US equities were weaker Friday, S&P down 0.9% but 2.5% stronger over the week as investors position and set the table for a week that should underscore the stark growth and inflation trade-off facing the FOMC.

While rising jobless claims, softer home sales, and a buildup in gasoline inventory show the Fed front-loading rate hikes are causing a slowdown and bringing inflation under control, the issue is at what cost. US GDP will be released later this week, and investors could be forced to look down their noses at declining back-to-back quarters or a so-called “technical recession.

On the broader picture, investors will need to decide if the bottom is in or if this is just another head fake?

While the overall macro backdrop didn’t change much, there were some positive developments. Nord Stream 1 pipeline back online. Ukraine Grain Export deal. Macau reopened, and an easing of China tech regulatory scrutiny.

The China Covid situation and the Ukraine/ Russia continue to weigh on investors’ sentiment and carry plenty of headline risk, but that can go both ways.


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There was a decent amount of focus on positioning and the peak negative sentiment, which explains at least some of last week’s broader index gains.

Earnings season has been mixed, but boring is beautiful.

Inflation is easing, and the pace of momentum is slowing; there is the risk that specific price hikes will be sticky. It comes down to demand and supply. So as long as the consumer is willing to pay for it, certain things won’t reverse.

Finally, the good news is that the FED prefers to avoid hawkish surprises on meeting days and seems very unlikely to provide another warning that a more significant move is coming through the press during the blackout period in light of the criticism it faced in June.


Crude futures tanked into week’s end on a list of bearish signposts.

Oil bears were focused on the rebound in Libyan production and hopes of a restart for the Keystone pipeline as early as this week. A jump in Chinese covid infections and evidence of softer US gasoline demand provided the sour eye candy on the demand destruction side of the equation.

I do not think any of these factors rise to the materiality level that would explain the collapse on Friday. So the persistent tight market with limited spare capacity could put a floor under the falling price. Still, with the market backdrop generally cautious as US GDP may signal a technical recession, traders seem to need little justification to take oil position risk off the table.

Originally published by Stephen Innes, Managing Partner, SPI ASSET MANAGEMENT