Risk-On - A Disinflation Trade [Rivian +50%?]
Non-Farm Payroll numbers showed a decrease in wage growth inflation supporting the disinflationary narrative, bullish for equities. Even-though, the unemployment rate fell to a multi-decade low of 3.49%, signals of slowing wage inflation were all markets cared about. Over the next couple of months more disinflationary data will be coming out. Financial conditions started easing around October as inflation peaked signaling future rate cuts and a path to the fed's 2% target. It's natural for steep increases in short term rates to decrease long term rates and ease financial conditions. Just as wage inflation data came in support of a disinflationary report, I expect headline CPI to fall as we saw rates decline and energy cheapen. It seems like recession in 2023 is now consensus view. Even though, I disagree with this due, to a historically low unemployment rate, healthy personal expenditure and higher gdp. Pricing in a recession puts downward pressure of prices and rates, which are bullish for equities. A (best case) scenario that induces rate cuts is to avoid a recession and maintain a low unemployment rate and decreasing inflation rate. Rivian and Tesla stock prices move very similar to each other. EV stocks such as these are priced and valued based on future production/success. As the share of electrical cars grows in the US, demand for EVs increase. As a result, these companies need too borrow money to fund their future growth. As real rates (TIP) decreases, higher future growth is supported. Looking for 19,21 or 24 on this Rivian trade. The trade will reverse in 1-3 months as markets realize that more tightening will be needed. The easing of financial conditions since October will reapply upward pressure on inflation. But, first the disinflationary narrative must run its course.
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lol the other EV stocks (Lucid, Tesla) popped was harder than this one. Was really hoping for more out of the disinflationary CPI print....
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Got a tight stop at 16.40 not willing to follow this stock down. Im hoping for 1-2 weeks of dollar weakness to help raise this but idk...
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Will re-enter next week... Dollar down, Yields Down, Gold up.... still have a feeling that we should be expecting a pop in Rivian. I just dont have the cajones to hold over the weekend....
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Should of gotten into Affirm instead for the RIsk-on trade....
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The point is. The Risk-on trade definitely occurred look at BTC, TESLA, meme stocks..... I just happened to picked one of the worst risk-on stocks: RIVN. RIVN just didn't see the strength of LUCID or TESLA b/c of their fundamental story. Lets see how far the risk-on sentiment goes..
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Risk-On rally is overbought expect a correction when fed meets. Risk-off correction at the least