is probably a positive albeit hawkish change at the Fed, one particular thing stood out most to me, which I already highlighted on Thursday too:

Maybe Warsh is the tougher cowboy, which only means there will be much more shards to pick up once he caves in.

So, here’s the “New Sheriff in Town for Dummies” redux:

The first is that the easiest thing in the world for a central banker to do is talk tough. The hardest thing in the world for a central banker to do is stay tough

With that out of the way, let’s do a cross-asset speed round, starting with the interest rates side of things for once.

The reaction of the bond market post the Warsh presser was one of the more the most emotional (read: hefty) ones of the past five ‘inauguration’ FOMC meetings:

Here’s the chart of the US 2-year Treasury yield, with the hand pointing at FOMC date:

Now, compare that to the same chart but on the 10-year yield:

Yes, you are right! A move less violent reaction, to be interpreted as that the market kind of liked (or at least accepted) the newly found Fed hawkishness, which should fight shorter-term inflationary pressures (2Y yield), without jeopardising longer-term growth (10Y yield).

Combined, this of course means that the yield curve (10y-2y) flattened, cutting through that (circled) pivot-point like a hot knife through butter:

We will revisit the shape of the yield curve in a moment.

But first…

Fed rate cuts are now clearly off the table, with futures-implied expectations for rate hikes exploding shortly after the Warsh press conference:

That’s quite the change since the beginning of the year:

The ECB already hiked two weeks ago, and one more hike is expected by autumn of this year:

The flattening process in the German Yield curve (10y-2y), as a proxy for the European interest rate market, has been ongoing for a while already:

Now, as a segue into the equity section, the macro, cross-asset playbook suggests that flattening yield curves, where short-term rates rise faster than long-term rates (which may even fall), are not very equity-friendly. These bear flattenings tend to happen when central banks fear inflationary pressures from an overheating economy. The perfect moment to remember Ed Yardeni’s quote:

“Bull markets don’t die of old age. They are murdered by the Federal Reserve.”

Now, this is by no means an immediate death sentence for equities and in recent past equities have shrugged just about any signs of “clear and present danger”, but still it should not be ignored, but rather considered one more warning light turning on:

Equities initially recoiled from Mr Warsh's hawkishness, but have since resumed their familiar habit of shrugging off bad news.:

On our “road map”, the S&P 500 continues to move within our well-defined “lines in the sand”, meaning for now no bets should be placed on either side:

On the futures market (ES1) of the very same, price got very close to a breakout on the upper side,

but patience and discipline, paid off well as Warsh turned out to be a party-pooper…

It turns out then that the break-out in the equal-weight S&P 500 (RSP) may have been premature:

Surprisingly enough though, small caps, after a break-out followed by a renewed breakdown have actually been able to recover above that line in the sand during the last trading day (Thursday) last week:

In theory, this small cap outperformance should not be happening, for several reasons, of which I highlight three:

• Financing channel (the dominant one). Bear flattening is driven by the short end rising faster than the long end — and the short end is exactly where small-cap financing is anchored.

• Bank/NIM composition. Small-cap indices are heavy in regional banks, who borrow short and lend long. A flattening curve compresses net interest margin directly.

• Growth signal. A curve flattening toward inversion is the market pricing slower forward growth. Small caps are domestic, high-operating-leverage, cyclically geared.

NOW …

Let’s remember this:

"In theory, there is no difference between theory and practice. In practice, there is."

— commonly misattributed to Yogi Berra

Hence, the current good absolute- and relative performance can probably be attributed to following three factors:

• Cycle stage. Early-cycle bear flattening (Fed just starting, robust nominal growth) can see small caps hold up because the earnings tailwind offsets the rate headwind.

• The driver. A real-rate / inflation-scare flattener (Volcker-flavoured) is harsher than one driven by front-loaded-but-credible hiking that markets expect to end soon.

• Starting relative valuation. If small-vs-large relative cheapness is already washed out, the incremental downside is smaller.

