研报

What We Told Hedge Funds

with Andreas Steno

The market is pricing a collapse of the AI build-out… so it is either collapse or a face-ripping rally from here.

The Flow Show

Enter the Dragon

Scores on the Doors: oil 72.7%, US stocks 11.9%, global stocks 8.7%, US dollar 3.4%, cash 3.0%, HY bonds -0.9%, IG -2.2%, govt bonds -3.0%, gold -6.9%, bitcoin -7.1% YTD.

A New Kind of Business Cycle

In Focus

Financial conditions have been falling fast this year on the measure I’ve used for the last ten years. The GMI Financial Conditions Index, built on the 10-year yield and the dollar, has dropped from the mid-50s in the spring to 44 this week and, on every cycle I’ve watched, a move like that takes the ISM down with it about nine months later.

Flows & Liquidity

Bottoming out?

Our overall equity positioning metric points to significantly lower equity positioning currently from the recent peak in mid-September. This suggests that while some of the near-term headwinds we noted last week remain in place, there has been some signs of adjustments in positioning that could start to limit downside from here. Neoclouds are neither a critical nor large segment of the overall AI ecosystem. Little sign of diversification flows out of the US at the aggregate level. While various US regulatory bodies enact rules to encourage institutional participation in the crypto ecosystem, somewhat offsetting the negative from the failure of the Congress to pass the Clarity Act, elevated political and legal risk premia are likely to persist over the longer term until comprehensive market-structure legislation is eventually passed.

Global Equities: Move From Defence to Offence, Start Buying Weakness

Global Markets

Equity markets are becoming technically washed out in Asia while parts of Europe look overbought, suggesting the balance of risk is shifting from maintaining defensive exposure toward selectively buying weakness, albeit with macro and correlation risks and levels still lingering but most likely largely baked in. Time to step in and take on the defensive rotation led by de-risking? Semiconductor stocks look interesting vs broader tech and software.

The Drill

Decision Time in Israel and Paris on Fire

The October 21 edition sets out three reasons Washington has shifted its tone on Ukraine in two weeks, then turns to two votes on October 27. Israel elects its 26th Knesset with the blocs dead level, and Rosenvold argues the deadlock is already in the shekel while an opposition win and a unity government are not. France votes on the revenue half of the 2027 budget with the OAT-Bund spread back at its euro-crisis peak, and he reads the constitutional sequence as a ladder with a mechanical floor, with the real tail in a dissolution.

Global Equity Volatility Insights

Defensives can bubble too

GOAL KICKSTART

AI concerns weigh further on risk appetite

Thematic Alpha: Conviction into Earnings

Thematic Alpha | North America

Morgan Stanley’s analysts name 14 stocks expected to move on the 3Q earnings release, with share-price upside seen in 12 and downside risk in ARE and HCA.

China: Housing stays weak as time-inconsistency lingers

Mortgage subsidies offer limited lift

JPM’s housing activity index remained subdued, with elevated contraction across major indicators. Tier-1 city home prices continued to outperform, led by Shanghai and Shenzhen, while Beijing’s secondary home price also improved. Beijing/Shanghai broadly followed the Aug 28 framework, with only modest transition relief. Tighter financing rules are weighing on land appetite. Late-Sept mortgage subsidies provide 100bps relief for five years, benefiting mainly lower-priced homes and lower-tier cities, with a mild policy impact.

Spark 2026: Where Are AI Returns? Is the Proof in the Privates?

Global Thematics & Technology

Spark showed the AI payoff we expect seems to be materializing in privates, with startups across verticals reporting ROI for customers & rapid scaling. Trends: Open-weight models seem to be here to stay, value is shifting around the model, moats are forming where physical/digital worlds meet.

Equity Markets Positioning Model

Global Positioning Shifts Toward Europe as US Short Flows Rise

Global positioning reflected a rotation away from growth exposures. Europe stood out as the primary beneficiary last week, attracting new long inflows while maintaining positioning levels that are constructive but not yet extended. In contrast, the US saw renewed shorts building, particularly across Nasdaq and Russell 2000, where bearish positioning has become increasingly concentrated. Asia remains the weakest region, with KOSPI and Nikkei continuing to see increased short activity against already depressed positioning levels.

Steno Signals

Is there something more fundamental to the AI risk this time?

Semiconductors have fallen for eight sessions in a row, the longest streak since 2008; the SOX lost 11% last week, and the Fear & Greed index sits at 18. The narrative has followed the price, as it always does: a month ago AI was going to end the world; now it is not even useful. But is there something more fundamental to the risk this time? Honestly, maybe. We are in a hiking cycle, and a lot of what we are seeing is what happens when the price of money goes up. Herein: what to watch for when the funding stress ends, whether it’s really unprofitable to run LLMs, whether China entering AI hardware kills the bet, and the two things that settle it within a fortnight.

The Macro Investing Tool

Raoul's Take

It’s not a green light to buy the dip yet. Liquidity and financial conditions, while not a strong headwind, are still gusting — so I hold and wait.

Understanding The Bond Sell-Off

The Post-COVID Madness Is Over

Sidney Homer’s classic A History of Interest Rates (1963) examined interest rates across five thousand years. Its great lesson for modern investors is that the ultra-low and sometimes negative rates that followed the 2008/09 Global Financial Crisis were historically unique.

Weekly Warm-up: Quality Breaks Out; What's Next?

Quality’s breakout and widening advantage in earnings revisions reinforce our view that the mid-cycle transition has further to run. We highlight our updated quality + strong EPS revisions screen today. Warsh's framing of financial conditions could be key to the end of the broader correction. Quality Is Breaking Out as our Mid-Cycle Transition Extends. Our quality factor has reached a new 52-week high, gaining ~6% since mid-August, while the equal-weight S&P 500 has fallen nearly 4%. Leadership has been broad across quality measures, led by profitability, consistent with our view that earnings durability should matter more as the cycle progresses. Earnings Revisions Support Further Quality Outperformance. The spread in earnings revisions breadth between high and low quality has reached nearly 10%, the second-widest reading since 2010. Historically, quality has outperformed by an average of 7.5% over the following year at similar levels. Relative valuation for the factor remains near its historical median, reinforcing our preference for quality. Financial Conditions Are Doing the Fed's work, in-line with Warsh's Preference. Our composite of rates, the dollar and energy is at its tightest since 2022, with economically sensitive stocks down nearly 10% since the middle of August. We think some acknowledgement of this tightening by Warsh would be well received by rate-sensitive areas that have already de-rated notably. Conversely, an indifference to this tightening may invoke memories of Powell's 2018 "Auto-Pilot" remarks in reference to that tightening episode. Where are we in the broader equity market correction? Equity and other risk markets have been correcting for over 3 months. We were early to identify this correction as a migration from early cycle to mid cycle at the same time the AI trade was transitioning from enablers to adopters. Key observations include the poor breadth of the market and a very distinct and now obvious outperformance of the quality factor noted above. The finality of such corrections typically end with the high quality index catching down even as the factor itself holds up. This can happen quickly or more slowly. Be ready either way as this will likely mark the end of the correction, rather than something more ominous about the end of the business or capex /credit cycle. companies covered in Morgan Stanley Research. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of Morgan Stanley Research. Investors should consider Morgan Stanley Research as only a single factor in making their investment decision. report.

GOAL POSITIONING

Cross-asset positioning turning more defensive

US Equity Derivatives Strategy

Q3 Earnings Volatility, Trading AI Rotation Beneficiaries into Reporting

Earnings expectations look elevated on the surface, but they’re achievable. Consensus sees S&P 500 3Q EPS up ~24% y/y, but this is a clear deceleration from last quarter and the headline figure is top-heavy: the median company is expected to grow a more modest +8%. Our strategists expect earnings to help underpin markets this quarter, with breadth improving even as AI continues to lead. Earnings volatility is moderately rich. Options imply elevated moves (~80th %ile) and screen modestly expensive vs. realized. The premium reflects earnings uncertainty, high rates, geopolitical risk, and shakier sentiment across the AI complex. We screen for attractive long and short gamma setups into earnings. Following the sentiment-driven drawdown in AI-exposed names (driven by datacenter buildout concerns, tighter credit for levered “neocloud” capex, and renewed memory pricing risk post-CXMT), we’re avoiding exposed high‑beta AI for now; a bottom may form, but timing is unpredictable and optionality is expensive. Into earnings, we favor trading segments with strong fundamentals that can benefit from improving breadth and rotation out of exposed upstream AI: The US consumer remains resilient: Chase card data show September consumer spending +6.6% y/y, with strength broad-based across income cohorts, and bank management teams reaffirmed consumer resilience last week. Express it via XRT call spreads given low implied vols and flat skew, JP2RTL call spreads for broader retail exposure, and/or single-name call spreads on sold-off consumer stocks with attractive leverage. Trade Quality AI rotation + cloud beats: buy worst-of-calls on [AMZN, GOOGL, MSFT] as a levered way to express hyperscaler earnings upside on strong cloud dynamics and a potential rotation from higher-beta upstream AI into “quality AI”. Buy AMZN call spreads into the print on continued AWS momentum and a resilient consumer backdrop. Buy HWM calls for a potential beat-and-raise and a sharp snapback from the recent sentiment-driven sell-off tied to competitor headlines. Buy T short-dated calls into this week’s earnings for an expected beat-and-raise, with upside potentially amplified by short covering and retail flows.

GLOBAL WEEKLY KICKSTART

Quality Regains Ground, Momentum Faces Headwinds

Equity Strategy

Stabilization in bond yields, if confirmed, will go a long way to support stocks

We argued two weeks back that the spike in bond yields was showing signs of getting stretched, and that bonds were entering oversold territory - see October Chartbook. Around that time, our credit team highlighted that the sentiment in credit has likely become too negative - see their report. We remain of the view that the rise in bond yields likely got overdone, our fixed income team has end-year targets for all key markets at long end either flat or lower than current. If bond yields are stabilizing, that will help equities, through allowing the cycle to look more sustainable, through reducing pressure on AI funding, as well as on consumer finances, and through reducing the drive for P/E compression. Indeed, during the most intense phase of yields spiking, forward P/E for AC World fell by 3 points, for SPX by 3 points and for Europe by 2 points. The multiple compression might not need to continue. Short rates adjustment has largely happened. It was the move in fed funds futures that pretty much fully explains the move in 10-year yields so far this year - see top chart. We do not look for further repricing of the fed rates, at least not relative to what the market is already factoring in. If this proves correct, the bulk of the upward pressure on long rates might ease. Inflation expectations are staying largely well behaved, looking at consumer surveys, and at market pricing of inflation, which is also not moving much. The latest inflation prints have been on the hot side in the US, but core inflation runrate that was seen in the months ahead of the start of Iran war is in Europe similar to the period after it, and only somewhat higher in the US, by 0.3%. PPI upmove is so far largely contained in energy-related components. Both the wage growth and wage expectations are staying soft. Looking at bonds demand-supply, our house view is that AI issuance is unlikely to crowd out government bonds. Further, FCF of hyperscalers might end up looking better than current projections once the results hit. Also, the evidence of disruptive/disinflationary impact of AI on parts of the economy is likely to build, probably earlier rather than later. France remains a concern, with difficult adjustment that is needed. Having said that, we do not believe the market should position for contagion. ECB has tools in place to be a credible backstop, Banks’ balance sheets are in a much better shape now than during the Euro debt crisis, their holdings of government bonds are less concentrated, and credit defaults are significantly lower. Alongside potential easing in bond yields pressure, where market breadth has narrowed as yields spiked, and vice versa most recently - see bottom chart, we are looking for a reassuring Q3 reporting season - see our report from last week. The earnings season is in the early stages, with 29 US and 14 European results so far. The concern by investors is that delivery might underwhelm, but so far the majority of results were “beat and raise.” The stock price reaction is more mixed in the US, but in Europe the stock price reactions, even to the mixed delivery, the expected weakness in consumer space is indeed a soft spot, have not been too negative, see for example LVMH. Oil price is a wild card, but if bond yields and earnings deliver as we expect, then equities will be able to perform into year end, in our view.

