Yo Pit Crazies,
One thing about President Trump, he keeps it interesting.
This week he picked up the offensive in the Strait of Hormuz AND told reporters the Iran war will end right after the November election. That told the market he plans to stay the course.
Volatility Central!
Oil closed above $100 a barrel Thursday, the highest close since May.
1 Year USO Chart
Inflation stays hot.
Then Trump said that if republicans hold the House and Senate, every adult citizen gets a $5,000 "Trump dividend." Nobody has said where the money comes from, and the tab runs north of $1 trillion.
That’ll push the national debt way up.
Oh, and long bonds just hit their lowest prices since 2004.
Look at the iShares 20+ Year Treasury Bond ETF (TLT):
TLT 5 year chart
It traded down to $81 on Thursday, a price it hasn't seen since May 2004, and holders sit roughly 55% below the 2020 peak before coupon payments.
People holding real bonds get paid face value by Uncle Sam at redemption.
TLT holders just get an ugly-fest.
I don't own much TLT. I started buying it last year around $88 since I figured old age keeps coming and I could start the Wheel Trade (selling puts to get in, then selling calls against the shares to collect income).
That looked ok in April 2026.
Not so good now.
The 4% coupon cushions the blow some, but it still looks like ugly-sauce next to the SPDR S&P 500 ETF Trust (SPY). I got rid of anything that looked like a bond in early 2022.
Not the exact top, but close enough.
For now, I have no interest in picking anything up. If TLT gets back to my entry point, I'll think about it.
Warsh Gets Stuck With the Check
Congress deserves the blame because nobody in that building watches our money. So the job falls to Fed Chairman Warsh and bond investors.
The latter set bond prices, and nobody can do much about that. Even Treasury's tripled buyback on Thursday, $6 billion of long-dated bonds, barely dented the long end.
I expected the PPI (Producer Price Index, what businesses pay before those costs reach you) to come in line, and it roughly did. The headline matched the 0.4% forecast. The annual number ran 5.4%, a touch above expectations, and energy did most of the lifting.
That number moved stocks a bit Thursday. You can learn to trade the daily moves here.
Considering nothing moves in the right direction now a days, I expected stocks to drop a lot more, and all we got was 0.58% in the SPY. Traders now price a 70% chance the Fed hikes next week, up from 62% before the PPI.
CPI drops Friday morning. If that runs hot, Fed Chair Warsh has to raise.
That sets up a famous dust up with President Trump.
The FOMC (the Fed's rate-setting meeting) and its aftermath have produced two to three percent market moves in short periods. Usually a feint shows up first (a head fake one way before the real move).
We got multiple news bombs this week and none of them landed well.
The temperature rose just when I thought it would cool off.
What went one way yesterday goes another way today.
For those who want to trade these big macro moves, I have a solution for you: I'll present it tomorrow after the State of the Market at 10:30 AM ET.
Hope this was helpful,
Andrew Giovinazzi