Turning to Europe, the STOXX 600 Europe index broke to new all-time highs (ATHs) early last week (Monday), and has been able to hold on to that ex-resistance now turned support:

Though the European landscape is clearly growing at different speed levels:

In Asia we continue to like love Japanese equities, where international recognition and acceptance is still slow to show up, providing continued tailwind to the rally. You had to be quick to buy those “corrections” on the Nikkei:

Remember that 1989 ATH in the TOPIX been taken out only last summer (August 25)? Well, that seems long gone now:

Whilst we usually are relative strength investors, every once in a while we like to foray into the world of “hated” investments, trying to pick early reversal points. Indian stocks may fit that description, where the relative chart has been hammered enough to coincide with an area of possible recovery:

On the chart (BSE 500) a first hurdle (dashed line) may have been cleared, not least due to hopes about a resolution to the Strait of Hormuz closure:

Lastly, in terms of valuation, India’s equity market now looks minimum fair value in absolute and relative terms:

Want to know how we invest in this potential, early-stage turnaround story? Become a client 😜

In terms of sector performance, here’s what our proprietary aReS-model suggests to hold (top) and what not (bottom):

One important note on Energy stocks, which have fallen hard given the geopolitical “calmation” of matters and now make up the bottom of the barrel (pun intended) ….

Whilst the oil price has dropped and the SPDR Energy ETF is on the verge of a breakdown,

we would not completely give up on the sector, given that the oil price is still higher than a year ago, valuation and dividend metrics continue to be very ok AND geopolitical tensions are not likely to go away in our multipolarity scenario.

Where we would NOT buy into is the software (SAAS) sector, where the dead cat’s bounce seems to have ended abruptly:

The long-term chart of the same illustrates technical downside potential should support be broken:

And then to finalise this week’s (as usual) too long letter, a few more charts covering currencies and commodities, which are currently all a function of the Greenback.

First, keep an eye on that US Dollar (DXY), which on (chart) paper has now broken out of its multi-month range:

Whilst the EUR/USD cross is just about holding on to key support,

the USD/JPY currency pair now trades WAAYYYY above previous BoJ/MoF intervention levels:

Whilst the USD strength over the past week, mostly likely all interest rate perspectives related, has been pronounced against all other majors,

it is probably most visible versus Gold:

Hence, our underweight Gold call is paying off nicely and the chart pattern has been close to “picture perfect”, with a break of the support line (grey dashed), a subsequent retest from the lower side (support turns into resistance, aka “Kiss of Death”) and finally the renewed turn lower, which should take the price of the yellow metal well below 4,000.

So, back to the introduction to this week’s letter:

1.

Of course, meanwhile talks have been ongoing this weekend at the nearly highest level of the US and the Iranian government on the beautiful Bürgenstock, Switzerland.

So far, so good it seems, which should provide some risk-on tailwind early in the week.

2.

Macro has become more important again over the past few years with central banks’ somewhat reduced intervention in financial markets. Warsh just did the next step in that process, by all but eliminating Forward Guidance and reintroducing the guessing game.

• Equity markets are “small” range stuck right now. Watch those lines in the sand. The following chart would argue that stocks head higher in July on efforts by the Trump administration to “massage” the mid-term election, whilst dirt will be thrown around then in August and September:
  

  

• Bond yields (prices) could move lower (higher) before resuming their secular uptrend (downtrend)

• Keep an eye on the US Dollar

• Stay out of Gold for now or take advantage of the volatility via option strategies

And last, but very far from least:

R.I.P. Alan Greenspan!

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

"I would like to die on Mars. Just not on impact."

— Elon Musk

• SpaceX (SPCX) has gone public via the largest IPO ever. From here: Caveat Emptor.

• Stock markets are recovering and with certain corners of the market (S&P 500 equal-weight, Russell 2000) already having made new ATHs, chances are high that the uptrend is reinstated already

• Bonds could rally further over the coming weeks, especially given the newsflow regarding ‘peace’ in the Middle East of the past few hours.

• The US Dollar remains range-stuck; Bitcoin may be worth a dabble to the upside

• Perfer Copper over Gold

Maybe this is the n^th post/newsletter/Substack you are reading this weekend titled “Rocket Man”, but for nothing on earth (or outer space for that matter) I would forgo the opportunity to make reference to Elton John’s fantastic song with the same title:

And then there is this, of course …

Unbelievable that Elon’s and my combined net worth is now in excess of USD 1 Trillion!

Alright, continuing …

Today’s letter is not about bashing the SpaceX IPO, which took place last Thursday (bean counting) and Friday (price setting and trading), as I am too much of a 1970ies child, who grew up with especially this:

But also this:

And then, of course, this:

So, any dude (or dude-ess) with such a world-building drive as Elon Musk gets my full respect and the whole things feeds fully into my “positiveness” regarding the future of humanity.

Or, in other words, optimism is an equity investor’s best friend …

… HOWEVER, greed hallucination is his ruin!