China: 70-city average primary property price edged up sequentially in September

The National Bureau of Statistics’ 70-city house price data suggest the weighted average property price in the primary market edged up by 0.3% mom annualized in September after seasonal adjustments, turning positive for the first time since April 2023. However, the improvement remained narrow based. Home prices in Tier-1 cities continued to rise sequentially, led by Guangzhou. Home prices in Tier-2 cities increased by 1.3% mom annualized, but the sequential decline in Tier-3 cities widened. We emphasize that the 70-city data are for primary market transactions (new home sales) only; secondary market data from NBS and some third-party platforms suggest price declines of 5-8% over the past year.

Global Equity Strategy

Risks vs fundamentals: where are the asymmetries?

Technology Key Debates

Cycles vs. Super Cycles

Investor Positioning and Flows

Chart Pack

Our measure of aggregate equity positioning edged lower this week but remained modestly overweight (0.17sd, 51st percentile). The decline was driven by modest cuts to discretionary investor positioning (-0.36sd, 24th percentile) which moved further underweight, while systematic strategies’ positioning (0.81sd, 86th percentile) remained largely unchanged at elevated levels. Positioning in large caps (0.39sd, 69th percentile) declined this week but remained overweight, while that in small caps (-0.69sd, 16th percentile) moved deeper underweight.

The Flow Show

Sell Signal Ends

Scores on the Doors: oil 70.0%, US stocks 1 3.1%, global stocks 10.2%, US dollar 3.8%, cash 2.9%, HY bonds -0.9%, IG -3.2%, govt bonds -4.4%, gold -4.5%, bitcoin -6.1% YTD.

US WEEKLY KICKSTART

What to own when slowing growth meets narrow breadth

Global Memory Tech

Weekly theme: Trough P/E and P/B, mixed feedback, 4Q guidance, stable spot prices

Severe correction resembles cycle trough, but no downturn. We believe memory-stock multiples bottomed after a deep correction lasting ~3.5 months, led by SK Hynix and Samsung Electronics (both down 50%+ from their June peaks). Based on 2027-28E consensus EPS, Samsung and Hynix trade at just 2-3x P/E (30-50%+ below the 4-7x recorded in previous upcycles ahead of the 2001 internet-bubble burst, 2008 global financial crisis, 2018 cloud boom, and 2022 COVID-19 online/e-commerce expansion). P/B multiples have also fallen to near 1.0x 2027-28E BVPS, levels typically seen at cycle troughs (high chip inventories, 50%+ DRAM ASP cuts, large operating losses, and high borrowing costs, as in 2023 and 2019). Even so, we continue to expect supercycle-level ASPs, revenue, and margins not only in 4Q26 but also through 2027-28. We acknowledge low QoQ growth across the quarters of 2027, followed by a single-digit YoY EPS decline in 2028. However, absolute 2028 sales, OP, and EPS should remain near record highs and close to their 2027 peaks. We also expect “replacement demand” for AI memory chips used in data centers, including LPDDR5, SOCAMM, HBM, and eSSD, alongside more advanced GPUs/ASICs. Overall, the recent correction in memory stocks appears largely disconnected from memory fundamentals and reflects excessive concern over an AI-memory boom-bust cycle.

What We Told Hedge Funds

A weak USD via a detour? What funding markets need

Two inflation prints, both hotter than our nowcast, and a market that responded to the second one by BUYING bonds and SELLING the dollar. That is not what the textbook says happens on the biggest PPI since 2022; rather, it’s what happens when positioning is stretched enough that the data stops mattering, and it is the first evidence that the extremes we have highlighted for a month, in the Mag-7, in the dollar, in oil, and in bonds, are starting to unwind. Herein: being wrong on macro and what it taught me about positioning, the detour the dollar may be taking, an in-focus on hyperscalers versus neoclouds versus hardware with the IRR study and the balance sheets, and what we need to see for the bullish setup to return.

World Radar Screen

October Update: Value/Momentum Rebounds as Short-Leg Weakness Fuels Global Gains

Value/Momentum strategies delivered a strong month globally, with the MSCI World long/short decile strategy returning +6.3%, driven by a short-leg collapse. US led (+7.8%) regional outperformance, with Asia ex-Japan (+6.2%) up strongly and UK/EAFE seeing mid-single digit gains. Strategy gains were overwhelmingly short side driven across DM. On a YTD basis, Japan (+24.5%) and EM (+24.4%) lead all regions; the US trails at -3.4%.

Key focus and themes

Watch US tech sector – a few asymmetric trades

In our last Key focus and themes , we highlighted that supports for USD remained intact ( shifting in this direction since 11 September ), but we were watching near-term risks. The surprise to us over the last week was the weakness in US equities, especially in the tech sector (specifically on 14 October). If this trend continues, it could drive a further weakening of USD, namely in the G10 space, while we believe EM/Asia FX generally underperforms on risk negativity/capital outflows. Our discussions with market participants have focused in on issues around CoreWeave (i.e., AI cloud computing and infrastructure technology company driven by Nvidia chips), noting the share price fall and surge in CDS spreads from high levels of debt, large capital spending and consistent net losses.

PULSE Monitor

Cracks

P: “Price” holds at negative as cross asset valuations sit in the top decile, yet forward multiples are now below 10yr averages.

Memory Semis Monthly

October '26 Edition: Is the Wall of Worry justified?

CXMT's possible 4F2 ramp not a concern for industry supply. According to the press (link), CXMT's President indicated "launching" 4F2 Vertical Channel Access Transistor (VCAT) DRAM before year end; it is unclear what "launching" means, but we suspect R&D or sample as 6F2 G5 (1a nm) manufacturing ramps in 2027. As we wrote before (link; link), 4F2 VCAT allows to increase density (all things being equal) by 50% vs. 6F2 whilst not changing the lithography half pitch; or less if relaxing it. Ultimately though, subsequent process nodes will need lower half pitch and more advanced litho. VCAT also has its own sets of challenges around deposition (ALD) and selective epi in particular. We note that Samsung is likely targeting 4F2 VCAT for 0a nm by late-2028, after 1d nm 6F2 ramp in 2027. Lastly, moving on a distinct path for DRAM process tech usually requires at least 3 process nodes iterations to maximize efficiency and performance. This may mean a later than otherwise move to 3D DRAM, which would, ultimately, remove the need for EUV litho for DRAM manufacturing. This, to us, would be the more material fork in the road.

This Week in Charts: Agents Denied

Super-Pareto TikTok Shop; Cure to High Prices is High Prices; Zoomers Living Large?

Agentic commerce is a thing. Muse and others advanced the timeline to “agentic commerce is here right now—it was nice knowing you, old-school ecomm” but then more recently, some big etailers (like Amazon) responded, “not so fast—agent shoppers are officially instablocked.”

Is This Cycle Different? The People Wanna Know

The trillion dollar setup; some charts for AI cheer; of cultural malcontents; Against Dual Mandatism

As the market continues to vent its AI Jitters, I stumbled across this chart that is a near perfect encapsulation of where things stand.

What Is Bitcoin Telling Us?

Are Investors Approaching a 2027 Upturn in the Liquidity Cycle?

We often describe Bitcoin as the most liquidity-sensitive major asset on the planet. If that proposition is even approximately right, its recent behaviour deserves attention. Bitcoin’s latest stabilization and rally may be telling us something important about the direction of Western monetary policy and, in particular, about what the Fed is doing with liquidity.

Global Equity Strategy

Navigating Earnings Risks: Deceleration & Concentration

Global EPS growth should remain strong next year, but markets will need to face down two key risks: deceleration and concentration. On deceleration, the pace of global EPSg is expected to fall by c20pp in 27E. A slowdown of this size would typically imply flat equity returns. However, we find that global stocks have risen c4% on average in “positive but decelerating" EPSg years akin to 27E, albeit with more Defensive market internals. On concentration, 27E could be one of the narrowest EPSg years on record, with Tech responsible for 70% of global profit growth. We find little relationship between EPS concentration and broad market performance. Notably, sectors responsible for an outsized share of EPSg tend to outperform initially. The achievability of still-upbeat forecasts will remain in focus amid headwinds from geopolitics, rates, and AI sentiment. We remain comfortable with our call for earnings-driven upside for global equities into 27E.

Flows & Liquidity

Differences to last July’s correction

US Equity Strategy

Are Rate Concerns Overblown?

Our view is that the traditional stock vs bond allocation decision has been somewhat negated by ongoing AI fundamental tailwinds, as well as structural changes in the underlying composition of equity ownership. Interest rates may matter more to expectations for economic trajectories but less to multiples and cross asset flows than commonly perceived. The good news is that the equity culture seems alive and well, for now. The bad news is that this raises the question of who’s the incremental buyer.

The Drill

Diesel before November: A Saudi-Houthi Window as Iran Shifts Gear

Trump is now laser-focused on one number before the midterms: the price of diesel. That explains the Russian diesel deal, the push for an energy truce in Ukraine, and his refusal to bomb anyone before November 3, and it has opened a window the Houthis are exploiting and may soon cash in. Iran, meanwhile, is shifting its war effort into a different gear. Below: diesel diplomacy, Iran moving toward total war, a contrarian Saudi-Houthi bet, both shores of the Bab el-Mandeb, shipping and a review of my 2026 calls.

The Impact of AI Demand on Inflation

US Economics Analyst

US Equity Strategy

Low bar and strong revisions into 3Q earnings

S&P 500 3Q earnings appear to be setting up against a low bar, with nearly 70% of companies expected to deliver slower EPS growth than in 2Q. Revisions remain unusually strong, with estimates up 1.8%, including 3.6% for Tech+ and 0.8% for ex-Tech+. Median EPS growth is expected to moderate to 9.1% from 14.6% in 2Q, but the median stock has derated 7% since the start of 2Q reporting, suggesting the deceleration is already priced. S&P 500 earnings are expected to grow 26.3% y/y and could finish close to 30% based on the historical beat of approximately 3%. That would mark the second highest growth rate since 4Q21, behind only last quarter.

Global Markets Daily: The Factors Behind the Rise in US Yields

U.S. Equity Strategy - 3Q26 Earnings Season

Season Opener

We expect this season to confirm that earnings growth remains on track amid healthy demand and strong pricing, but trading the prints is likely to be high-risk, high-reward as elevated yields and the volatility-led rally raise the bar for companies to deliver on 3Q results and forward guidance.

GOAL KICKSTART

Better asymmetry into Q3 earnings after valuation reset

Global Liquidity Watch: Weekly Update

Is the Liquidity Backdrop Turning Less Supportive?

Global liquidity fell for the first time in almost three months as weaker collateral values and a stronger US dollar weighed on liquidity conditions. Still the collateral multiplier is at a record high indicating that collateral haircuts have yet to adjust to the recent jump in volatility. Investor risk appetite is easing, with flows shifting away from Asian EM toward commodity producers and the US

LOCKED AND LOADED.

A textbook initial reaction to last week’s historic signals. My core scenario may be in motion.

