Is The Fed Done Raising Rates?

0:00Join over 5 ,000 attendees for the largest AI event in Asia, Super AI in Singapore, February 28-29, 2024. Edward Snowden, Benedict Evans, Balaji Srinivasan, and over 150 others will hit the stage, joining the industry's most influential minds to explore and unveil the next wave of transformative AI technologies. Singapore will become a vibrant AI hub for a week from February 26 to March 3, with over 150 side events that will make for unparalleled networking opportunities. Visit www.realvision.com forward slash super AI for 20 % off tickets with the code realvision.

0:56Is the Fed done raising rates? Hi, everyone. Welcome to the Real Vision Daily Briefing. With me today is Tony Greer, editor of the Morning Navigator newsletter. Hey there, Tony. How are you? Yeah. Maggie, what's happening? How are you today? I'm good. I'm good. I'm recovering from the holiday weekend slowly. It seems like everybody's a little slow maybe coming back because it was pretty quiet today. We had stocks really kind of hanging on change for most of the day. We saw a little bit of a creep higher in the last half hour. So it looks like they're going to end in positive territory. The Dow and the Nasdaq up about a quarter percent with yields moving lower a little bit as well, but pretty tight ranges all around.

1:36What's top of mind for you this week? Today, there was an interesting comment to one of the talking feds said that interest rate, I think Waller said interest rates are likely high enough to bring inflation back to the 2 % target and that the economy may be slowing enough to tame inflation, i.e. the Fed may have kneecapped the US economy enough to fix their problem. So I thought that was interesting to see if kind of follow through and yields today, right? That's like the really important takeaway, kind of a big macro day, the stock market still kind of waking up, like you said, from the tryptophan slumber.

2:16And so the big rotation in the stock market that goes nowhere. But the move today was in the dollar and in yields. And that's just a continuation of the date that will live in infamy of last November, quite honestly, of November 14th, excuse me, when we got that CPI number that came out in line and the markets absolutely freaked out with 17 sectors having two sigma breakouts and the S &P just cutting loose for the next leg of the rally. So that's that's, you know, what we've seen in general. Yeah. So, um, so there are two, two days in my mind though, because, you know, we've talked about the fact that you were on November 1st and sort of giving us a sense that sentiment felt like it was looking for something.

3:02And then we got that major and we, and we'd already started moving. And then we got that major crazy day when you were on with us again, as it turns out, I'm wondering how you feel about, or what are you seeing in the market right now? Because we did come a long way in a short time. We know there are a lot of people that kind of hate this rally because maybe they missed it again, you know, because it was so fast. What are you seeing out there? Where does it seem like sentiment sitting right now? Well, it's definitely switched from negative to positive. That's for sure, right? The AAII bulls index on Bloomberg has recovered towards the highs of just, you know, not extreme bullishness, but definite clear bullishness.

3:46I know the CNN fear and greed index, which seemed like it was broken for a little while, stuck on fear. I think the guy might have fell asleep at the wheel and forgot to update that thing or something. But now it's back into the, you know, positive levels of greed, which you would expect after a 10 % rally in four weeks, right? So we've got to say, you know, the trades are going on the board, right? The longs are piling in. It's definitely happening. CTAs have definitely shifted toward long positioning. So now we're in a situation where we've got some long positioning and we've got some positive sentiment, but we definitely don't have the sort of runaway performance chasing phase of the markets yet.

4:27So there may be a situation where the markets dip now, but I have a feeling that like myself, there's a lot of people on the sidelines that are like, OK, that thing just went 10 percent in four weeks. I totally missed it. The next dip, I'm in. You know, and so I think that's probably a fairly popular idea. I mean, geez, you know, people are looking to trade this market and make money between now and Christmas. They better have that attitude. I have a feeling. So that's what I feel like we're set up for. We've got seasonality tailwinds in the stock market, even though the stocks are doing nothing today.

