The Market: Cross-Asset Market Update
Israel-Iran, SPOOZ, Trump 47, and The WOTE Quant.
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Discussion
On Tuesday I made the following four observations about cross-asset market price action:
Gold is acting as if a major Israel-Iran escalation is coming
The US Treasury curve and the Discretionary vs. Staples macro pair are acting as if economic animal spirits have been unleashed
The IG CDX market is acting as if SPY could pullback to circa its $565 50dma
The Chinese fixed income market is acting as if the next leg of the Chinese equity bull market has begun
The China observation was updated in a post earlier today, so here I want to stick to the first three.
Israel-Iran
Yesterday on X I wondered out loud whether the delay in Israel’s response to Iran was due to the fact Israel is heavily engaged in Lebanon and perhaps it just doesn’t make logistical sense to go after Iran in a manner that opens the door to large-scale retaliation and in turn a “months long” war. The more I noodle this possibility the more convinced I am of its validity, especially considering the equity market behavior discussed in the following section.
Gold’s persistent uptrend continues to point to a major escalation in the medium-term, but in the very near-term the equity market pretty decisively says Israel will not respond before Election Day as David Woo suggested in multiple interviews this week (see here and here).