Ulrik Simmelholt

Are small-caps back in fashion or was the rotation short-lived? We have looked at various factors of relevance to this question and the conclusion is that you should not jump the bandwagon.

Our short metals trade is starting to work very nicely, but we are also sensing the early stages of a turnaround in the consensus on metals. Meanwhile, the oil trade is currently quiet, while natural gas is bouncing for good reasons! It’s time for our Commodities editorial!

The inventory data is starting to support our bearish view on copper, while the precious metals story depends on whether we are in a bull- or bear-steepening scenario. Loads of copper will arrive on Western exchanges before the end of the month.

Take aways:  This currently looks more like normalization than weakening  More fuel to the story of an income driven cycle The productivity / disinflation story of ‘23 likely a hoax The post Covid labor market has been especially good for low skilled workers Welcome to this short labor market watch on the back of this week’s NFIB and CPI numbers. Currently the labor market has softened considerably from tight conditions in 2022, yet there is still some time before this slowdown potentially leads to a recession. From the NFIB numbers we already got more hints of the deflationary trends suggested by this month’s CPI report as price plans continue their decrease. For more on the CPI release, you can find our breakdown here.  Chart 1: Currently this looks more like normalization than recession  From the dashboard below our main takeaway is the lack of recessionary vibe that pockets of the market are screaming about. The optimism index has been rising over the past quarter and inflation is still looking like a far greater threat to small businesses than interest rates. Also noticeable is the drop in price plans for the next 3 months which has been grinding lower over the last quarter fueling the disinflationary story in the US… Small businesses giving Powell the green light to start rate cuts if yesterday’s CPI report wasn’t enough?  In the job component there’s a notable disparity between job openings and employee compensation, with the gap reaching its third lowest level since 2000. […]

Freight rates continue up, but we are yet to see the broad repercussions. Meanwhile, we are getting mixed data signals from the US economy and shipping companies, hinting that being long energy/commodities is NOT a no brainer.

Crude oil’s strong performance and rising freight rates signal potential inflation pressures, despite current weaknesses in goods inflation and metal prices. The market is though not overly scared of it (yet), but the curve steepening is a first hint of something brewing beneath the surface.

The oil market is one of the few appealing commodity longs currently, as cluster risks in the natural gas and metals space will take center stage into July.

Is there a path to a rate cut from the Fed due to receding inflation pressures in housing and insurance? If goods inflation remains muted, the Fed will likely get a chance to cut. We take a look at the details here.

Bearish sentiment surrounding shipping equities these weeks.. Question is: Do we short?

Taking profits in natural gas!