You can't lift the stone without being ready for the snake that's revealed.

I finally got around to seeing Oppenheimer on the weekend. I really enjoyed, even if it is not one of Nolan’s best. From a markets and geo-politicis perspective, one similarity from that period to now, is that we are in a period where instutions, beliefs and alliances are being broken and new ones formed. This will continue to have implications for financial markets, especially bond markets, as issuers of debt look for new buyers of their paper, and traditional buyers seek to park their cash in more friendly jurisdictions. The bond markets are under stress - how will markets react?

Whilst I am not a buyer of the BRICS taking over the role of global trade or currency any time soon, at the edges things are changing. The trends of more regionalisation and where possible re-shoring will continue. For some time I think the big winner out of this is Mexico for North America and Turkey for Europe for certain industries. Already in the U.S. you have seen a move away from Chinese imports on a relative basis

Meanwhile, the EU continues to be very reliant on Chinese imports as can be seen by the same chart (courtesy of the FT).

Maybe Australia can start making cars again instead of importing record amounts of Chinese cars?

In any case things are changing, and changing quickly.

The oil and product market had a fantastic month in July. Demand in Europe and the US has been strong and supply issues with refineries added to the strength.

What a crazy month. After the madness of June the insanity continued. Bulls & bears would have had a tough month in the grains complex with markets moving 15-20% in either direction on a dime. Better than expected weather and good South American supply have kept a lid on prices. The second half of any year in G&O is all about demand (until you start worrying about SAM weather again) so the big question is will China turn up for US supplies?

The bond market has had a rough couple of weeks. I am no expert in US Treasuries, but the price action over the past few weeks suggests we are a tipping point. Whether that means bonds go up or down I will leave to the experts, but the cleanest trade to me as an outsider is to bet on a steepening of the curve. Either inflation is entrenched because the economy is doing ok, so the back end has to sell off, or we hit a major slowdown and the Fed cuts boosting the price of the front end (reducing the yields on the front end). It seems pretty simple to me that either of those outcomes get the same result in the yield curve.

The biggest dynamic the bond bulls forget is that the fiscal side is so much stronger than before thanks to IRA etc. If the back end does sell off, that is the proverbial snake under the stone… and many pension portfolios will go up in smoke.

I think commodities in general have seen an upsurge as the Northern Hemisphere tries to sure up supply ahead of a winter that is not likely to be as warm as last years. China has been aggressively fillings it’s SPR which puts an overhang on the market should crude prices make much headway over $90-100.

Which makes me start to think we will remain in this oscillation of fear (oil collapse - but it doesn’t happen thanks to government buying) to panic (inflation! - but demand tapers off and SPR is released) for some time longer. Whilst this is the case the world economy likely remains in decent shape with pockets of underperformance.

If commodities see a resurgence into year end, that will really test the central banks patience and that could be catalyst for a recession vs. the soft landing now priced and expected.

The biggest known unknown is the bond market. How that behaves into year end will drive financial markets and housing markets. For the time being I think the real economy slows down but does not enter a protraction recession. Whilst fiscal support remains strong hard to see a persistent recession globally just yet.

Growth stocks remain bouyant but have entered some congestion on the chart, and the recent earnings reports provide some caution for AAPL and MSFT. How did the NASDAQ rally close to ATH with rates above 5%? Ask these two..

Tactically, I would not be surprised to see decent correction in growth stocks after the fantastic run over the past few months - NASDAQ back to 13,700 (15%) would be a good target.

Good luck and watch out for those snakes..