10/17 Daily Market Note: Left Tail Risks begin to pile up, but Investor Positioning in Q4 has a buyer’s bias.
10/17 Premium Strategy Note
Note to new readers: Don’t forget to join our list below for up to 4X Daily Market Notes per week! Thoughtful and generous previews provided in every single one. In future editions, I will also incorporate elements & concepts of wealth building into my Daily Market Notes. Stay tuned.
Hey Folks,
There is increased consternation among market participants as investor focus grapples with added variables in the Middle Eastern conflict, re-emerging 10Y Yields due to hot retail sales, as well as the recent ban on Nvidia Chips to China. Let’s talk about these items one by one and how investors may be weighing these areas.
On the Middle East: Left Tail Variable and Risks now Added
Earlier in 2022 when Ukraine and Russia entered what would stretch out be a longer term military conflict, markets initially shook it off (in the same way the market did in early October when the Israel/Hamas event began). Over a period of 2-3 months, it became more and more clear that there would be no quick decisive victor and the commodities markets started to price this in. First we saw Oil rise and then we saw other key components in the input manufacturing process of food such as fertilizer soar to very expensive levels, creating a cyclical bull market in both CF Industries and Mosaic in 2022. As a result, we saw quite meaningful food inflation get entrenched throughout the world and we still cope with these high prices today. If the Biden Administration is unable to help the Middle East resolve their conflict with diplomacy, the length of the Left Tail risks will be extended as Murphy’s Law comes into play (anything that can go wrong will go wrong). Most important mission by Biden will be to ensure that more countries don’t get involved, and if that can be accomplished, markets will swiftly recover and yields will fall, which we’ll talk about next.