Steno Signals

The One on the CPI preview, Trump’s Numerous Ceasefires, and Why Inflation Is not yet High Enough to Kill the Cycle

Wednesday’s CPI is the most important print of the quarter, because it is the one the Fed has told us it is looking at. Our nowcast has it mildly below consensus on both headline and core, and I will tell you upfront that this is NOT a high-conviction call. Meanwhile, Donald Trump has spent the weekend handing out ceasefires: an energy truce between Russia and Ukraine (already broken), a diesel deal with Vladimir Putin, and a promise not to attack Iran before the midterms. Every one of them is aimed at the crack spread, which is the thing actually driving the headline. And the big question: Is this inflation high enough to end the cycle? Not yet. Here is why.

All This, and Still at All-Time Highs?

Thoughts on the Market

During one of the most aggressive bouts of selling on record, we dismissed the breadth scare, looked past the seasonal headwinds, focused on our improving Proprietary Risk Model, and actively increased our risk exposure as the parts of the market that matter most continued to show strength.

Is the Fed Deliberately Behind the Curve?

Chair Warsh Lets Markets Do the Tightening

Recent weekly moves in Federal Reserve liquidity raise a basic but important question: how much monetary tightening is actually reaching the financial system? Fed funds alone do not measure the pace of US monetary tightening. Rather collateral conditions, bond volatility, the dollar and yield-curve signals are better policy indicators.

The AI Jitters (and three grimmer interventions)

An AI non-cause for worry, followed by causes for worry abroad, nearby, and everywhere

The Fed raised rates for no reason, and shortly thereafter, the market hit a new all-time-high. Both Nasdaq and the S&P peaked this week, although the S&P is barely visible against Nasdaq’s extraordinary tech-driven growth. Is it a bubble? Again, no, not really—if anything, stocks are relatively cheap, compared to their forecast earnings growth.

This Week in Charts: Are Prediction Markets Politically Biased?

Rule of 40 Ain’t What It Used To Be; Atoms keep winning, but what about everyone else?; AI Has Come For Call Centers, After All?

Earlier this week, Flávio Bolsonaro secured a surprise first-round victory in the Brazilian presidential election. Or maybe it wasn’t a surprise. Charts knows next to nothing about Brazilian politics, so we really couldn’t say.

Can AI automate AI R&D yet?

Not yet, but it will claim otherwise

Leading AI companies say they are building automated AI researchers. Many — including the labs themselves — say that recursively self-improving AIs could be extremely dangerous. But how close are we to actually achieving it?

What We Told Hedge Funds

You don’t think rates are restrictive? The economy and the market disagree

A week in which one sector beat the index, European banks flirt with their four-year uptrend, the AI trade sold off on a Financial Times story about an accounting line, and the Administration took warrants in a company we own. Herein: why the market now agrees with us that rates are restrictive, why the bank tape says we are back at March/April pessimism, why the OpenAI “hole” is a buy-the-dip, an In Focus on Wolfspeed and the question of whether you should celebrate when the state buys your stock, and an honest portfolio update on two leans that are not getting traction.

Will 2027 Prove a Recession Year?

The Investment Clock Is Ticking

Markets look six to twelve months ahead. Capital Wars reads the investment clock as moving from boom toward slowdown, with higher bond volatility and energy prices pointing to weaker growth in 2027. The report expects a slowdown to be more likely than an outright recession.

Valuations Matter. Just Not the Way Wall Street Says.

Starting valuations, sequence risk and the case for Defined Duration® over market timing

Global Liquidity Watch: Weekly Update

Rising Volatility Yet to Hit the Collateral Multiplier

Headline global liquidity rose to US$196.6tr last week, supported by a record collateral multiplier despite the jump in bond volatility. Rising volatility typically forces higher haircuts and drains liquidity, but the data show this has not happened yet. Meanwhile, investor risk appetite continues to shift away from Emerging Asia towards commodity-producers and select Developed Markets

The Drill

Three ballots: France is a buy, Spain is priced, and the AI train keeps running

France, Spain and the US all vote within the next seven months, and the market has a firm view on each. I think the market is wrong on France, mostly right on Spain, and is focused on the wrong risks connected to the US midterms. Below: why Le Pen is closer to a coin flip than the spread implies and would change less than feared if she wins, the one Spanish trade that is not in the price, and where the AI risk from the midterms actually sits.

A MARKET DIVIDED.

Hitting the ground running on Q4 — full speed ahead, laser-focused on the tape:

Steno Signals

So can anything convince the central banks to slow down? My take on the mid-cycle versus late-cycle debate

Soft core PCE on Wednesday, a 29k payroll print on Friday, and front-end yields finished the week ABOVE where they were before either number landed. A market that cannot rally bonds on dovish data is telling you something about the Fed’s reaction function: growth and labor do not count for now, only inflation does. So the question for Q4 is whether anything can convince central banks to stop once they have already begun hiking… and whether this is the mid-cycle adjustment we think it is, or the late-cycle killer the curve is starting to price. Three arguments for each side, and an honest bottom line.

The Macro Investing Tool

Raoul's Take

29,000 jobs in an economy growing close to 4% is productivity. Yields have to reflect the growth, and the Fed doesn’t need to hike again.

Crypto, Gold and Bonds

Global Liquidity Still Dominates

Global Liquidity, measured on our full-sample basis and expressed in US dollars, continues to reach new all-time highs. Admittedly, and contrary to our expectations at the start of the year, the cycle has extended far longer than we anticipated. This report argues that while the level of liquidity may still be abundant, the collateral system through which that liquidity is transmitted is becoming progressively tighter.

Market Update & Signals 10/1/26

China’s Next Phase

Yuan’s Necessary Internal Devaluation

China is entering the next stage of a prolonged balance-sheet adjustment. The challenge is no longer simply weak economic growth, a troubled property market and indebted local governments. It is the interaction between a large stock of debt, insufficient liquidity and persistent deflationary pressures.

October: The Q4 Reload

We are turning more constructive on US equities into Q4.

What We Told Hedge Funds

The USD is NOT strong, the EUR is weak… and mostly for the wrong reasons. Le Pen is not the end of the world. Trump was not either

Micron printed $54bn and guided $61.5bn; Korea printed exports up 83.5%, and the memory thesis we have run since December is still gaining momentum. Meanwhile, the dollar is flat against the euro and down against everything else since we turned short USD, which tells you the euro is the weak one, and it is weak for reasons (France, gas) that we think the market has mostly wrong. Herein: why the US is the softest economy on the board, why Le Pen is a buy-the-fact event in reverse, why positioning is already sour, an In Focus on the memory cycle (that is not a cycle), and the portfolio.

Equity Thematic Strategy

Midterm Elections, Scenario Analysis, Baskets

In a little over a month, one of the year’s most anticipated political catalysts will come to pass in the form of the US midterm elections. At stake will be the Republican majority in Congress that has so far directed key tax, spending and regulatory decision-making. Early indicators suggest Republicans will face a strong challenge in maintaining their majority given current generic Congressional vote polling (Dems +8.3pts, see RCP), betting odds (Dems 92% House, 63% Senate, see Figure 20) and historically challenged outcomes for the incumbent party (e.g. 20 of 23 historical midterms resulted in a significant loss of seats for incumbents). In the 2024 presidential election, it was easier to map the equity impact of potential policy priorities across sectors, industries, themes and factors. However, the equity impact for the upcoming midterms across election outcomes scenarios will likely be more nuanced and favor stock picking. For now, S&P 500 options suggest only a modest event premium around the election, with no pronounced kink in the term structure (see Figure 3 and Report). Historically, US equity volatility has tended to rise in the months leading into the midterm elections, often trading above typical seasonality patterns (see Figure 5). The VIX has typically peaked roughly one month before election day and then reset lower post-election (see Figure 6).

Artificial Intelligence

ROI on AI: The Future of Open Is More Control than Cost as Frontier Labs Pull Ahead

We believe we have passed the local peak of open-weight models’ impact on frontier model revenues, as the capability gap rewidens and usage economics increasingly favor frontier labs’ model suites. While open-weight models made substantial progress toward the proprietary frontier, much of the gap narrowing occurred when regulatory concerns restricted advanced model releases and open-weight developers benefited from distillation and access to advanced offshore compute. As Poolside Co-CEO Jason Warner noted (Figure 8), the long-term value of open models is the control they enable via customization, deployment flexibility, and IP protection. Increasing compute availability should allow frontier labs to distill models more efficiently than open-weight competitors, offering enterprises a broader range of price-performant options. As labs expand beyond APIs into agents, orchestration, governance, routing, and security, we expect their enterprise advantage to widen, even as enterprises use open-weight models and proprietary data to build specialized models for internal use cases.

China AI Monthly

Global LLM Price War; Dive into World Models (Part 1)

Flows & Liquidity

Equity vulnerabilities

Market Update & Signals 9/30/26

Measuring the Crowded Trade in Global Equities

Tech and Energy Anchor Top Crowding Ranks as Industrials and Financials Hold Firm

Equity Technical Chartbook

Technology Keeps the S&P 500 Index in an Uptrend While Other Segments of the Market Struggle to Find Footing

Market Update & Signals 9/29/26

State of Markets

US Equity Strategy

Where Macro Meets Micro – 4Q 2026 Outlook: Navigating Uncertainty

In mid-June, we revised our year end ’26 base case target to 8100 from a prior 7700. This acknowledged the exceptional earnings growth that unfolded during the first half of the year, which was driven primarily by the AI infrastructure cohort. Our base case index earnings estimate is now $365 for ’26 and $400 for ’27, materially higher than the $320 estimate we entered the year with. However, we have not increased our bull case target of 8300. The implication is that we expect downside risks to increase relative to upside reward as 4Q unfolds. In turn, our target multiple is lower than previous, an acknowledgement that the AI play is middle innings, if not later.

Quantitative Global Macro Strategy

Where are all the allocators’ blocks? Remaining pro risk despite hawkish risks building

Positioning changed little this month, with asset-allocators remaining pro-risk and conviction concentrated in EM assets and commodities. EM equities remain the clearest consensus longs, alongside overweights in US (albeit reduced) and Japanese (added-to) equities. In fixed-income, allocations were broadly stable, with a preference for EM and European bonds and a modestly more constructive view on JGBs. Credit positioning remains cautious, favouring EM corporates and European HY over US and European IG. Commodity conviction remains strong across energy, base metals and precious metals. However, a hawkish shift across central banks has weighed on rates and precious metals while the USD has broadly outperformed. Energy gained as Middle East tensions and supply-disruption headlines remained elevated. In FX, EMFX remains the dominant consensus long, while GBP and CHF remain preferred shorts. The growth scare theme has faded; consensus is now based on earnings-led resilience with cost of capital concerns.

Equity Markets Positioning Model

Diverging Flows Drive a Polarised Positioning Landscape

The dominant positioning story remains one of increasing concentration rather than broad-based risk taking. Across US indices, risk flows continue to skew towards large caps while small caps have stayed heavily bearish, leaving positioning increasingly one-sided. Eurostoxx retains the strongest positioning backdrop globally, with new risk flows pushing EuroStoxx levels back toward recent highs, although weak underlying P&L leaves portions of the long base vulnerable to fatigue. Meanwhile, Asia continues to see persistent de-risking, with renewed short positioning in the Hang Seng reinforcing an already bearish regional backdrop. The result is a market increasingly driven by positioning imbalances and flow dynamics rather than broad-based directional conviction.

