Historic round-trip in markets, with an explosive move up in implied volatility followed by a move down at a speed and scale quite unlike anything we’ve seen. Not exactly the kind of activity one would expect to see so close to all-time highs in equity markets. It’s the kind of odd market behavior I suspect we look back on in the quarters to come, as having been the start of something very important. A seismic process in motion.

Dusted off an anecdote published in April 2017 about bull and bear markets. The human propensity to buy high and sell low (see below). Back again in September with full wknd notes. All the very best, E

Week-in-Review: Mon: Panic strikes global markets as Asian markets assess the US economic data from Friday / VIX trades up to 65(!) during Asia hours in ultra-thin liquidity / mkt prices 60% chance of an emergency 25bp rate cut by next week, Berkshire Hathaway slashed apple stake by ~50%, US considering banning Chinese software in autonomous vehicles, NVDA new AI chips delayed by 3m+, Fed’s Daly says labor mkt slowing but not falling off a cliff / Goolsbee says jobs number weak but not recessionary, Fed SLOOS shows reduction in tightening credit standards, China Caixin serv PMI 52.1 (51.5e) / comp 51.2 (52.8p), Indonesia 2Q GDP 5.05% (5.00%e), Turkey CPI 61.78% (61.95%e) / Core 60.23% (60%e), EU investor conf -13.9 (-8e), EU PPI -3.2% (-3.3%e), US ISM services 51.4 (51.0e) / employment 51.1 (46.4e), S&P -3.0%; Tue: RBA unch as exp / says they considered a hike and see no cuts in 2024, Harris selects Minnesota Gov Tim Walz as VP running mate, Hamas names Sinwar as political leader, Japan cash earnings 4.5% (2.4%e) – primarily due to bonuses, Germany factory orders -11.8% (-14.2%e), EU ret sales -0.3% (0.1%e), US Trade balance -$73.1b (-$72.5b e), S&P +1.0%; Wed: BOJ’s Uchida says won’t hike if mkts are unstable, US 10y auction tails 3.1bp with weak demand, BOC mins removed language around “gradual” pace of easing, New Zealand Unemp rate 4.6% (4.7%e), China Expts 7.0% (9.5%e) / Impts 7.2% (3.2%e), Japan leading index 108.6 (108.8e), Germany IP -4.1% (-4.2%e), US consumer Credit 8.943b (10b exp), S&P -0.8%; Thu: India CB unch as exp, Mexico CB cuts 25bp as exp, Turkey CB keeps year end infl forecast at 38%, S. Africa mfg prod -5.2% (-0.9%e), Mexico CPI 5.57% (5.53%e) / Core CPI 4.05% (4.02%e), US init claims 233k (240k exp), S&P +2.3%; Fri: TSMC revenue growth forecasts help stabilize mkts further, China CPI 0.5% (0.3%e) / PPI -0.8% (-0.9%e), Brazil IPCA infl 4.5% (4.47%e), Mexico IP -0.7% (-0.2%e), Canada emp chg -2.8k (25k exp) / unemp 6.4% (6.5%e), Russia 2Q GDP 4% (4.2%e), S&P +0.5%.

Manufacturing PMI (high-to-low): India 58.3 (previous month 57.5), Russia 54.9 (previous 54.4), Vietnam 54.7 (previous 50.3), Greece 54/54.9, Taiwan 53.2/50.9, Sweden 53/54, Brazil 52.5/52.1, Spain 52.3/54, South Korea 52/51.6, China 51.8/51.7, Mexico 51.1/51.2, UK 50.9/51.2, Netherlands 50.7/52.5, Indonesia 50.7/52.1, Singapore 50.4/50.6, Japan 50/50.4, Canada 49.3/49.3, South Africa 49.2/50.4, Hungary 49.1/51.3, United States 48.5/48.7, Hong Kong 48.2/49.2, Turkey 47.9/48.4, Norway 47.67/51.74, Italy 45.7/45.6, France 45.4/46.4, Czech Republic 45.3/46.1, Poland 45/45, Switzerland 43.9/46.4, Austria 43.6/46.3, Germany 43.5/45.4. Services PMI: India 60.5/60.2, Spain 56.8/56.9, US 55.3/54.8, Brazil 54.8/55.3, Ireland 54.2/55, Italy 53.7/54.2, Germany 53.1/54.2, Sweden 52.2/50, UK 52.1/52.9, China 51.2/54, Australia 51.2/52.5, France 49.6/49.3, Japan 49.4/53.8, Russia 47.6/49.8.

Weekly Close: S&P 500 -0.05% and VIX -3.02 at +20.37. Nikkei -2.5%, Shanghai -1.5%, Euro Stoxx +0.3%, Bovespa +3.8%, MSCI World -0.0%, and MSCI Emerging +0.2%. USD rose +19.6% vs Ethereum, +6.7% vs Bitcoin, +3.8% vs Russia, +0.8% vs Turkey, +0.4% vs South Africa, +0.3% vs Sterling, +0.2% vs India, and +0.1% vs Yen. USD fell -3.8% vs Brazil, -1.9% vs Chile, -1.8% vs Mexico, -1.7% vs Indonesia, -1.0% vs Canada, -1.0% vs Australia, -0.6% vs Sweden, -0.1% vs Euro, and -0.1% vs China. Gold +0.1%, Silver -2.8%, Oil +4.5%, Copper -2.7%, Iron Ore +0.0%, Corn -2.0%. 10yr Breakevens (EU -4bps at 1.80%, US +6bps at 2.11%, JP -12bps at 1.28%, and UK +2bps at 3.49%). 2yr Notes +17bps at 4.06% and 10yr Notes +15bps at 3.94%.

