Quick summary:
New survey (on our new app) is up & running - click here.
This is the final week of the Q3 competition! Good luck to all those in the running.
Last week saw a sharp post-FOMC sell-off, amidst a very hawkish Fed. Our positioning was short from both the BASON and the macro, and we had a 5% weekly return, our best week year-to-date.
We discuss all of this in our podcast, check it out.
This week is the final week of Q3, and will produce a number of economic data. On Thursday, paid subscribers will get a detailed analysis of what we expect from Q4.
The survey is live on our new app, jump right in:
We are entering into the final week of our Q3 survey competition. The race is still tight, for both the top spot (less than a point separating the first four), and among the rest of the top ten. This can all change in one week. Looking forward to an exciting race ahead! Great job everyone and best of luck!
NOTE: For all those new to the whole thing, here is a video of Scott and myself guiding you through the survey, showing you all its features, and briefly explaining how the competition works.
Podcast episode #5: Hawkish FOMC and the Myth of the Soft Landing
Last week’s performance
What was supposed to have started two weeks ago after CPI, started last week after FOMC. A strong sell-off, with SPX losing 140 points (-3.15%), and NDX losing 550 points (-3.5%). The Fed came out much more hawkish than expected in their economic projections, signalling another potential rate hike this year, but more importantly, much less cuts than expected next year (50bps instead of 100bps).
Now, the Fed dot-plot is not usually the best forecasting tool (recall what the projections were in Dec 2021), but investors nevertheless quickly price in all changes in expectations. A month ago, cuts were expected to start in May, even March. Currently, the expectation is end of July for the first cut, and November for the second. This means the Fed does NOT expect a recession any time soon. Higher for longer is here to stay.
However, Powell explicitly rejected the soft landing narrative that has been fueling the 2023 rally. No soft landing means a recession is coming. When? No one has a clue. Naturally, a market reaction to all these signals is a sharp sell-off.
On Saturday we showed you how our hedge positioning benefited from the moves last week: a 300% gain on both put spread positions.
The BASON did great as well. It provided the bulk of those weekly 5%. In a week where we got 6/6 in the right direction. Precision wasn’t all that great; a bit of underestimation of the sell-off, but this is normal and expected in FOMC weeks. That’s why it’s important to get direction right during such weeks, as the payoff is quite big.
A busy week: Q3 ends, so some portfolio re-balancing from institutional investors is at play. In addition to that we get Powell speaking again on Thursday, PCE inflation and consumer sentiment on Friday, Q2 GDP estimates on Thursday, and new data on housing, jobless claims, etc. Should provide for an exciting end of the quarter!
…join the $20,000 competition!
Join our survey competition to get an opportunity to participate in our quarterly ($5000) and annual (3% of our profits) prize distributions:
DISCLAIMER: Neither the survey nor any of the contents of this website can act as investment advice of any kind. The results of the survey need not correspond to actual market preferences or trends, so they should be interpreted with caution. Oraclum Capital, LLC (Henceforth ORCA) is a management company responsible for running the ORCA BASON Fund, LP, and for organizing a survey competition each week, where it invites the subscribers to its newsletter (this website) to participate in an ongoing prediction competition. The information presented on this website and through the survey competition should under no circumstances be used to solicit any investment advice, nor is it allowed to be of commercial use to any of its readers. The survey and this website contain no information that a user may use as financial or investment advice. All rights reserved. Oraclum Capital LLC.
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ORCA podcast ep #5: best week year-to-date