And in the case of SpaceX, coming to the public market with a Price-to-Sales ratio of somewhere around 100x (believe me, the exact number is not so important at these lofty levels), it is greed hallucination an investor needs rather than optimism, to buy into this stock.

Maybe it is a good time to blow off the dust of Scott McNealy’s, then CEO of SunMicroSytems, words, pronounced a few years after the DotCom bubble burst:

At 10 times revenues, to give you a 10-year payback, I have to pay you 100% of revenues for 10 straight years in dividends. That assumes I can get that by my shareholders. That assumes I have zero cost of goods sold, which is very hard for a computer company. That assumes zero expenses, which is really hard with 39,000 employees. That assumes I pay no taxes, which is very hard. And that assumes you pay no taxes on your dividends, which is kind of illegal. And that assumes with zero R&D for the next 10 years, I can maintain the current revenue run rate. Now, having done that, would any of you like to buy my stock at $64? Do you realize how ridiculous those basic assumptions are? You don’t need any transparency. You don’t need any footnotes.

What were you thinking?

And this, even before I get started on Private selling to Public, as I already ranted in last Thursday’s daily edition of The Q (click here for the full post):

and the observation that we should be watching like a hawk whether these IPOs make money for PUBLIC MARKET investors vs treating them as “Exit Liquidity” for the PRIVATE MARKETS.

Unfortunately, I know the answer already.

But fret not, I will not go there again, but rather, and to finish off the topic, will get the better of me again and remind myself that I am of part of Gen X, where during my youth years Science Fiction was in full blossom. So, if you really can’t help yourself, consider SPCX a cryptocurrency-like investment with no anchor point for valuation, and go and buy a share of two of Elon’s Mars dreams - like that you will always be able to tell the alien wives/husbands of your grandchildren that you were there!

Please just don’t bet your entire portfolio on it and of course:

CAVEAT EMPTOR!

And now, for something completely different,

i.e., the rest of the markets!

Yes, indeed and against all rumours, ‘things' other than SpaceX exist out there.

For example, the S& 500, where BTW the brave policy-setting committee of Standard & Poors voted against a “fast track” inclusion of SPCX (despite having nearly the same ticker as the index - SPX).

As we documented last week, the (equity) market started correcting the week before last on June 3rd, just a day after the index hit a new all-time high (ATH):

The index rapidly corrected just over five percent, lead by a sell-off mainly in the semiconductor sector, but also dragged down by weaker Mag7 stock behaviour. Now, you may have noticed on the chart above that the S&P 500 quite precisely sold off all the way down to its 50-day Moving Average (MA), only to turn higher again on a needle’s eye.

Hence, the question is: Was that it? And the unequivocal, clear-cut answer is: Possibly.

Same chart again, now on a two-hour time frame, would suggest that chances for a bottom are in, and traders can add above 7,480 to any longs:

But for us position-trading investors, we are actually in a set-up I really quite like. Let’s call it “The Lines in the Sand”-setup, and it happens when the S&P 500 is stuck in a smallish range, with clear upper and lower resistance, respectively support points nearby:

In other words, no need to take excessive bets risks right now, as we are roughly in the middle of the range of our sand lines. Go aggressive upon breach on either side!

HOWEVER, if you cannot be bothered to patiently wait for such a break, then make the bet to the upside.

Not only because the DJ Industrial index is less than a percentage point away from a new ATH,

but especially because small-cap stocks (Russell 2000),

and the equal-weight S&P 500 (RSP),

have already achieved that feat (of a new ATH).

Turning to Europe, and this may come as a small surprise to you, the Euro STOXX 50 index, a narrow measure of the Eurozone’s largest companies, has also already hit a new ATH last Friday!

And the broader STOXX Europe 600 (SXXP) index is on the verge of achieving the same:

Actually, this all looks suddenly very bullish again!

Two European markets to highlight:

1. Spain, which has proven to have one of the most robust economic growth in the Eurozone, looks super-bullish on the chart:
   

   

2. As does Switzerland’s chart of the SMI, even though is coming to play catch-up from behind:
   

   

Turning to Asia, we look at only one chart and ask ourselves if the combination of the current relative level of the Indian stock market to the rest of the emerging markets, coupled with some hopes around the opening of the Strait of Hormuz, could be enough to warrant a recovery rally?