US Equity Positioning: Month-End Headwinds

Pension quarter-end rebalance and dealer long gamma to the upside represent a short-term headwind on US equity markets into the end of September. Pensions are estimated to be sellers of $75 bn of global equities, of which $68 bn is supply for the US market to digest. Additionally, September quarterly expiration includes some outsized option positions which will act as a significant source of dealer long gamma, particularly to the upside, acting as a headwind for the market, absent a catalyst to spur meaningful new buying demand.

Global Liquidity Watch: Weekly Update

Shadow Monetary Base Dips. Bond Volatility Rises

Global liquidity has hit a record US$196.3tr, but underlying liquidity is at a 16-month low. A stronger US dollar, weaker collateral values, and slower Chinese liquidity growth are weighing on conditions. Risk appetite remains high, but rising bond volatility poses a risk

THE HARD TRADE.

Rates and energy are blowing out, headwinds are everywhere, and the stock market is hanging by a thread. Something has to break. Highlighting the Seven Charts which most stand out on my screens, the Top Signals I’m watching, how I’m thinking about Risk/Reward here, and how I’ll be approaching Q4 — Midterms and year-end are a blink away.

Tech de-rating became advanced in a number of areas

Equity Strategy

Large Cap Sector Allocation: Where We See the Best Risk/Reward

We recently launched on US Large Cap Strategy with a bullish outlook for the S&P 500. Our sector allocation continues to favor areas with accelerating earnings, improving fundamentals, and macro support. Overweight: Fins, Health Care, Tech, and Materials; Market Weight Energy, Industrials, Staples, & Utilities; Underweight Comm Services, Discretionary, and Real Estate.

📈 Monday data: Damming the slop floods

AI makes content cheap. Who pays to make it trustworthy?

There’s a flood of AI content coming down the pipeline across all forms of media. Music, images, LinkedIn posts, longform, and book summaries. As AI output grows, the question becomes: what does a future coexistence with AI-generated content look like?

🔮 Safety in numbness

On originality, intellectual bravery and why disagreeing with LLMs is a good sign

Standardization matters. The Marquis de Condorcet, the French Enlightenment thinker I’ve studied extensively over the past year, understood this in 1794. He was interested in the shared notations and symbolic languages—standardization—through which knowledge could accumulate:

🤖 Your agent, whose interests?

Meta’s Muse shows that users want a digital butler, but there may be a conflict of interests

Climbing The Wall Of Worry With Optimism

Taking stock of the big scheme of things, and reflecting on the Capex that stirs the drink

Public company earnings for the first half of 2026 are basically in the bag, so let’s take a gander at where things sit.

The AI earnings headwind and accounting headache that’s set to intensify

Plus a charted review of the macro crosscurrents

Is the massive and growing investment in AI infrastructure worth it?

The Macro Investing Tool

Bond yields aren't high. They're fair value for an economy growing 3% in real terms, and equities are pricing the same thing.

The 10-year closed at 5.18% last Wednesday, the highest since 2007; the 30-year hit its highest since 2004; the Fed hiked for the first time since 2023; the dollar went back above 100, and the Nasdaq made a new high anyway. Everyone is asking why yields are so high, and I don't think that's the question, because the question is where the fair value for bond yields sits if productivity and growth pick up meaningfully from here. Once you ask that question, it all makes sense.

Weekly S&P500 ChartStorm - 27 September 2026

This week: the stealth correction, equal-weighted exhaustion, flows, momentum, profit prophets, valuations, Fed, active management, wealth creation, geopolitical risk and energy stocks...

Steno Signals

The yield curve inverts again… Should we care?

The swap curve has inverted, the Treasury curve is close behind, and the flattening came from the WRONG end after the Fed hike. The textbook cycle-killer… yet equities keep making highs. Most of us learned our curve reflexes in a 40-year bond bull market, so this week I ran the history instead: what FX, rates, commodities, and equities did around the eight inversions since 1978, how long markets took to dislike it (4 months to the peak, 2 years to the trough), and why the new bond regime says respect the lags.

The Market Is Cracking. But Look Who’s Cracking.

Thoughts on the Market

If you asked investors what happened last week, there’s a good chance many would point to some pretty ugly developments underneath the surface of the S&P 500:

A more hawkish reaction function

US Economics Weekly

We were neither expecting the sharp rise in energy prices nor the Fed’s increased willingness to react to them with higher interest rates. A reaction function that includes energy prices means risks skew hawkish in the near-term and make it hard for the market to price-out aggressive rate hikes until data convincingly show either slowing inflation or softening activity. That dynamic took Treasury yields meaningfully higher this week. But fundamentally, we see underlying inflation cooling. Higher long-term interest rates should slow growth and loosen labor markets. In our base case, the Fed will pursue significantly less hawkish policy than what is currently priced by the market.

Investor Optimism Wins As An Investment Strategy

The headlines have never sounded scarier, and the market keeps setting records, which is exactly why investor optimism wins over a full cycle, and why your own behavior is the real risk.

Market Update & Signals 9/25/26

Interesting Chart: Equal-Weight S&P Now Behind Comp; Small Still Has Slim Lead

Quest for Interesting Chart: It's a sad chart, with S&P Comp back ahead of Equal-Weighted. Small has a tiny YTD lead of 109bps after being ahead by 1300bps. This comes despite much better earnings, with growth ahead of LT averages. When growth is better, performance is broader, with Small/Mid ahead of Large by 1.0% & 2.2%, respectively. We see little difference between Equal-Weighted & 500. We also see better absolute performance by Smaller Small/Smaller Mid.

Phoney Press Panic

Why Bonds Are Becoming Attractive Again

With some private US nowcasts suggesting that Q3 growth may already be approaching an extraordinary 7%, buying long-dated bonds might appear premature. We have been bearish fixed income throughout this year for exactly this reason. In the near term, this stronger economic growth could still push yields higher. Over the longer run, yields are also likely to remain above the depressed levels of the past decade because nominal GDP (NGDP) growth is settling at a structurally faster pace.

Market Update & Signals 9/24/26

Just when things were starting to look easy.

Global Asset Allocation

House Views September 2026: Rates Bite, Equities Fight

Since our last asset allocation, there has been a triple punch against global duration, driven by hawkish front-end repricing from the Fed, ECB, and BoE, coinciding with higher oil prices. While the FI sell-off is extended, the market is not pricing a 1999 type cycle either, which has become more plausible. With geopolitical uncertainty, we remain neutral duration (long EM, short Europe – now limited to core and periphery, with Gilts back to neutral). With fixed income volatility rising, the headwind to risky assets becomes stronger. We stay long equities and base metals, as both in the bigger picture can do well in a rising rate environment, but had cut gold earlier, which does not. Today we cut our EMFX carry, given our volatility signal triggered.

Impact of Higher Yields On Growth and Equities

Cross-Asset Strategy and US Economics

Our simulations show that a 100bp term premium shock costs 1.5–2.0pp of GDP over eight quarters. Yet with relatively macroindifferent AI capex driving earnings, we think equities can still outperform bonds.

End of Week Market Intelligence: here comes AI...

US stocks are posting modest gains Friday and on track to post a 1% gain for the week (for the S&P 500 as of 12:00PM Friday) as investors have been digesting a sharp ramp up in rates, an evolving AI trade, and a positive set of business and consumer sentiment surveys.

US Weekly Prospects

There was little new data this week, but what there was came in strong, further raising upside risks for 3Q growth and lifting bond yields. Over the course of the week, markets upped their probability of an October Fed hike to 64% from 53%, and the 10-year Treasury yield jumped another 16bp, to 5.16%. Last week we discussed some of the risks around whether the Fed would hike beyond our forecast for a December move, but the discussion is quickly turning to whether the Fed could hike as soon as October.

Macro Trade Recommendations

We thus retain tactical USD length into next week’s US payrolls report, particularly with only ~17bps currently priced for the October FOMC meeting and with late-September seasonality that is still USD-supportive. The broader backdrop of resilient global growth and higher rates remains supportive of our carry bias despite this week’s risk hiccup, although performance across our carry positions was mixed. Most notably, the stronger dollar has pressured EM FX while supporting CAD on crosses, triggering the take-profit stop on our CAD/MXN short despite little improvement in the Canadian backdrop (stay long USD/CAD). With that exit mechanically reducing our EM carry exposure, we add to DM carry via a new long NOK/SEK position following this week’s European central bank decisions, to go along with our existing shortCHF and long-GBP baskets. Elsewhere, we retain short SEK/JPY as recent rate checks and USD/JPY’s renewed approach towards 160 raise the prospect of yen-supportive policy action, and stay long AUD (via short-CHF basket) into next week’s RBA decision which should deliver another hike. On net, the portfolio remains centered on USD longs against low-yielders and selective G10 carry, with SEK and CHF as our preferred funding currencies.

Investor Positioning and Flows

Rotation Into Tech Still Has Room To Run

A notable feature of equities recently has been a series of rotations, ranges and sharp catch-up rallies, as investors alternate between the boom and the gloom, with unprecedented earnings growth on the one hand and battling a slew of negative catalysts and fears on the other.

SIGN (Sector & Industry Group Navigator)

Navigating Uncertainty

Citi’s Take: US Equities have posted a solid Q3 to date, advancing roughly 3% on the heels of a strong Q2. NDX (+0.8%) and RTY (-6.0%) lagged, underscoring whipsaw price action. The quarter was mostly a tale of two tapes. The broadening call we embraced headed into Q3 was working well until the Jackson Hole summit in late August. At that point interest rate/inflation headwinds, along with oil price pressures, combined to flip the playbook with Tech gaining a renewed foothold from that point. Macro and AI-related uncertainty persist. Our positioning response is best described as eclectic for Q4.

Fundamentals offer little relief from tightening expectations

US Economics Weekly

Markets may be overpricing Fed tightening, but fundamentals offer little reason to believe that yet.

Global Market Outlook

Earnings above all

Higher oil prices are in a tussle with stronger growth. We expect strong growth to help the global economy weather inflation risks, allowing equities to focus on the strength of earnings growth. Oil prices remain the key risk to monitor.

PULSE Monitor

Mixed Signals

P: “Price” holds at negative as cross asset valuations stretch to new highs alongside the backup in yields.

Global Quantitative Insights

Style Leadership Remains Elusive as Momentum Reasserts

September style performance reinforced a key theme of recent months, Value's rotation has been meaningful, but not yet durable. Despite supportive macro conditions earlier in the year, Value has struggled to extend leadership globally, while Momentum and Growth have recovered some lost ground and factor leadership has become increasingly inconsistent. Narrowing valuation spreads, elevated crowding and weakening breadth argue against extrapolating the first-half Value trade too aggressively. While higher energy prices and further yield normalisation could continue to provide intermittent support for Value, we view the upside as increasingly region-specific rather than global in nature. As such, we retain a selective preference for Growth in our global style recommendations.

Americas Technology: Sizing the AI Economy Needed to Justify ROIC on Hyperscaler AI Capex

Against rising compute needs to match outsized and growing AI token consumption, the US-based hyperscalers have undergone a dramatic transformation around capital intensity to match this computational shift. These investments are being made against a combination of both real-time demand signals (in a current supply/demand imbalance) and multi-year compute needs of key customers. Throughout this year (and most notably with this past Q2 earnings season), we’ve noticed that this theme has become better understood – from earnings results and company commentary, investors have achieved greater comfort that both (a) the hyperscalers are earning a sufficient (if not outsized) return on prior-period capex (CY2023-25) through incremental revenues and operating cash flow and (b) that the hyperscalers are currently undergoing the next phase of capex spend (CY2026-27) against a compute-constrained and accelerating end demand environment (producing pricing levels for compute solidly above our assumed long-term baseline). As a result, the debate has shifted in the past few months toward a more forward outlook: how current period capex spend (across CY2026-27) might deliver a return in future (CY2028-30) periods (and how current ROIC earned on prior-period capex can be used as a baseline). In this report, we introduce a framework to analyze the necessary output from the AI economy in order to earn a baseline return on invested capital (“ROIC”) on the current levels of capex spend from the US-based hyperscalers.