4:59That's kind of not too shocking. But in general, there's still breakouts to be traded, right? Today, gold miners, big two sigma breakout in the New York Times zone. Gold closes 2041 bid, the highest price we've seen in a while. And now we're 50 bucks away from a big breakout, like a huge breakout in gold. Wait, so I think you sent a chart over on that. So that's interesting because I think you're right. Everyone was like, damn it, I missed the rally. And they're really glued to stocks. We've been getting questions about gold. So it's sitting really close to important levels? Yeah. Yeah. Gold breaks through 2100.

5:39That's been the sort of triple top that has been failing and failing and failing. See how I did that? And it looks like if it breaks this time, there's like a huge cup and handle pattern near the top now that a breakout from that sort of handle means an extensive run of a breakout that we've seen hundreds of times with that pattern. So that's really interesting. The move in gold miners today is interesting. There are one, two, three, four major gold miners with two sigma rallies today. So these are the trades that the market's giving you. There's pretty much telegraphing what's going on in rates and what's going on in the dollar.

6:20Dollar closes at a new low today. Dollar yen breaking down below another moving average to 147. You know, this is a really important point. And you and I've talked about it, but this is a this is not a market where you can set and forget. I think this is where you have to be really cognizant, as you've been pointing out to us, to be looking for the market and trying to pay attention to the signals it's giving you and where the opportunity is because things are moving. I mean, it was volatile and people were getting their heads ripped off for a lot of the year, but there's still a lot going on that you really need to pay attention to.

6:55You really need to be nimble in this market. Yeah, true. And Maggie, while I think, you know, I kind of agree that it's nothing's ever set and forget for me, you know, like you always want to make good sales when you're long something and you always want to make, try to make good purchases when you're getting into something. And so there's always that tactical trading about the markets. But for the first time in a while, I've had the S &P on my view matrix as just being long the S &P. And we went on, I think, I believe I added that actually on November 14th, because that move was so convincing to me.

7:29When you see 17 sectors pick up and respond to the macro gyrations that took place that day, to me, that's a little bit, and not entirely, but a little bit of a signal that it's like, whoa, this is like asset class up and to the right now. And I'm not really smart enough to pick exactly which sector is going to lead. It might be tech, but everybody's long that. It might be energy, but that doesn't seem to be going anywhere. I don't know which it's going to be. So I just buy the whole thing as a basket. And for this moment in time, I feel like that's a good trade to have on the pad to let it ride for a little while.

8:05Hey, everyone, We're going to take a quick break right now to hear a word from our partners. We'll be right back with more of the day's top analysis on the Real Vision Daily Briefing.

8:36$100 once your account is approved. And the great thing is that in addition to crypto, Plus500 gives you access to a wide range of instruments. S &P 500, NASDAQ, gas, and much more. Explore equity indices, energy, metals, forex, and beyond. With a simple and intuitive platform, you could trade anytime, anywhere. Experience the fast, accessible futures trading you've been waiting for with Plus500. With over 20 years of experience, Plus500 is your gateway way to the markets. Visit us.plus500.com to learn more. Trading and futures involves the risk of loss and is not suitable for everyone. Not all applicants will qualify.

9:11Plus 500, it's trading with a plus.

9:17We did get a question. Let me see if I can find it. I usually do them a little bit later, but

9:25David asking, what does Tony think of the Magnificent Seven and the Clash song? I love it. One of my absolute favorite Clash songs for sure. I mean, it's not Rock the Casbah, which has a special part of my life, but Magnificent Seven has a very, very cool groove to it, right? I love it. So I think, David, though, when it comes to Magnificent Seven, based on what you're just saying, Tony, you're like, listen, and this is where sentiment gets tricky because there are people that just feel like those doctor overvalued. They hate chasing them. We just saw Amazon say that they've come out with a new AI tool today.

