May 2024 Market Strategy
As investors are in the process of capitulating on the landing trade, the overall sentiment and positioning picture remains fuzzy. Eventually this rotation will result into a clearer picture.
Disclaimer: The information contained in this article is not and should not be construed as investment advice. This is my investing journey and I simply share what I do and why I do that for educational and entertainment purposes.
As a recap, in my April 2024 Market Strategy article, I concluded that we are currently witnessing a profound sentiment and positioning shift as investors are burying the landing trade in favor of a no landing trade. They finally started selling bonds and other defensive duration assets in droves and replaced them by cyclical assets. The catalyst for this shift was found in three very poor inflation reports from January to March.
I further outlined that this rotation comes with very poor timing because deficits are already in the process of declining. This increases the odds that the current inflation echo will likely be short lived. Just when the bond bet started to make sense, investors capitulated on it. More details here:
How as this picture evolved since then? Let’s look at investor sentiment and positioning, CPI data, monetary policy and fiscal flows as of May 2024.