US Equity Views: AI capex, required revenues, and what’s priced in the AI trade

Outlook for AI capex: The largest US AI hyperscalers are on track to spend $800 billion in capex in 2026 and consensus expects $1.1 trillion in spending in 2027. Our baseline forecast is that capex spending will increase in 2027 and surpass consensus estimates but the rate of both capex growth and upside surprises will diminish relative to recent quarters.

What We Told Hedge Funds This Week

“Scott has started QE... just out of the Treasury building”

There is plenty to worry about, and still the book is up a handful of percentage points since the last letter. We are back in the QE-like regime; the war is past peak escalation, with the US and Iran talking about a phased reopening of Hormuz, and Korean chip exports just set a new record. Everything you need to know right now is that we are in a QE-like environment, and Scott Bessent has started it out of the Treasury building.

The Drill

New York, New York

With the Greenland crisis averted, we can turn our focus to what’s happening in New York… and Washington!

Understanding The Commodity Boom

A Tale Of Two Monies

Guiding our investment views for 2026 was the simple observation that all money that is anywhere must be somewhere.

Mapping AI's Rate of Change: From Buildout to Broadening

Thematics

AI leadership is entering a new phase: from a concentrated enabler trade toward a broader, barbelled opportunity set spanning select enablers and emerging adopters. Our 6th global AI stock mapping across ~3,600 stocks provides us with quantitative backing.

US Equity Strategy

Midterm Election Perspective

Current polling supports a consensus view toward a House flip. The Senate is a toss-up, but we would not be surprised by a Democratic sweep. Generally, we do not expect a meaningful impact on S&P 500 fundamentals in any outcome over the intermediate term. Rather, we expect incremental sector influences to be more likely, particularly in a Dem sweep. The AI influence is likely to remain the dominant one headed into '27. Consumer Discretionary has been the worst-performing sector in the current term and aligns with falling issue-specific approval ratings.

Equity Markets Positioning Model

Positioning Eases, as Short Covering Risks Develop

Global equity positioning continued to weaken as investors adopted a more defensive stance. The common theme across regions in the past week has been the near consistent return of short positioning, particularly in US small caps, Europe, and parts of Asia. While net positioning remains comparatively resilient in EuroStoxx and US large caps, underlying sentiment has weakened and investors are increasingly reducing directional risk. At the same time, elevated short exposure across several markets is creating growing asymmetry in positioning outcomes. The most notable risks now stem from potential short-covering dynamics, particularly in Nikkei, KOSPI and the S&P 500, where increasingly stretched bearish positioning leaves the indices vulnerable to sharp counter-trend rallies on improving sentiment.

Weekly Economic and Financial Commentary

Start the Warsh Cycle

Global equity markets were mixed last week. The Federal Reserve delivered its first rate hike in three years, driving the US 10-year Treasury yield above 5.0%, a nearly two-decade high. Once the hike was digested, technology stocks rebounded: the Nasdaq rose 0.72% and the Philadelphia Semiconductor Index gained 0.83%. Tech-led Asian markets also recovered in the second half of the week. In contrast, European equities lagged, with German and French indices falling.

Worry List Is Growing More Worrisome

We’re still strong believers in our Roaring 2020s scenario, hinging on a productivity boom that strengthens economic growth even as it contains inflation. However, we’ve shaved the subjective odds that we ascribe to that scenario from 80% to 70% and now see a 30% chance that rising geopolitical and other risks could derail it. Today, Ed and Elias update our deepened worry list, detailing the concerning prospects, as well as reiterate the reasons that we remain bullish. We still believe that strong earnings growth will lift the S&P 500 to our 8400 price target by year-end. … Also: Check out our chart collection (https://cdn.sanity.io/files/m74go295/production/6084f48b93665a21b57b9c792abf0e20c042c053.pdf).

Global Liquidity Watch: Weekly Update

Record Collateral Multiplier vs. Stalled Base Money

Global liquidity rose above US$196tr last week, driven by favourable funding conditions. The collateral multiplier is at an all-time high according to our records. Investor risk appetite remains elevated, but capital is rotating from emerging markets toward developed markets and commodity-producing regions

Earnings Mean Reversion: When Estimates Snap Back

Consensus earnings estimates now sit close to 50% above trend, and that gap is exactly where an earnings mean reversion tends to begin.

The Next Leg Higher May Already Be Taking Shape

Thoughts on the Market

After we highlighted last week how positioning among institutional investors had become extremely light, we now know that sentiment was telling a very similar story heading into the FOMC.

The current balance of power in open models

The expanded form of a testimony I prepared for Congress.

I was recently invited to brief a group of Congressional members and staff on the state of open-weight models in the lens of U.S.-China competition. I’m sharing my prepared remarks as a state of the union on open models that is accessible to a broader audience.

Global Markets Daily: Re-Assessing the Value of Duration for Balanced Portfolios

Global bond yields have risen sharply YTD, driven by stronger nominal growth, lingering inflation, fiscal concerns and increased competition for capital from AI. From here, the optimal bond weight in a balanced portfolio will be conditioned by (1) relative return, (2) relative risk, (3) diversification benefits and (4) the return on cash.

Weekly Warm-up: Classic Mid-Cycle

In line with our long-standing views, earnings strength has offset valuation compression. This is a hallmark of a mid-cycle transition as is quality leadership, which we expect to continue. We view the Fed hike as credibility-enhancing, with energy prices still the near-term risk.

China Musings: The Deleveraging Trap – A Fragile Balance Sheet

Household deleveraging is self-reinforcing amid housing and income weakness. Consumption will likely remain subdued until Beijing steps in to break the cycle through mortgage support and enhanced social welfare.

RV Entry-Level Equity Portfolio #33

with Joe Bland

Greetings, fellow Investors and speculators! Welcome to another edition of the RV Entry Level Portfolio. The aim of this publication is to combine technical structure with macro context to identify where capital is flowing within the cycle and why, in an increasingly reactive market environment, understanding that flow is becoming more important than ever.

The Big Daddy

with Raoul Pal

The dollar is on one side of 88% of every foreign exchange transaction on earth. Around 60% of central bank reserves are held in it. Roughly 40% of the world’s outstanding debt is denominated in it, and it funds close to 90% of all cross-border loans and bonds. Half of global trade is invoiced in dollars even when America isn’t part of the transaction, and most of the world’s commodities are priced in it.

The Macro Investing Tool

Liquidity is still lacklustre

At the highest possible level, GMI Total Global Liquidity is sitting at $144 trillion, having pulled back somewhat over the last couple of weeks as the dollar bounced, and it’s now rebounding. The peak was $144.75 trillion on the 8th of September; the dollar went from 98.8 back above 100 in the week of the Fed hike, and liquidity measured in dollars gave back about half a percent before turning back up.

Steno Signals

Wars never repeat, but they rhyme… Why this reminds me of March/April again

Six months ago, the world was bearish on everything because of the Iran War; oil positioning was at a record, sentiment had collapsed… and then risk assets staged one of the biggest rallies of the decade, with semiconductors leading in April. We do not think history repeats. But it rhymes, and right now it is rhyming loudly: a war that is fading in intensity, positioning that is stacked for the end of the world, and Korean chip exports doing the bizarre thing again while nobody looks. Herein: the three rhymes, the one thing that is different, and what it means for the book.

WHERE THE STORM BREAKS.

Highlighting the Seven Charts which MOST stand out on my screens, and two NEW Thematic Longs lighting up our scans — showcasing the best opportunities I’m watching, and how I’ll be investing capital going forward.

The Ratio That Drives Everything: Debt, Liquidity and the Financial Cycle

Understanding The Architecture of Modern Finance

In this report, we outline our framework for interpreting the financial cycle. It first explains the two-way dependence between debt and liquidity, then identifies the ratio’s proposed equilibrium range, and finally considers the implications for crises, asset bubbles, policy and markets.

Looking Out To Year End: Still Constructive

Global Equity Strategy & Asset Allocation

A broadening of the economic recovery as the long-awaited rebound in manufacturing kicked in has led to an unprecedented earnings boom that is set to continue. The boom reflects an acceleration in AI demand just as cyclical growth picked up, while oil and commodity prices rose on the Iran war. Company guidance has been very strong on spillovers and multipliers from the broadening recovery and continues to drive analyst upgrades.

The Macro Investing Tool

The Fed Can Hike Into the Oil Shock, but the Dollar and the Front End Still Decide the Damage

As I've been writing about over the last few weeks, the September to October period is often rocky in a midterm election year, and it remains that way right now, with mixed signals coming out and the Iran situation still not resolved.

Steno Signals

A Hike in September, While the AI World Is Ending? Or…?

I thought the CPI was the most important thing that happened in macro last week. Then Dario Amodei published 3,800 words on Saturday asking the AI industry to slow down... A couple of weeks after his largest competitor took back the lead. What a coincidence.

Is a higher earnings bar really harder to clear?

Plus a charted review of the macro crosscurrents

Ahead of quarterly earnings season, analysts have typically revised their earnings estimates lower.

US WEEKLY KICKSTART

The impact of higher interest rates on equities in charts

SEVEN Critical Charts I'm Watching Here:

Today I want to highlight the Seven Charts which MOST stand out on my screens — showcasing the best opportunities I’m watching, and how I’ll be investing capital going forward.

Bonds, Treasury QE and the ‘3-3-3-30’ Policy Framework

The Path to Faster Monetary Inflation

Bond markets are rarely the most exciting area of finance, yet they remain the most important for investors to understand. Government bonds are not simply another asset class. They underpin the global collateral system, determine funding conditions and establish the hurdle rate that all other investments must ultimately beat.

What We Told Hedge Funds This Week

Semi-hot CPI.. and the USD WEAKENED once the dust settled. The pain trade is lower USD, lower oil, higher equities

A semi-hot CPI: core at 0.29%, above the street’s 0.22% (and above our own nowcast), hot enough to clear every fence-sitter’s bar and make a September hike the base case. And then the interesting part: once the dust settled, the USD WEAKENED and risk assets went HIGHER. On the one print everyone said would decide the month. That is not a market that wants to reward the consensus positioning, and the positioning data tells you exactly why: the market is very, very long dollars and very, very short bonds. The pain trade from here is lower USD, lower oil and higher equities.. and it will surprise everyone.

Why the interest rate ‘bark’ has been worse than its ‘bite’

Borrowers are “well positioned to absorb higher rates” ... for now

Broadly speaking, rising long-term interest rates are a headwind for borrowers, including most households, businesses, and governments.

2Q26 Earnings Learnings: Raise S&P 500 PT & EPS, Yet Again

We raise our FY26/FY27 EPS estimates to $365/$414 and our YE26/YE27 S&P 500 PT to 7950/8800 following a standout earnings season led by Tech.

We raise our FY26/FY27 EPS estimates to $365/$414 and our YE26/YE27 S&P 500 PT to 7950/8800 following a standout earnings season led by Tech. Big Tech continued beat-and-raise execution, reinforcing AI-driven earnings durability, while a more hawkish rates outlook keeps valuation conservative.

