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
The only chart that has me question future rates cuts anytime soon is the overall commodity chart...the fed needs commodities to puke but commodities have really just stabilized from the June 2022 high and haven't really done much after the initial fall. Between mid-July and now they are pretty much in a sideways pattern but they are making lower highs and lower lows on the weekly. So CPI will most likely come down but it won't come down in a meaningful manner. The fed rate increases do take time to work through the economy so I completely agree with you that a recession in 2023 doesn't seem likely based upon your points and "time" playing out. I also don't think the long bond trade will really do much either as I think rates will stagnate in a tight range. 2023 will most likely be some sort of sideways type market so follow price action. Anyways, I like your idea. Pot stocks also have some good weekly bullish closing candles.
arama-nuggetrouble
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@Vixtine, I agree CPI will not come down to a level consistent with 2% inflation with the tightening so far. Markets are eating up any good news on disinflation so, with more disinflationary data coming out markets will rally until they realize the fed may need to hike and hold longer... Commodities should see a path back higher especially with a weaker dollar. The easing of financial conditions like commodity prices and lower rates since late last year sets up the US economy in 2023 to avoid a recession with consumers having more money. Also, unemployment is at 3.5%. Dont think the economy is slowing down as much as the fed would like. There most certainly are lags with monetary policy but it seems markets more generally follow the fed's future guidance. Like how the fed was able to hurt the housing market relatively quickly.
crystalcastles
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Lol you were right about the risk on rally but picked the worst risk stock 😂😂😂😭😭😭L
arama-nuggetrouble
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youre 100% :')
jwow5555
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Hi Nuggetrouble, I saw index is at major resistance and overbought these 2 days. Do you think the rally is going to continue? If yes, where would the bonds yield be going, still going to the 5%?
jwow5555
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So we long TSLA Rivian and equities in Q1?
arama-nuggetrouble
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@jwow5555, risk-on move for the next 2 weeks at least. If rivian is going up, spy, qqq, BTC, etc. should follow.