9:58and is this a retail company anymore? Is this a cloud, which it's been for a long time, and generative AI company? That was one of the headlines. So it's kind of tough to know what to do. It sounds like you're saying, listen, not sure who's going to win, so I'm going broad the S &P 500. Is that right? Yeah, yeah. It's like, similarly, I don't want to just be piling into the Mag-7, and I know we were just riffing on the clash on there, but just to mention them for a moment, like, you know, sure, they're driving the market. At least if I get along the S &P now, I get a little bit of exposure to that, right, where I'm really not being a chaser for that.

10:32But I look at the conditions in the world right now and in the macro world, and I'm like, man, the conditions are pretty good for the Mag7. I mean, they were doing all that buying for a good reason, and it looks like they're going to be right on this, at least for a run. You know, there may be a hot potato moment for it when, you know, things back off. But in general, it feels like those names and the whole AI, like you just said, like you just pointed out very astutely, that's the sort of theme that kind of, you know, is kind of bubbling at the forefront of the tech markets and kind of driving it every day to something new and quite honestly more exciting to me.

11:07I mean, my eyes crossed, glaze over trying to keep up with it. And I haven't felt like that since, you know, the tech boom back in like the mid 90s. So I think that's kind of cool to see how that's going to drive the tape. And if that's going to drive the tape and you've got a hold of the S &P, then you're going to do just fine. Yeah, that's a great point. There's a time when that works, you know. And by the way, we were spending an enormous amount of time on AI for this very reason. Because, you know, in order to figure it all out, you need to understand what's behind it. When it comes to the NASDAQ, just want to play a clip from RAL.

11:39He recently spoke on, I don't know if I have this name right, actually. Who did he catch up? Ari. I think Ari Paul. Yeah, Ari Paul. And they talked about really the macro cycle, but interestingly, how it's affecting both the NASDAQ and crypto. Let's have a listen, and then we'll talk on the other side. So where are we in the macro cycle? Well, everything went down a lot last year. That usually is the indicator that the markets saw a recession and economic weakness. We had high inflation. That is all behind us. The markets mainly are now being driven by liquidity cycles. That's the dominant force of all assets now.

12:20It never used to be the case, but it is super dominant. Because the world reset interest rates in 2008. Everybody had basically a debt jubilee, which was, we'll forgive all interest payments and make them zero. Everybody reset their debts in this three to five-year time horizon. So we've now got this rolling four-year cycle that we're all sucked in, the NASDAQ, crypto, everything. So that's the cycle we're in. So where are we in that cycle? Well, most of that was priced in last year. So we're in what's known as crypto spring or macro spring. Crypto spring, macro spring is like spring. One day it's rainy, one day it's sunny, then there's a frost, then it's really hot.

12:56You can't really figure it out. But when you look back, the weather's got better every day. You look back and you look at Bitcoin's up 70%, ETH's up 35 or so, Solana's up 140. It's like, oh, wow, OK, yeah, that's spring. So to drive macro or crypto spring to macro crypto summer, which is what we actually care about, what you need is more liquidity and a recovering economy. So my forward-looking indicators in terms of economic growth have all turned higher. So we're in the kind of latter stage of the economic slowdown. Also, forward-looking indicators suggest inflation falls quite dramatically, unemployment rises a bit, giving the Federal Reserve and every central bank around the world a chance to lower rates.

13:41Whether it goes back down to the lows or at a different level, who knows, doesn't really matter. It's the rate of change that's going to matter, and liquidity will come into the cycle as well. That full interview is on our website, as well as the new Crypto Academy, which we developed to help everyone wrap your head around this relationship between macro and crypto, which Raul was just touching on there. If you haven't checked it out, take advantage of our holiday sale, 50 % off. They extended it through today, 50 % off all memberships and upgrades. So jump on that, folks. Tony, wanted to ask you about bonds, but you just said to me in the clip that there's news just crossing that Charlie Munger, the investing giant Warren Buffett's partner, just died at age 99.

