Equities are rallying again today as speculation around peak Fed hawkishness from Wednesday’s FOMC minutes and the potential for China’s zero-Covid policies easing keep sentiment afloat.

But one must wonder whether we are back to ‘bad news is good news” for the equity markets. Despite the disappointing US pending home sales number, Wall Street was hugely bid from the New York get-go.

The run of negative US economic news seems to be taking the sting out of fears the Federal Reserve will be forced to hike aggressively.

Cleaner positioning, a return of “buy the dip” mentality from Retail and a reduction in bond market volatility with USD strength showing signs of peaking has investors tentatively back on the rally wagon, indicative that there was more at play than simply a “cover bid.”

And the icing on the cake was a surprisingly strong showing from US retailers Macy’s and Dollar Tree, which helped calm recessionary fears last week as investors hit the reset button for the setup in consumer names.


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Peak Fed hawkishness and China reopening with a possible reset in consumer names make the short thesis more challenging now.


Momentum is flat-out bullish, with many factors pointing to a tighter market even more so with the EU on the precipice of a total ban on Russian energy.

Ahead of peak US driving season, refined products remain in alarmingly short supply in the West which should keep a high floor on oil prices through the summer, although US gasoline demand on a four-week rolling basis just tumbled to the lowest level for this time of year since 2013, not counting 2020 when consumption was shattered due to the pandemic( worth keeping an eye one)

But the windfall taxes are a massive boon for oil bulls as the duty will likely reduce CAPEX budgets at energy companies, which would lead to less supply in the future—indeed, deterring investment in expanding capacity amid tight markets is a recipe for higher oil.

Russia is still producing oil, but a record amount of output from the Urals is now on the high seas looking for a home. Though those barrels are fetid geopolitically, they may go to India and China, but it is a high-stakes game of Axis and Allies.


Lower equity and rates vol is leaving USD longs struggling for any material upside traction. Since we have not taken out any major ranges, I suspect the USD downside reflects investors are pulling back long USD exposure rather than opening outright dollar shorts in meaningful size. However, increasing efforts from China’s official institutions to loosen economic policy could spur a more long-lasting USD downside.

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