Attack the Week (ATW)
Sunday Thoughts
Whenever I am awaiting an important data event like last Friday’s payroll numbers, I put on my headphones and listen to soothing music, which helps me focus intently on the event. Looking intently at my Bloomberg screen, I usually scan the most important numbers before then glancing over quickly to assess the first reaction of various asset markets. I never trade in the first hour following a data print but rather scan for what markets are making and projecting initially. We then usually get a pullback of the initial reaction, which offers an opportunity to load on trades I like. Friday was my best trading day this year by quite a mile. While it is tempting to lock in profits quickly, history has taught me that it’s typically too early to do so.
While I watched markets unfold their full recessionary fear playbook, I listened to the following great tune, which I discovered on the soundtrack of the excellent television series The Bear. Have a listen.
The excellent series centers around Carmen "Carmy" Berzatto, a young and talented chef who inherits his family's Italian beef sandwich shop in Chicago after his brother's unexpected death. Having honed his skills in prestigious fine-dining establishments, Carmy returns home, determined to revitalize the failing restaurant and honor his brother's legacy.
One of the standout features of "The Bear" is its remarkable cinematography. The visual storytelling is masterfully executed, capturing the frenetic energy of a busy kitchen with a raw and unfiltered lens. I was glued to the screen watching it. It was mesmerizing.
Complementing the visual feast is the series' astounding soundtrack. "The Bear" features a meticulously curated selection of music that enhances the emotional resonance of each scene, from the adrenaline-pumping tracks that underscore the chaotic kitchen sequences to the more mellow, reflective tunes that accompany moments of introspection.
The soundtrack reminds me somewhat of the current regime shift, which has transformed a serene environment into something way more treacherous in a matter of a few weeks. Whether it’s a real “bear” will only be obvious in hindsight. This is a great macro environment but one equally poised to test your nerves and your positions. My advice is to be nimble and keep your positions small. Also, as emotions inevitably increase, I read my piece on emotional risk management during those times. You will need to keep a calm head.
A quick chart from the engine room puts the current US treasury 2-10s curve steepening in context (green line). The orange (1-month rolling change) and the pink line (1-year rolling change) would suggest we still have about 20-30 bps of steepening to accomplish, although absolute levels still look way too flat compared to history.
Let’s now look at the calendar ahead and acquaint ourselves with the most pressing charts we should consider. All to play for. I am also updating the bond models, which I have now adapted to different global bond markets. The equity model is also being updated, which shows interesting results. Let’s take stock.
Let’s go!