Summary: Today we pick apart the market drama that unfolded in the wake of a modestly dovish Jackson Hole speech from Fed Chair Powell, with market divergences more compelling to discuss than the speech itself and its boost to the broader market. We also emphasize that the week ahead could prove a pivotal one as the AI theme faces its critical quarterly test in the shape of Nvidia's earnings on Wednesday after the US market close and US Labor Day marks the end of summer. FX reactions, anecdotes, links and more also on today's pod, which is hosted by Saxo Global Head of Macro Strategy John J. Hardy.
Listen to the full episode now or follow the Saxo Market Call on your favorite podcast app.
There is still something called the credit cycle - some great work here on NBFI (non-bank financial institutions) lending and the timeless risks to everything in a down-cycle if credit in the space rolls over.
The only risk for inflation is that it goes up, right? Well, maybe not - at least for the near term according to at least one monetarist. Alternative points of view on this are always worth considering, especially because disinflation would bring forward a policy response as either the nominal economy must outgrow interest rates or central banks need to be doing massive QE to prevent debt loads from rendering our economies insolvent, which will never happen.
There is an awful lot of market cap out there in companies that wouldn’t like for you or anyone else to ponder this question: What if"big data" just…isn't worth very much? From the Techtris substack.
Enphase Energy is a solar energy equipment manufacturer that serves home and commercial solar solutions. They make the inverters, battery storage systems and management software for solar systems, not panels.
Throwing a bit of further skepticism on the information value of Friday’s massive surge in the average stock, especially the average value or small cap stock, let’s have a look at the single very best performer of all 500 S&P 500 stocks: Enphase Energy (ENPH), up just over 10% on Friday. Was this due to Bank of America’s upgrade to Hold from Underweight or a similar move by Jefferies on Thursday? Doubtful - yes the stock opened a bit higher on Friday but it rallied hard right at the time of Fed Chair Powell’s speech. So what is special about Enphase if no other news than the modest upgrades? Perhaps that it is the single most shorted stock of all S&P 500 stocks if measured as a percentage of the overall float that is shorted, in this case 23%. The company has become a consensus short due to the Trump administration’s hostility to any support for anything linked with alternative energy.
No single stock can tell a broad story, but the combination of outstanding performance in a heavily shorted name combined with relatively weak performance in the highest momentum areas of the market lately (AI-related names and Nasdaq 100 index more broadly), could point to crowded trades hitting resistance and facing unwinding risk.
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