Weekly Warm-up: The Signals Through the Noise

While the S&P 500 has made little headway since early June, a lot has changed under the surface with a rotation from early to mid cycle winners and toward quality. This shift is consistent with a broadening given the S&P's dominant quality weight and the strength in earnings across the index.

The Drill

Hormuz and Houthi endgame?

Witkoff and Kushner came home from Moscow with nothing, the Houthis are hitting Saudi refineries again, and the US Navy is running out of carriers to cover Iran and the Pacific at the same time. Below: the Russia trip, the Hormuz endgame, the Yemen escalation, and why the carrier gap points at one stock.

Market Warnings

Household enthusiasm is waning, is capital spending too strong, credit risks are rising, stocks outpacing bonds in 100-year record, real investment per job flatlining, YC to stall profits, and more.

The U.S. stock market continues to hold near record highs as dip buyers keep reviving the market after any meaningful temporary setback. Nonetheless, today’s missive highlights a few relatively obscure warning signs for overall stock prices which remind investors that all may not be as calm as it appears on the surface.

8% Cheaper While Nobody Was Looking

Thoughts on the Market

For us, the biggest takeaway is pretty straightforward: since June, the S&P 500 is up less than 2%, while forward earnings estimates have jumped 10.7%. Put differently, the market has become roughly 8% cheaper over the summer while everyone was busy soaking up some sun.

6 Charts For The AI Bulls

Some thoughts on Jevons in machina carne viva

I generally think that “it’s so early” and “they don’t know what’s coming” are super-annoying phrases, used mostly by people who want to make predictions so vague, and on a time-horizon so long, that by the time they’ve been falsified (or not), no one will remember.

Steno Signals

One Inflation Print to Rule Them All

Friday’s U.S. CPI report is a GENUINELY binary event, since most fence-sitters have made it explicit that this one print decides their September vote. I guess that is what you get without forward guidance… Decisions based on ONE number, after years of evidence and with plenty of live inflation measures available.

STRAP YOURSELF IN...

The World’s Most Crowded Trades, the MAX Pain Scenario, and the Best Opportunities on Watch.

September is underway. Positioning is all over the place — be careful out there. Walking through a MINE FIELD — the world’s most crowded trades, and the dangers of being consensus. Nice moves in Tech & AI this week — focusing only on the very best options on the board (continued). Heading into one of the most important weeks of the year for Macro… strap yourself in — this could be one for the history books.

Bitcoin’s Liquidity Paradoxes

Could More ‘Treasury QE’ Explain Bitcoin’s Recent Rebound?

We view liquidity as circulating through two distinct channels: the financial economy and the real economy. We often express this idea by saying that all money that is anywhere must be somewhere; it cannot occupy two places simultaneously. In broad terms, liquidity in the financial sector supports bond prices and risk assets, while liquidity in the real economy fuels commodity markets, business activity and corporate profits. When liquidity shifts between these two circuits, equity P/Es may fall as bond yields rise, but stronger earnings can offset that pressure to a greater or lesser degree.

What is the Debasement Trade?

What’s driving this trade, what assets are in it, and how much further will it go?

Back in the fall of last year, when the rally in gold and precious metals was at its peak, I did a series of posts on the “debasement trade,” summarizing what we know and don’t know. This trade is a new phenomenon, so it’d be foolish to think it’s well-defined or encompasses a fixed set of assets. Neither of these things are true. What’s clear is that this thing is increasingly entering the mainstream vernacular and growing in popular appeal. So this post updates my summary of what we know. I’ll cover the underlying driver of this trade, what assets are in it, and how much further it has to run.

Has Bitcoin Bottomed?

Bitcoin started selling off from its all-time highs of over $126K last October, tumbling to under $58K two months ago. Question is, have we seen the worst of this Bitcoin bear market yet?

Bitcoin started selling off from its all-time highs of over $126K last October, tumbling to under $58K two months ago. Question is, have we seen the worst of this Bitcoin bear market yet?

Charts of the Week: Experience > Skills

Netflix Having a Blockbuster Moment?; Cyber Game Done Changed; Data Center Job Boom Continues Apace

Charts has already observed that one of the challenges for prospective entry-level hires (other than the fact that entry-level hires have always been a relatively small share of tech hiring) is that existing tech workers appear to be getting older. Why that’s the case is some combination of aging-in-place, plus remote work unlocking a broader pool of talent, plus perhaps some premium for more experienced workers–and while AI may have something to do with it, as well, the evidence for that is pretty weak.

Bull Bear Report: Week Of September 4, 2026

September Market Weakness: The Setup Has Teeth

This was a decently boring week that ended just about where it began. The S&P 500 closed Friday at 7,718.60, up a rounding-error 0.1% for the week; however, that flat headline hid a decently bumpy five sessions. Stocks dipped early as oil spiked on fresh Middle East hostilities, recovered midweek when Fed Governor Chris Waller struck a dovish note, and yields eased, then handed it all back Friday when the August jobs report landed hot.

Impossible Things

Could ‘Speculation’ Investment Regime Be Extended By More ‘Treasury QE’?

Markets are being asked to accept three widely held assumptions: that rising US bond yields reflect a loss of confidence in US assets, that higher rates are inherently bearish, and that recent US Treasury and Federal Reserve interventions amount to disguised yield curve control (YCC). The evidence suggests otherwise.

What We Told Hedge Funds This Week

The ECB cannot print molecules either...

A quarter or two ago, the line was “the Fed cannot print molecules”. The past month or two, the molecules moved continents: the genuinely tight energy market is European Nat Gas, where storage sits 25 points below seasonal norms and EU law forces price-insensitive buying into the hole. Including: the USD update (the trade now runs on the GROWTH channel, not the inflation spread), what Waller and Williams just told us about September, TWO In Focus sections... the gas squeeze (with the Romanian trades) and the OpenAI comeback via GPT-6 Astra... plus a salty portfolio note on the “peak AI” pundits who have re-emerged exactly on schedule...

While I Was Gone…

Data Center Moratoriums, OpenAI Agents Gone Rogue, NVIDIA-Hugging Face Marriage, Moonshot-Hyperscaler Revenue Share

I just returned from a trip with my young family to Shenyang, my place of birth, so my almost two-year-old son can meet and hangout with his almost 95-year-old great grandmother. It was a filial piety trip.

12 stock market charts that caught my attention

Some bullish. Some less so.

All things considered, it’s been a pretty good year for the stock market. Year to date, the S&P 500 is up over 11%.

Deep Dives

Inflection: Part II — portfolio construction after the major crypto inflection

I make portfolio decisions on probabilities, and the balance of evidence has continued to move in favor of the major-low thesis. Although it remains early, the market has delivered enough confirmation since my aggressive mid-July deployment to justify further changes to the portfolio.

The Drill

Mowing the grass

The US tried to move the Iran war from the Strait to the balance sheet in August; the IRGC dragged it back to the water, and Washington now answers with “tanker for tanker” and a standing campaign against the Iranian coast. At the same time, Berlin has formally blamed Moscow for the Leipzig airport drone and rockets that hit a Brandenburg grid substation.

$55M Portfolio + Positions Update: +18.4% In August

Our strategies returned 18.4% this month after momentum bounced back from July.

Our strategies returned 18.4% this month after momentum bounced back from July. Here's what delivered and how were thinking about the market.

The Macro Investing Tool

Warsh is holding out on inflation. The data is about to come his way.

Kevin Warsh stood up at Jackson Hole on Friday and told us he isn't convinced on inflation yet. He named PCE as the gauge he will act on, said financial conditions are not restrictive, and left a rate hike on the table for the coming months.

Steno Signals

Warsh versus Bessent

Warsh was not the productivity dove I had hoped for, and the market now treats a September hike as the base case. But run the language through a quant lens, and he did NOT set a new hawkish peak. The repricing was the LACK of dovishness after soft CPIs, not added hawkishness.

A Primer on AI Lab & AI Hyperscaler Unit Economics

We expect some confusion as AI labs start reporting GAAP financials, as business mix and revenue recognition can vary.

We expect some confusion as AI labs start reporting GAAP financials, as business mix and revenue recognition can vary. Similar to how UBER and LYFT are in the same core business yet gross bookings and net revenue have different definitions, comparing AI labs may prove difficult.

The Week Ahead - 8/30/26

A look at the upcoming week for the US economy and equities — covering key drivers including earnings, positioning, breadth, valuations, sentiment, seasonality, and the Fed.

DISCIPLINE over CONVICTION.

Closing one of the Best Months of 2026 — Portfolio NEXT STEPS, plus CORE September Framework.

September is setting up to be a choppy month for markets. Stay disciplined, take only the best risk-reward setups, and watch Bitcoin as a signal for risk assets.

Can the Fed Just Talk Rates Down?

FULL FREE VERSION

Friday proved that Warsh can talk the front end around and talk inflation expectations down for a day. The long end went its own way.

More (Johnny) Cash?

I’m Going to Jackson, I’m (Not) Gonna Mess Around…

Hotta than a pepper sprout it was not. Kevin Warsh’s low-key Jackson Hole speech offered little fresh guidance on the Fed’s intentions, which makes the sell-off in gold look overdone. Still, Chair Warsh did reinforce several points:

RV Entry-Level Equity Portfolio #31

with Joe Bland

Greetings, fellow Investors and speculators! Welcome to another edition of the RV Entry-Level Portfolio. The aim of this publication is to combine technical structure with macro context to identify where capital is flowing within the cycle, and why, in an increasingly reactive market environment, understanding that flow is becoming more important than ever.

RV Pro Deep Dive: Ethereum, Solana, Sui

with Raoul Pal

This is the first of a new monthly format. Once a month, instead of adding something new to the book, we'll go back to positions we already own and review them properly: what has actually changed since we last wrote them up, how they're moving now, and whether the framework still supports them. This month it's the three crypto majors, and the timing isn't accidental... crypto sits at exactly the point in the cycle map where the next few months decide the sequence.

What We Told Hedge Funds This Week

SaaS wasn’t dead; the labor market wasn’t dead... but Anthropic will still IPO with that backdrop

The software doom-porn marked the EXACT bottom; the labor market never died... it just stopped hiring while margins exploded, which IS the productivity everyone claims is missing. AI on TOP of vertically integrated software is a token-demand machine, the macro case around the Anthropic IPO (the fastest revenue journey in corporate history, chart included), the panic behind the SpaceX deal, why I am tempted to prefer the OpenAI pipeline... and an In Focus on Nvidia handing its margins to the memory companies. Plus, the Warsh verdict: very little news, a Fed deliberately making itself SMALLER for markets... and a stand-pat base case that survived Wyoming fully intact.

Markets Update - 8/28/26

A look at what happened today impacting US equity, Treasury, and selected commodity markets, and what to watch for tomorrow

US equity indices were little changed into Chair Warsh’s Jackson Hole speech Friday, then parted ways as large caps initially lifted while small caps fell.

Is it bad when economic data gets revised down?

For stock market investors, it might actually be a good sign

Economic data is crucial because it informs decisions about policy, business, and investing.

Markets Update - 8/27/26

A look at what happened today impacting US equity, Treasury, and selected commodity markets, and what to watch for tomorrow

US equity indices opened higher led by tech shares as a bullish outlook from Nvidia Corp and strong results from software firm Salesforce bolstered confidence that the rapid growth in artificial-intelligence spending is likely to run for longer.

You are not a model. Don’t price per token.

Charging per token is becoming the default for AI companies. For most AI applications, it is a mistake.

Token pricing began in the right place: the model layer. When OpenAI launched its API in 2020, charging for the computation a model consumed was a sensible way to meter raw inference.

Bonds are Boring … Until They’re Not!

