18 years in Wall Street, left after finding out it was all horseshit. Founder/ Master and Commander: iBankCoin, finance news and commentary from the future.
Joined Nov 10, 2007
23,329 Blog Posts

Why is Wall Street Pricing in a Renewed Spike in Inflation?

Once again, the US 10yr is soaring, +13bps to 4.17%, sending the small cap Russell swooning lower by 1.8%. The chasm between the large caps and small is wide and pervasive — 130bps for the session. Digging deeper into the tape you’ll find high beta stocks or stocks that were previously fashionable crashing lower by 3.6%.

It is because of this deep decline in high beta that I am directionally bullish now. I had traded out of $TZA for a profit earlier — but have since opted a long only portfolio, at least for now. I might switch it up the closer we get to the close.

I did, however, move rapidly out of risk this morning in favor of slower, larger capped names. My losses, at the present, stand at around -50bps for the session and fully admit to be in conflict with the market.

On one hand the earnings and general sense of the economy is status quo. This condition was fine all of last year for higher stocks. But on the other hand, the rapidly rising rate environment has me a little concerned about a renewed spike in the CPI. Is that what is being priced in now? I cannot think of any other reason short of just massive selling of US bonds by foreign shareholders.

For trades, both $DWAC and $RUM are attractive to me, especially with Trump +5 in national polls over Biden. I had $DWAC earlier and sold it — but still own Rumble.

Bottom line: Perhaps the market is diving back into bear market mode — but I am not going to risk going short here with high beta stocks already off by 3.6% for the session. However, into the waning hours of trade — I might hedge and attempt to freeze my portfolio until better clarity is achieved.

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