14:27We were all commenting lately. And he was on talking to someone not that long ago. Extraordinary that he was working right up until that time. It's crazy. Huge. Tremendous. Yeah. So I wanted to talk to you about bonds. So this is interesting. And, you know, Raul has been sort of against consensus with his thoughts that he was expressing there about the fact that the recession that everybody's kind of now expecting, You know, Rao has this view that a lot of it was priced in or there were pockets of it happening. So his little outside the consensus, I think it's fair to say. But the bond trade, I'm wondering how you're feeling about bonds here.

15:08The bond trade was one of the most painful things again this year for people. There were a couple periods where, you know, people just got the timing wrong. It was just it's been brutal. You know, there's been a lot of volatility in treasuries in a way we haven't seen. We've seen this big drop. We talked about the stock rally just now, but we've seen this big reversal in yields. I mean, a lot of it is based on this idea that we started, the question we started at the top of the show with, is the Fed done hiking? How are you thinking about bond yields here? Well, I'm trying not to think about them because they're telling a great story all by themselves.

15:42You know, Maggie, since we've got that day, since the report on November 14th, we've been getting a clear message from the bond market, which is the Fed is done. It just looks like that's what the bond market is telling us. Twos have finally come down. Tens are under the 100-day moving average as of today. That means those are signals that the trend is changing, undeniably. So when the bond market sends signals that clearly that the trend is changing, I don't think anything. I just sit up in my chair and decide how fast I can drive the bus. And because I feel like that's what the market's giving us the chance to do.

16:22You know, I mean, the S &P 10 % in four weeks got that message loud and clear. That was as rates came off the peak to where they are now. Positioning has changed. Sentiment has changed. The whole thing, you know, the gears are moving for a tactical trade higher. There's going to be an ebb and flow to this trade. But this trade is on like Donkey Kong into the end of the year, if you ask me. So we'll see what happens. But, you know, it looks to me like, you know, Jared Dillian, you know, has kind of circled the sentiment bubble in bonds at the lows. As of now, the lows are still in on the day that we got the two tweets from Bill Ackman and Bill Gross, which is just unbelievable to me.

17:01But after that, we got the reaction to that benign economic CPI number when everything just exploded and the stock market yields collapsed, dollar collapsed. And that was a watershed day that the market is still reverberating through. Yeah. And so if you're looking for markets telling you what's going on and giving you evidence-based moves that you can look at and circle of large magnitude and say, I understand that. I've got that. This is what's going on on the screens right now. Yeah. You just said something really important, I think, because we did see, and it was absolutely, again, you know, as, as you talked about with us through the beginning of the month, we had that, uh, the day on the 14th and you really underlined for everyone just how powerful and important it was and why you were paying such close attention to it.

17:56But I feel like people are sort of, some people are conditioned to think when you get a big move like that, then there is an absolute snap back in the other direction. Because we, to be fair, we did see some of that earlier this year, but it's not always the way, right? You just said there's going to be some reverberations or digestion of this, but it's not that you can't have smaller moves. You're talking about this bigger trend move right now. A little bit, yeah. We've just seen what's interesting, Maggie. We've just seen a couple of the big banks pivot to more bullish, more higher target S &P targets for the end of the year and et cetera, et cetera.

18:35So I think it's the kind of thing where people have to acknowledge that the trauma the market went through while rates went from zero and a quarter to 550 Fed funds is over, right? And we have the tire marks are all over the tape of what the S &P did while the market was adjusting to that treacherous move in yields. And it looks like the market is coming out of it, breaking ranges. There are breakouts to be traded. There's a little bit of follow through. The S &P looks good. The big names look good. And we're in a period where the S &P can and should rally because of those things. The market atmosphere right now, and of course, there's going to be ebb and flow to it, but it's hard to find better places for your money than stocks.

19:24I love the way you said that. Okay, so let's get some questions. And the ebb and flow is important to, I think, underscore. Let's see. Okay, Steve asking, What's your outlook for oil over the next three months? We have an OPEC Plus meeting tomorrow. Yeah, there's been a big pullback, right? I don't really have a strong view on the commodity. I feel like not anymore. I was bullish at the highs and managed to get out on the way down with my life and everything like that as usual, which is like marching orders here at TG Macro. So we live to trade another day. The view here is sort of, I don't know, the market feels like it likes these prices somewhere between 75 and 80.