Overall, my guess is it’s more likely bond yields will decline significantly during the balance of 2026 than it is that a bond vigilante will bring justice to the financial markets.

High-quality bonds usually provide steady predictable income and small price movements and consequently are considered safe but boring investments. But bonds are boring … until they’re not!

Macro Memo: Regime Change

Treasury-Fed Accord 2.0 and Banking Reform

One of the first reports Citrini ever circulated was a thesis arguing that Silicon Valley Bank was technically insolvent and at serious risk of failing. In March 2023, SVB collapsed and the report (along with a handful of tweets detailing the setup) began to make the rounds.

Missile Restocking

The Bottleneck Moves to the Battlefield

Our goal at Citrini is to identify trends that are going to sustain longer than a few good earnings reports. And while the collective attention of market participants has been fixated on building out compute, capital cycles where the duration and magnitude are both underpriced…

Protection Matters

Cybersecurity’s Winners and Losers

Nuance has not been an especially strong suit of the AI Trade to date.

Breaking the data

Is a lot of manufacturing data meaningless?

In this edition of our 'Breaking the data' series, which focuses on interesting data that show how our Nine Themes are shaping the future, we explore why manufacturing data are much less relevant to the whole economy than in the past.

Markets Update - 8/26/26

A look at what happened today impacting US equity, Treasury, and selected commodity markets, and what to watch for tomorrow

AAA Rated: Bonds and the Hidden Architecture of Modern Finance

Robin Wigglesworth’s “A Fabulous Debt: The Epic Story of How Bonds Built the Modern World”

Markets Update - 8/25/26

A look at what happened today impacting US equity, Treasury, and selected commodity markets, and what to watch for tomorrow

Markets Update - 8/24/26

A look at what happened today impacting US equity, Treasury, and selected commodity markets, and what to watch for tomorrow.

The $40T Debt Squeeze: How Will The Market React?

The macro setup heading into the most important month of 2026

For the first time in the history of US, the national debt crossed $40T, and the 30-year yields hit its highest level since 2007. On the same morning Treasury Secretary, Scott Bessent, announced he’s doubling the government’s bond buyback program.

Markets Update - 8/20/26

A look at what happened today impacting US equity, Treasury, and selected commodity markets, and what to watch for tomorrow

Markets Update - 8/19/26

A look at what happened today impacting US equity, Treasury, and selected commodity markets, and what to watch for tomorrow.

Things Are Cheaper (If You Know Where to Look)

5 Idea Wednesday: deflation abounds; 'cheapest' model isn't the cheapest model; private credit's other problem child; China's beggar thy neighbor; Still no housing shortage (nor renovation boom)

A Few Things which Caught My Attention

A few concepts and questions investors should ponder!

The Bessent Put

Is AI a bubble yet? Our five gauges say no

Demand is justifying all the spending, but the spending is getting harder to unwind

Is AI a bubble? Not yet. Our updated dashboard tracking the investment wave currently has no gauges in the red, two in amber, and the rest in healthy green (just).

Markets Update - 8/18/26

A look at what happened today impacting US equity, Treasury, and selected commodity markets, and what to watch for tomorrow

Steno Signals

The case for VERY low inflation... But maybe also growth?

My old mentor's forward-looking regression says the US cycle rolls over... I say the surveys feeding it are lying to him. The live data points to the rarest mix in macro: VERY low inflation AND decent growth, driven by a war-energy unwind, a tariff PAYBACK and a services labor market losing steam... meanwhile, the only real inflation left hides in DRAM, megawatts and refinery margins, where the CPI never looks. Plus: why the Fed's June forecasts are about to age like the finest milk.

The Macro Investing Tool

The Data Did the Work

Welcome to the first edition of this note as its own publication. It's the same weekly note I hand-write on the MIT dashboard, now also landing directly with every Alpha member each week. Right, to work.

Markets Update - 8/17/26

A look at what happened today impacting US equity, Treasury, and selected commodity markets, and what to watch for tomorrow

Equity Strategy: Updating on key market themes

We maintain a positive stance on the equity market, expecting continued supportive Growth - Inflation tradeoff, with corporate earnings a tailwind. Internal participation is broadening, and Cyclical sectors are likely to keep rallying. We look for new highs at index level into year end, including for SXXP. In this report, we refresh our thematic positioning, with focus on Europe.

The Week Ahead - 8/16/26

A look at the upcoming week for the US economy and equities — covering key drivers including earnings, positioning, breadth, valuations, sentiment, seasonality, and the Fed.

Deep Dives — Bitcoin at the Break: volatility compression, liquidity and the next regime

Bitcoin at the Break — volatility compression, liquidity and the next regime

Bitcoin has entered a genuinely unusual state of volatility compression. Extreme compression usually tells us that Bitcoin is approaching a transition, often within the next one to two months, but the compression itself is not the edge. Once price leaves the range, upside breaks have historically been much more reliable than downside breaks.

What We Told Hedge Funds This Week — A weak USD is the final piece of the puzzle

A weak USD is the final piece of the puzzle

The stars are aligning with our nowcasting: soft(er) inflation, cyclicals rebounding, the Fed slowly repriced towards on hold, but the dollar refuses to budge against >2 standard deviations of spec longs. The missing link runs through the Hormuz Strait, and NOT via crude — via the products. Plus: why we would rather buy OpenAI than Anthropic on costs, and a loaded catalyst pipeline in the small-cap biotech sleeve.

Postcards from the Universal Code: The Reward Circuit

(postcards from the universal code)

When the same pattern appears in markets, cities, biology and machines, that’s not coincidence, it’s the architecture showing through. A short essay reading 2025’s record tourism through the lens of the universal code: Europe as the reward circuit of the global intelligence economy, Japan locked out of the same loop, and the choice between producing intelligence again or settling for being beautifully maintained.

Markets Update - 8/14/26

A look at what happened today impacting US equity, Treasury, and selected commodity markets, and what to watch for next week

Markets Update - 8/12/26

A look at what happened today impacting US equity, Treasury, and selected commodity markets, and what to watch for tomorrow

A look at what happened Wednesday impacting US equity, Treasury, and selected commodity markets, including the latest CPI print and Fed rate hike expectations, plus a look ahead to Thursday’s PPI report.

Markets Update - 8/11/26

A look at what happened today impacting US equity, Treasury, and selected commodity markets, and what to watch for tomorrow

Markets Update - 8/10/26

A look at what happened today impacting US equity, Treasury, and selected commodity markets, and what to watch for tomorrow

Steno Signals

Cycles don't die of age; they die of central banks

Our CB decision index, the best medium-term leading indicator we run, projects a cycle peak in Q4... but the oil impulse, a trillion in unused eSLR capacity, and a Fed that just got a -23k payrolls report all argue that the executioners may holster the weapon this time. Here is the full cycle rundown.

The Week Ahead - 8/9/26

A look at the upcoming week for the US economy and equities — covering key drivers including earnings, positioning, breadth, valuations, sentiment, seasonality, and the Fed.

Markets Update - 8/7/26

A look at what happened today impacting US equity, Treasury, and selected commodity markets, and what to watch for tomorrow

What We Told Hedge Funds This Week

The Fed is Wrong

Payrolls printed MINUS 23k this morning, below even our street-softest call, while the Fed was busy discussing a HIKE... so forgive the victory lap. The short version of this week: A second Hormuz deal is coming and you should NOT chase the price of crude lower; the July momentum rout was liquidity and not information; and the hyperscaler order books tripled while everyone was busy panicking...

Markets Update 8/6/26

A look at what happened today impacting US equity, Treasury, and selected commodity markets, and what to watch for tomorrow

US Equity Strategy Data Pack

August 2026

Morgan Stanley's August 2026 US Equity Strategy Data Pack argues that the cycle is moving from early to mid cycle, favoring quality, with momentum rotating away from semiconductors while hyperscalers remain attractive with important dispersion risk.

Markets Update - 8/5/26

A look at what happened today impacting US equity, Treasury, and selected commodity markets, and what to watch for tomorrow

Flows & Liquidity

TMT Equity Sector and Multi Strat hedge funds at the center of July’s deleveraging

• Preliminary data from Pivotal Path suggest that TMT Equity Sector hedge funds lost an unprecedented 10% in July excluding the Situational Awareness loss. Multi Strat funds lost 2.3% in July, the fourth largest monthly loss in their history. • The severe loss in July makes it likely that the capacity of TMT Equity Sector and Multi Strat hedge funds to hold tech exposures would be structurally more limited going forward. • If this assessment proves correct and the capacity of hedge funds to hold tech exposures is structurally reduced, the tech trade would become over the longer-term even more dependent on retail investors and thus more susceptible to the swings emanating from leveraged ETFs, retail option buying and retail margin accounts. • Covering of yen shorts post fx intervention in a similar fashion to end-April/early-May. • Room for policy uncertainty to push UST term premia higher. • The flows into hyperliquid ETFs stalled in July and August after surging in May and June. • Flows & Liquidity will not be published next week due to holidays. The next issue will be published on August 19th.

Momentum, rotation and the value in growth

In early 2025 we argued that a series of dynamics would broaden out the returns available for investors, increasing the rewards to diversification. In the fifteen years that followed the financial crisis, equity markets were very bifurcated. The US equity market dominated regionally, Technology consistently outperformed sectorally, and Growth persistently outpaced Value. Since 2025, and again through this year, the opportunity set has shifted. Equities have performed well, but the geographical spread has widened (Exhibit 1). The US has been the weakest of the major regions.

Assessing the Current Pace of AI Investment

AI investment is a key focus of macro markets, but measuring it is not entirely straightforward. The most frequently cited measure is the projection for almost $800bn in 2026 capex from US hyperscalers. However, this estimate ignores investment by private and foreign companies and captures non-US and non-AI investment.

The Weekly Alpha Digest

One Margin Call, Not a Cycle Top

Was July the month the AI trade broke? The evidence says it was the month one balance sheet broke. A single thematic fund carrying roughly four times its capital in gross exposure met a collateral call, sold its whole listed portfolio to one counterparty, and on the way out, took the momentum factor to its worst month on record. Memory pricing, order books and backlogs all improved while the shares fell. Consensus read the exit of a forced seller as a verdict on the theme. It was a verdict on his leverage.

Markets Update - 8/4/26

A look at what happened today impacting US equity, Treasury, and selected commodity markets, and what to watch for tomorrow

Markets Update - 8/3/26

A look at what happened today impacting US equity, Treasury, and selected commodity markets, and what to watch for tomorrow

Steno Signals

The war moves in sinus waves, but the market doesn’t

Trump has paused the HUGE attacks because “the perimeters of a deal has been agreed to”... exactly like last time. But the real story of the weekend was not in the Gulf, it was in Tokyo, where Bessent literally wrote “Buy Japanese Yen $5-10 bil” on his to-do list, and then DID it. We stay short the USD…

US WEEKLY KICKSTART

Q2 2026 mid-season earnings update

The Week Ahead - 8/2/26

A look at the upcoming week for the US economy and equities — covering key drivers including earnings, positioning, breadth, valuations, sentiment, seasonality, and the Fed.

The Momentum Sell-off

Style Rotation or Crowded Unwind?

The sharp reversal in Momentum has become the defining factor event of recent weeks, with investors rotating away from the AI tech-oriented winners and back towards valuation-sensitive exposures. While the breadth of Value outperformance, rising style dispersion, and falling correlations point to a meaningful shift in leadership, the evidence remains regionally uneven. Developed Markets are exhibiting the early characteristics of a broader Value-led rotation, Emerging Markets particularly continue to display the hallmarks of a positioning-led corrections, with losses concentrated among former Momentum leaders. Our interpretation is therefore one of an emerging rotation in DM alongside a correction in EM, rather than the start of a synchronized global change. As such, we view the recent Momentum sell-off as a reset in leadership rather than a definitive end to the broader Growth and Momentum cycle.