Alright, time to look where relative strength lies amongst the different sectors via our proprietary aReS™ model:

The overall ranking shows that Technology and Energy (is that the new 60/40 portfolio?) continue to lead. However, what I want to highlight is the climbing up the aReS™ ladder of financial stocks since early May:

So, was the for example, this list of stocks hitting a new 52-week high led by financials as much in the US,

but especially also in Europe (SXXP):

Definitely a sector to keep on the radar, not only because of the above, but also the following chart of the iShares Global Financial ETF as a sector proxy, which has just produced a major breakout:

What’s left now in the equity section is our usual glance at the best performing stocks in the US (SPX) and Europe (SXXP) and how they have fared over the past five trading days.

For sure there must be some previous winners to be picked up after the recent correction!

Oh! Not quite what I expected, to be honest…

Well, let’s turn to the fixed income space then, if there are no shards to be picked up anymore and that equity bucket list 😒

One item on my unwritten list of investment rules is: “With all evidence a move should happen, but it does not, is a strong sign in itself.”

Point in case: Inflation numbers and the bond market.

Last week, we saw some horrendous price numbers in the US, which screamed inflation:

Hence, it is hard to talk this chart, which shows US inflation in four different ways, pretty:

In other words, inflation surprises have been accelerating to the upside again:

However, measures of market implied inflation expectations, such as the 2-year Breakevens (grey) or the inflation swaps (red), completely failed to react to those “surprises”:

Quite “au contraire”, the drop accelerated.

So, what does this tell us? That those inflation numbers were already fully baked in and the absence of an even worse number calmed down markets? Or, the market is looking beyond the Iran war and sees the Strait of Hormuz (SoH) open again?

Probably, a bit of both.

Accordingly, US ten-year yields came lower last week and also show some interesting lines in the sand:

A drop below 4.43% could be very positive for bond prices, whilst a move above 4.57% would make us go full “risk-off” again for that asset class.

Visually, when looking at the iShares 20+ Years Treasury Bond ETF (TLT), it feels like there could be more bond price upside (yield downside) ahead:

The “lines in the sand” are a bit more difficult to define on German Bund yields, but twisting my arm behind my back I would also call for a short-term resolution lower on yields, before the secular uptrend resumes to the upside:

And from a credit spread risk point of view, still no news other than that incredibly tight spreads are becoming even tighter:

From a monetary policy perspective, we get a FOMC decision next Wednesday, and whilst no change is expected, it IS Kevin Warsh’s first intervention as the new Fed Chair:

New central bank bosses have somehow a knack for messing things up early in their new jobs, so we are taking out our popcorn on Wednesday.

And then there’s the ECB, which of course could not help itself and HAD to hike in order to end the war in Iran (cough, cough) last week and setting themselves up for yet another policy blunder:

In currency markets, the US Dollar Index (DXY) remains moon struck range stuck, having been rejected yet once again at the upper boundary:

With USD yields increasing more rapidly than their EUR cousins until recently, the EUR/USD cross (red) has been under pressure. However, it seems the interest rate differential (grey) bottomed out recently (arc):

Bitcoin (upper clip) just saw a cross higher in its MACD (lower clip), which also exhibits a positive divergence between price and momentum indicator:

Worth a try on the long side?

In commodity markets, we did lighten (aka kill) our exposure to Gold, which we communicated here, for three main reasons (and many smaller ones):

1. Gold itself broke several key levels (red circle) on its price chart, including its 200-day moving average:
   

   

   
   
   

2. Real rates (grey) are rising, and even though in the past few years that relationship had been broken, we think that negative real-rates/gold price correlation should be heeded again:
   

   

3. We were invested in Gold via a physical ETF, which was absolutely fine, but did not allow options trading. Hence, in a scenario where we expect gold to move more sideways than directional, we will implement option strategies and-and-around GLD (SPDR Gold Shares)

   

Where we have more conviction to trend continuation is on copper, where our long idea continues to play out, admittedly at an elevated degree of volatility:

So, to sum up all of the above, and adding the newsflow over the past few hours (Sunday night), which came in AFTER 99% of this letter had been written, equities and bonds are likely to continue their path higher. Bitcoin is worth a try to the long side, whilst the burden of proof for Gold lies with the bulls. I prefer the long copper trade. And, of course, if you cannot live without SPCX, then go and buy it FFS! Just do not treat it as an equity investment in your portfolio, but throw it into the same bucket as you have categorised your crypto-investments.

Now, be a good (wo)man and go and hit that LIKE-button (looks like a heart).

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 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