Trading Desk

RB1!

PLTR

VIX

BZ1! CL1! DBA

Back in 2021, inflation was running wild and the Fed still had not hiked. In November, the administration signed another $1.2tn spending package. That was when we first warned of the risk of stagflation that rhymes with the 1970s. The Fed tightened the following year, and inflation came down. Trump campaigned on reducing deficits and tackling the debt problem. As we head into the midterms, it is clear he has failed to deliver. That is putting it mildly. His administration have been doing the opposite of what is needed to salvage either problem.

The 1970s offer a familiar sequence. The 1973–74 oil shock drove energy costs sharply higher, and inflation reached 11% in 1974. The Fed tightened, then eased before inflation was fully contained. Inflation fell to 6% in 1976, only to climb again as the second oil shock arrived in 1979. Inflation rose above 13% in 1980. Volcker then tightened aggressively, taking the fed funds rate to around 19% in 1981. The 10-year Treasury yield rose from around 6% in the early 1970s to above 15% in 1981.

It's all just the same thing over and over. We just can't help ourselves.

The war is stagnant. No matter how many headlines about deals and reopening you see, there has been no real progress. The self-engineered TACOs are exactly what I expected and outlined in recent Tactical Positioning.

Unlike most prices, oil has second-order effects. It feeds into transportation, chemicals, agriculture and food production. Much of the shock has yet to reach consumers. Margin compression is ongoing: Campbell's adjusted gross margin fell 240bp YoY in Q3 and 190bp in Q4; General Mills' fell 90bp in its latest quarter. The next phase is passing those costs on to consumers. Food prices are the thing to watch, given the weight of food in inflation and its exposure to transportation and fertilizer costs.

If I am right—and let's hope I'm not—that the war drags on for years, the moves in oil and yields and the cross-asset repricing we have seen over the past seven months are only the beginning.

I posted this midweek but was quickly banned:

“Should the war drag on, the 150bp rise in 2y yields and 120bp rise in 10y yields since the war began are just the beginning. The inflation shock has yet to fully work its way through the economy. Food prices have yet to reflect the cost pressures that will inevitably feed through from higher transportation and fertilizer costs. Oil inventories continue to be drawn down at an unsustainable pace, with inventories in many regions already at minimum operating levels.

I expect major swings in the years ahead. There's gonna be a lot of money to be made trading through this mess.”

01810.HK

NIFTY The downside path I laid out continues to play out. For India, oil is a cost rather than an earnings cushion. It pressures the import bill, the rupee and inflation while higher global yields make the backdrop harder for equities. August food inflation reached 5.95%. NIFTY remains below the broken ascending trendline and 24.34K, with 22.1K-22K next. A break and hold below 22K opens further downside.

GDXWhen GDX gapped higher in August, I said I did not like the gaps it left behind. If my view of the war's trajectory is right, persistent energy pressure will keep pushing yields higher. Even with geopolitical safe-haven buying, gold will remain under pressure. Gold could break its July low. If that happens, I expect GDX to fill those August gaps.

HG1! Copper held up through another round of hawkish Fed repricing and a firmer dollar. The stronger signal this week came from the physical market: SHFE copper stocks fell 15.9%, while the LME cash premium over three-month copper widened. The improvement in Chinese buying I noted last week is now showing up in inventories, not just the Yangshan premium.

Tariff uncertainty is still pulling metal into U.S. warehouses and tightening availability elsewhere. If Washington backs away, some of that regional tightness can unwind. It will not fix the supply problem. Higher yields and a stronger dollar remain risks, but so far they have not overwhelmed the physical bid.

USDJPYOur tactical short around 155.55 was invalidated when USDJPY broke above that level, with clear follow-through this week. Japan and the US intervened verbally on Friday, reiterating their concern over yen undervaluation.

META

601899

Z1! sits on both sides of the energy shock. Its energy and bank exposure offers a cushion, while the same shock keeps UK inflation risks alive and the BoE on guard.

AMZN

XAGUSD XAUUSD

Gold has pulled back below 4.4K, the resistance I flagged in last week's Tactical Positioning. My tactical long from the FOMC low was stopped out on a trailing stop for a nice profit. As warned, the sharp rise in yields has weighed on precious metals.

Gold's next major leg higher begins when it breaks its inverse relationship with yields and the dollar. We are not there yet. Silver has remained range-bound since early August.

Given the technical setup across precious metals, yields and oil, Trump has every incentive to deliver a series of TACOs ahead of the midterms to tame oil and yields. If he does, that should help gold and silver break above 4.4K and 69, respectively.

Aside from heavily manipulated oil futures prices, inflation prints also matter for precious metals. Next week's PCE release on September 30 is the one to watch.

MSFT

HTI1!

US10Y https://www.meridianresearch.app/highlights/share/57be1c95-ac14-4d42-bd0c-9d1b04870bf8Reading note

XAUUSD has pulled back below 4.4K, the resistance I flagged in last week's Tactical Positioning. My tactical long from the FOMC low was stopped out on a trailing stop for a nice profit. As warned, the sharp rise in yields has weighed on precious metals.

Gold's next major leg higher begins when it breaks its inverse relationship with yields and the dollar. We are not there yet. Silver has remained range-bound since early August.

Given the technical setup across precious metals, yields and oil, Trump has every incentive to deliver a series of TACOs ahead of the midterms to tame oil and yields. If he does, that should help gold and silver break above 4.4K and 69, respectively.

Aside from heavily manipulated oil futures prices, inflation prints also matter for precious metals. Next week's PCE release on September 30 is the one to watch.

TSLA

MAGS

DXYbounced sharply over the past two weeks, supporting our limited-downside view laid out in Tactical Positioning | Week of 08.10.

KOSPIKorea's semiconductor exports hit a record in the first 20 days of September, but KOSPI has still not held above 7.1K. In its final session before Chuseok, KOSPI opened above 7.1K, faded to close at 7,081, and foreign investors were net sellers. The cash market reopens Monday.

XLFAs the yield curve flattens, bank stocks remain under pressure and have continued to fall from the resistance level we identified.

NKD1!