20:08There's a lot of jostling going on between there. But gas prices have come off and seem to want to stabilize. Diesel prices came off. Everything adjusted. And now you're seeing kind of the crack spreads pick up again, which are kind of good signs for the stocks and for the refiners and positive signals for the market. So I'm not really bullish the oil price. I think the stocks are going to survive this. And, you know, if there's a move either way in oil, like$10 either way, maybe I'll get interested. But right now I have no idea where that's going to be. We're going to take another quick break to hear a word from our partners.

20:40We'll be right back with more of the day's top analysis on the Real Vision Daily Briefing.

20:49J &J, I think asking something very similar, I just want to make sure we didn't miss anything. What did you think of NatGas breaking down? You know, same thing. You know, the scenario is not set for natural gas to take off on a low inventory, scarcity, you know, cold weather driven type of explosion. You know, there was another failed attempt at a breakout. The thing falls back down below three bucks again in a couple of days move. And it's all over. All the longs get washed out and we'll see what happens next. Let's see. And I didn't ask the rest of that, JJ, because I think he just talked about oil and crack spreads and stuff like that.

21:31So in the energy space, AJ asking about rig producers, just similar to the fact that you don't feel strongly in oil? Or do you have something, anything different to say about rig producers, Tony? Rig producer? Like exploration oil producers? I think that's what he means. AJ, you may have to be more specific, but I'm assuming he means, yeah. Let's say, yeah, I mean, I'll talk about E &P stocks, oil services stocks. I'm fairly constructive. One of the reasons that I got even more constructive on that space recently, Maggie, is the way that the stocks withstood the sell-off in oil. There was practically almost a 20 % pullback.

22:12I think it might have been 20 % from peak to trough in oil. And energy stocks backed off like 8.5%, 9%. You know, not that it had to be congruous, but their move was certainly no breakdown technically the way oil broke down technically and the bulls had to throw in the towel. You know, in energy, we're still in this big giant range along the highs where, you know, it feels like the risk is to the upside. You know, after seeing the jaws of flow of this year, the way they panned out and everybody flowed money into technology and everybody flowed money right out of energy. You know, so it's interesting to see, you know, the chances are lined up for that sector to survive, if it's fair to say, you know, having just a slight pullback with oil going from 95 to 75.

22:57So I felt like that was a sign of strength. And I may look to buy those on a dip or something like that. But it's just kind of a continuation of staying bullish in those stocks that are set up for success, quite honestly, given the dynamics of the physical oil markets right now. They're merchants in the trade and the gasoline demand is cooking. So. G Blackburn asking, what drives the next move in industrial metals? You know, XME has been in a range and a very obvious range. If you're following the sector, I kind of threw in the towel. I am so bored with base metals that I can't even I can't even talk about them.

23:37And so I literally I've left them for dead. I won't discuss them at cocktail parties or at dinners, absolutely not on the table, just because we came out of a scenario that was so bullish for copper and specialty metals and base metals and industrial miners. And we were supposed to take, inventories were nowhere, and we're supposed to have bigger drawdowns and huge demand for the pivot to electric vehicles. And they talked about how much copper we were going to need for that. And what did the price do? It fell on its face while inventories built to ridiculous levels, sent the spreads into contango, and there's no copper trade to be had for miles.

24:17Yeah. For miles. So maybe that's the sign where people leave it for dead. I mean, I've certainly left it for dead. When trade leaves the sector for dead, that's usually when it kind of wakes up and creeps up on everybody. So maybe now it'll reverse, but it looks like it just reversed to where we are now, where it's got no upside teeth at all. And it's not like breaking moving averages and having large magnitude extensions and doing things that copper is capable of. It's just bumbling around in the moving averages. Yeah. Yeah. Mr. Copper has not been kind. Mish also, who looks at a lot of metals all the time.