Market On Open, Thursday 18 December
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Timing. It’s All About Timing.
by Alex King, CEO, Cestrian Capital Research, Inc
US CPI reported just now, coming in at the lowest level since 2021’s rate-hike-fever-dream commenced. Risk asset markets are happy right now, but it’s important we all understand why they are happy. Are they happy because the young people can afford more groceries now? So that the next generation have spare cash to invest in long-term productive assets? Maybe that they can take a little time out of their day to learn how to become more productive with AI, for the benefit of all?
Lol no. Markets are happy because the Fed is more likely to reduce rates further, and that means that everyone from your local Master of the Universe to your neighbor’s deluded meme-coin-trading basement-dweller can get their hands on (1) more leverage at (2) lower cost and then use that to go buy more risk assets. Yay!
Now this will resolve one of two ways (and, stop press, increased prudence on the part of investors isn’t one of them). Either the economy is going to maintain solid rates of GDP growth but at a structurally lower rate of inflation - that would be a wonderful thing for most constituents, except for The Internet Doomsayers, or the economy is slowing and that’s why prices are rising less quickly than expected. That would be bad for most constituents apart from, er, the bond market. Also Doomsayers.
It’s too soon to tell which, so in the meantime we can probably expect high-beta risk assets to keep on chugging the moonshine they discovered in the back of the drinks cabinet earlier this morning. If the economy is slowing in a material way, anyone high on Uncle Brian’s World Famous Poteen (alcohol %: no-one knows, and it melted the last equipment anyone used to try to test it) is going to get the mother of all methyl headaches next year. But if we do have an everything-good-here-move-along set of numbers in 2026, at sub 3% CPI, well, then this bull is going to run long.
For now we can just check in on the charts and use price and volume to tell us the story.
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Alex King
US 10-Year Yield
That Wave 1 down is continuing.
Equity Volatility
Back down below the 17 level. Bullish for equities.
Disclosure: No position in any Vix-based securities.
Now let’s talk about the S&P500, the Nasdaq, the Dow, bonds, gold, oil, crypto, and key sectors.