I noticed this chart from BofA.
I’ve been concerned about this week, mainly relating to crypto, which we are sort of seeing start to play out.
I dropped that idea in the meeting with the Fink Cohort members last week, but I clipped a bit for you to watch.
Valentine’s day lecture for @Fink_Money Cohort Members on why I was bearish for this week in crypto specifically…
DM me to jump on the next one. pic.twitter.com/VzYHsepF7I
— 🧠 David (@db_fink) February 18, 2025
I hadn’t actually spoken about credit spreads, but I think I should now (only because I hadn’t seen the chart above).
On the surface credit spreads are looking good.
The chart above is inverted, so the higher they go, the better.
But I feel like there is a bit of a paradox here.
See, credit spreads reflect the difference in cost of corporate debt vs a benchmark US treasury.
So you would think that if rates were coming down, that’s good for credit and the economy.
Well, it is, but context of rates coming down matter.
Right now we’re seeing multiples like the below, which at this level are followed by only a 2% growth in the world index in the following 12 months.
The world index is mainly US — we may as well go as far to call it a more subdued US equities index to be honest with you.
But this price to book level and expected returns are in the context of a few headwinds.
1) A dogshit European economy — UK, Germany, France et al seem to be run by clowns; do not let their stock market performances trick you
2) Trump bombs — volatility is likely to be higher over the coming months
3) Inflation expectations are higher — commodities are higher off tariffs
4) Growth COULD have a bit of a falter — not yet though, but markets price the future in, don’t they?
Now BofA also offer a Triple Momentum Model up.
Price, earnings and news.
Notice semiconductors in the US and tech hardware.
Is there any sort of correlation between, say, TSMC and Nvidia?
Yes.
Heavily correlated.
But if Semis have now a negative momentum, then what does that mean for tech hardware?
Well, I don’t really like that proposition as an eternal bull.
Consider that tech hardware makes up a hell of a lot of the SPX now — the proposition is likely a slowdown in the market.
This makes me feel sick — but I think it’s becoming more and more likely as we proceed into a situation where inflation ticks up more and more, which it has been doing for the last 6+ months…
Here’s the 5 year inflation expectations chart…
Highest since 2023.
I am not shitting myself.
However, I will be taking some profit on our tech longs because we can always run the momentum model again, a big indicator, by the way, is that HSBC is actually leading it at the moment… a financial!
(We’ll be providing this as an essential dashboard very soon. It will make your lives so easy you might want to cry).
Anyway, I don’t like writing these things and rarely do, but I wouldn’t be doing my job if I didn’t.