2024 Year-to-Date Equity Index Close: Venezuela +55% priced in US dollars (+58.5% priced in bolivar), Argentina +47% priced in US dollars (+70.4% in pesos), Denmark +17.7% in dollars  (+19.4% in krone), Turkey +17% in dollars (+32.6% in lira), Malaysia +14% (+9.7%), Hungary +13.7% (+18.8%), Taiwan +13% (+19.7%), S&P 500 +12% in dollars, NASDAQ +11.6% in dollars, India +11.2% (+12.1%), Netherlands +10.8% (+12.3%), MSCI World +8.8% in dollars, Belgium +8.1% (+9.5%), Czech Republic +6.1% (+10%), Ireland +5.8% (+7.2%), UK +5.6% (+5.6%), Greece +5.6% (+7%), Germany +4.4% (+5.8%), Spain +3.9% (+5.3%), South Africa +3.8% (+4.6%), Colombia +3.6% (+9.6%), Norway +3.4% (+10.6%), Switzerland +3.4% (+6.5%), Italy +3.3% (+4.7%), Russell +2.7% (+2.7%), Canada +2.4% (+6.5%), Austria +2.3% (+3.7%), Euro Stoxx 50 +2% (+3.4%), Israel +0.8% (+5.8%), Poland +0.7% (+1.5%), Japan +0.5% (+4.7%), HK +0.4% (+0.3%), Singapore +0.1% (+0.7%), Philippines -0.4% (+3.1%), Australia -1.4% (+2.5%), New Zealand -1.5% (+4%), Sweden -2.1% (+2.6%), Saudi Arabia -2.6% (-2.5%), UAE -2.8% (-2.8%), Indonesia -3.6% (-0.2%), Chile -3.9% (+2%), China -4.7% (-3.8%), Finland -4.8% (-3.6%), France -4.9% (-3.6%), Portugal -6% (-4.8%), Korea -8% (-2.5%), Thailand -11.1% (-8.4%), Brazil -14.2% (-2.7%), Mexico -16.8% (-7.6%).

Anecdote (April 2, 2017): “Humans sell low and buy high,” said Yoda, high in the Rockies. “And in those moments, they believe it’s for good reason. It cannot be otherwise.” Snow fell, rain too. Spring on its way. “Bear markets end when every piece of news is seen as an excuse to sell. And bull markets peak when the opposite is true.” Somewhere in the clouds Nasdaq futures were breaching all-time highs, defying the latest Twitter tempest. “The longer a market trends lower, or higher, the more confident people become that tomorrow will look like today.” He turned his palms upward, heavy flakes landing, melting. “And what they forget is that the single most important consideration in investing is your starting point.” The trail led higher, and Yoda knowing his way, felt the summit nearing. “In bear markets, prices are low, economies are in crisis, policies are in flux, and these things in combination create the starting point for enduring recoveries.” In bull markets, of course, the opposite holds. “It is often easy to lose track of where you are. But eight years into an uninterrupted economic recovery and historic bull market, you must not forget how far we’ve climbed.” In March of 2009, the S&P 500 traded 666, and is now 240% higher. Unemployment was 8.3%, it’s now 4.7%. Overnight interest rates were 0.00%, they’re now 0.75%. 10yr bond yields were 2.88%, they’re now 2.40%. Household net worth was $55trln, it’s now over $93trln. “You must remember that at cycle highs a new narrative always captures investor imaginations. It is never something that was evident at the lows, or during the heart of the climb. It always appears near the highs, as if it had always been there for everyone to see.” And Yoda took a seat. The sleet yielding, clouds lifting, revealing the valley far below.

Good luck out there,

Eric Peters

Chief Investment Officer

One River Asset Management

Disclaimer: All characters and events contained herein are entirely fictional. Even those things that appear based on real people and actual events are products of the author’s imagination. Any similarity is merely coincidental. The numbers are unreliable. The statistics too. Consequently, this message does not contain any investment recommendation, advice, or solicitation of any sort for any product, fund or service. The views expressed are strictly those of the author, even if often times they are not actually views held by the author, or directly contradict those views genuinely held by the author. And the views may certainly differ from those of any firm or person that the author may advise, converse with, or otherwise be associated with. Lastly, any inappropriate language, innuendo or dark humor contained herein is not specifically intended to offend the reader. And besides, nothing could possibly be more offensive than the real-life actions of the inept policy makers, corrupt elected leaders and short, paranoid dictators who infest our little planet. Yet we suffer their indignities every day. Oh yeah, past performance is not indicative of future returns.