Investor Positioning and Flows

Rotating On Cue Again

The rotation out of Tech began on cue two months ago from the top of its long-run trend channel (Tech Comes Full Circle, May 15 2026), and in our reading, the rotation back has also begun on cue after hitting the bottom earlier this week. MCG & Tech positioning fell sharply from elevated levels to near neutral this week and has bounced slightly higher (62nd percentile). It is in line with earnings growth around 20%, i.e., already implying a sharp slowing from the 52% it is tracking for Q2 (Q2 2026 Earnings: Broad Based Acceleration, Jul 31 2026). We see the rotation into Tech having further to go with a typical outperformance of 20pp. This would be the 5th such rotation in the last 3 years with the market focus repeatedly swinging between stellar growth and bubbles fears at an increasing rate. Within Tech, we see the best risk-reward in the hyperscalers whose relative performance to the S&P 500 is just off the bottom of a 3-year range.

Global Data Watch

And isn’t it ironic?

July central bank meetings reinforced our view that a broad DM hiking cycle is on the horizon. While we look for one hike from each G4 central bank before year-end, markets appropriately price in the risk of earlier and more action. This risk bias is linked to the rising possibility that the Fed starts earlier than our forecast for December. The anticipated 2H26 moderation in US inflation and consumer spending should stay the Fed’s hand until a clearer tightening in labor markets is established. While data surprises may prompt earlier action (we forecast a 4.3% July u-rate next week), this week’s FOMC meeting highlights another reason why the committee may act earlier.

Markets Update - 7/31/26

A look at what happened today impacting US equity, Treasury, and selected commodity markets, and what to watch for next week

What We Told Hedge Funds This Week

This is by FAR the most stupid market I can remember

Oil Flash Update: Are We in Trouble Again?

Trump has ended the ceasefire, the Strait is on fire again, and cracks are at record highs. But the oil math looks very different from March. Here is why I am not panicking (yet), and what would make me change my mind.

Markets Update - 7/30/26

A look at what happened today impacting US equity, Treasury, and selected commodity markets, and what to watch for tomorrow

Information Timing and Release: The Gaming of Guidance!

Quarterly Earnings and Fed Guidance

Update on the de-leveraging process in Korea (2)

The KOSPI’s recent decline has substantially normalized leveraged ETF and hedge-fund positioning. With valuations and earnings momentum still supportive, the report sees Korea’s setup as attractive on balance.

US: Will AI-driven productivity lead to disinflation?

Markets Update - 7/29/26

A look at what happened today impacting US equity, Treasury, and selected commodity markets, and what to watch for tomorrow

As We Approach The Open... 7/29/26

Roundup of global markets and financial news ahead of the cash opening of US equities including corporate and international updates

S&P 500 Leading Indicator, Insiders Action, Equity Supply & Investment Themes by Decades = Maverick Equities Charts of the Week #57

4 + 1 Maverick Charts that say 10,000 words

Markets Update - 7/28/26

A look at what happened today impacting US equity, Treasury, and selected commodity markets, and what to watch for tomorrow

As We Approach The Open... 7/28/26

Roundup of global markets and financial news ahead of the cash opening of US equities including corporate and international updates

The Future Costs of Current Suppression

Have policymakers been deliberately holding down oil prices and bond yields?

Late investment cycle signs continue to accumulate, from bearishly flattening yield curves, through strong commodity markets to persistently positive economic data surprises. Weekly Global Liquidity data also reveal choppiness, as the chart below confirms, but with a trend towards weakness that has proved sufficient to pull down the liquidity-sensitive BES$ crypto basket (60% BTC$; 30% ETH$ and 10% SOL$). We explain this slide mostly through the crowding impact of a rapacious real economy, but there are also gathering signs that several central banks are starting curtail liquidity impulses.

Something Doesn't Feel Right.

The Biggest Risk/Opportunity I'm Watching.

In today’s report: “EXIT TO THE LEFT.” Today I want to update on critical new ideas, including extreme positioning, sentiment, oil, rates on the edge, volatility, and a confluence of signals I’m getting concerned about. Plus timely new topics: Bounce, or breakdown? A BIG upgrade to our toolkit — and much more to come. Have a great week ahead!

Steno Signals

The biggest inflation divergence between the Eurozone and the U.S. in years

Our nowcasts show the U.S. decelerating on inflation while the rest of the world re-accelerates on the back of the Middle East. Meanwhile, the earnings “wall of worry” is built on the most mean-reverting consensus forecasts I have ever seen...

Markets Update - 7/27/26

A look at what happened today impacting US equity, Treasury, and selected commodity markets, and what to watch for tomorrow

The Week Ahead - 7/26/26

A look at the upcoming week for the US economy and equities — covering key drivers including earnings, positioning, breadth, valuations, sentiment, seasonality, and the Fed.

Weekly Warm-up: The Broadening Out Shifts to a Quality Rotation as Early Cycle Phase Ends

The broadening out story is shifting to a quality rotation as we exit the early cycle phase of the rolling recovery. Our factor analysis supports this view led by the sharp reversal in capex/sales. Semis still underperform hyperscalers, but AI adopters likely to outperform both.

Investor Positioning and Flows

The Boom And The Gloom

The equity market has once again been in a tight range, in place for 2 months now, accompanied by notable rotations, echoing the period from November to February (Rotation Continued Amidst The Chop, Jan 2026). This week it fell to near the bottom of the range as positioning slipped to neutral. While the Q2 earnings reporting season so far confirms the boom that began in Q1 is accelerating, it has been overshadowed by the gloom around surging Tech capex, escalating geopolitical risks, climbing oil prices and rising rates. We note:

What We Told Hedge Funds This Week

Middle East wreaking havoc on the data...

Writing to you from a cabin next to the tigers, while Trump threatens HUGE attacks on Iran (again). Oil is bid, products are calmer, our July nowcast is still remarkably soft, and we are upping our conviction in hardware after Alphabet officially became a hardware store.

Intelligence Grows Legs

I’ve been promised robots my whole life. So have you. Not just the walking, talking, science-fiction kind, but the whole zoo of them, the arms and the wings and the wheels and the blades; all of it always twenty years out and somehow staying there for seventy years straight...

Midyear Outlook 2026

Still Riding the Wave

Our theme heading into 2026 was “Riding the Wave.” As we look toward the second half of the year, that wave continues to roll. In that spirit, welcome to Carson Investment Research’s Midyear Outlook 2026: Still Riding the Wave.

The Return Of The Real ‘Liz Truss’

What Can Go Wrong in Britain, Probably Will Go Wrong

In markets, there are no unrelated events. ‘Big State’ is fast-becoming the policy ‘norm’ everywhere: are we are being dragged helplessly towards the Chinese model? Big government has a rapacious appetite and needs feeding. This report adds context to Britain’s economic deterioration and fiscal profligacy. It is set against a backdrop where even Japan, the World’s major creditor nation, faces a sinking currency and persistently rising bond yields. Japanese investors, themselves, have large investments in Europe: mostly purchased when Japanese interest rates were relatively low.

The Macro Investing Tool

Business Cycle Update

Welcome back to your weekly dose of macro mayhem.

The Drill

Pivot on Ukraine, Detente with China, all-out war in the Gulf

Three stories this week. The Iran war has roughly two months left on the clock, and it is cash and inventories that will decide it, not diplomacy. Trump’s China accusations are theater, which means the September summit looks safe. And MAGA is pivoting on Ukraine.

Trade without AI

What happens if the boom fades?

Global goods trade has demonstrated remarkable resilience over the past 18 months against formidable headwinds (volatile US tariff policy, Middle East shipping and trade disruption), thanks largely to the AI boom. Last year AI-related goods drove more than 40% of global merchandise trade growth, according to the WTO, despite accounting for just one-sixth of traded goods.

All Along the AI Watchtower

Qualcomm’s Card, the Builder’s Toolkit, Enterprise Spending, and… PEMDAS

Everyone along the AI value chain thinks they can price the piece directly in front of them. The value of the whole, and who gets to keep it, is where there’s less confidence. Against the backdrop of a historic momentum correction, it’s even harder to see through fog.

AlphaSignals: Analyst Insight, Measurable Alpha

AlphaSignals package MS analysts’ highest-conviction calls into a globally consistent research data layer. In earnings, the long-only AlphaSignals Earnings Cycle Strategy delivers a 1.49 post-cost Sharpe ratio and 1.23 information ratio, monetizing pre-event anticipation and post-event confirmation.

Weekly Warm-up: Broadening Continues as Index Struggles

The broadening trade continues as the equal-weighted market and cyclical industries outperform, while semiconductor leadership corrects and investors focus on earnings quality.

Time to Ease

China’s growth momentum slowed sharply in recent months, with real GDP growth falling from 5.3% qoq annualized in Q1 to 3.6% in Q2. Retail sales and fixed asset investment both weakened meaningfully, raising downside risks to the government’s 4.5-5% full-year GDP growth target.

Week 29 Wrap

Market activities and sentiment sequentially improved at margin

Transaction volumes increased by 7% and 1% week over week in primary and secondary markets, sending month-to-date July year-over-year improvements in both markets to 6% and 2%, respectively.

Korea’s Equity Rally

Household Wealth Gains amid Consumption Constraints

Despite the recent correction in July, the KOSPI remains up around 60% year to date and more than 110% from a year ago, boosting household equity wealth by an estimated 17% of GDP.

Three Things in China

Three quick highlights from China

China’s real GDP growth slowed from 5.0% year over year in Q1 to 4.3% in Q2, below the consensus expectation of 4.5%.

China Consumer Dashboard 2026Q2

Consumption momentum softened sequentially

Household disposable income per capita rose 5.6% year over year in Q2, while household nominal consumption growth increased to 3.8%. Sequential consumption growth softened from Q1.

Selloff of US Memory Stocks Creates a Compelling Entry Point

An unusual memory cycle driven by data center demand

Memory shortages in data center markets continue to intensify, while recent concerns about pricing deceleration, capital expenditure and de-speccing were already visible in the cycle.

Assessing Moats, Business Models, and Valuations in the Agentic Era

Agentic AI is reshaping the enterprise software stack, changing customer priorities and shifting investment budgets while software monetisation moves toward hybrid seat, consumption and outcome-based structures.

The Maturing Stage of the AI and Momentum Unwind

Various AI groups have had a challenging spell of performance, with sharp declines across Korea, semiconductors and individual memory stocks as market leadership broadens.

Global Views: Renewed Escalation vs. Lower Inflation

Renewed escalation in the Middle East has pushed oil prices back up, with the Brent futures path above the report’s forecasts of $80 per barrel in 2026Q4 and $75 in 2027.

Steno Signals

Say Hello to Kimi. She is going to increase the GPU and memory demand

First, let’s spend a few seconds on what actually worries me, and then we will get to our new friend Kimi from China, which does not worry me at all. At least if you are not a holder of Anthropic or OpenAI stock, where it is a potential issue for them, but not for the hardware trade.

Equity Markets Positioning Model

Positioning Eases but Vulnerabilities Remain

The technology-led selloff weakened positioning across major equity markets. Nasdaq remains vulnerable because long positions are offside, European positioning continues to deteriorate, and KOSPI retains the largest regional deleveraging risk.