Inside Markets — Pain Trade

The pain trade remains skewed to the upside with the SPX just ~2.4% below its all-time high.  This week’s key macro report is Wednesday’s CPI print, but we also flag tomorrow’s Small Business Optimism survey where the Hiring Plans sub-index has been a leading indicator (1-3 months) for non-farm payrolls. While inflation is a key risk given its impact on the bond market, equities will likely keep their bid until the labor market breaks. In our opinion, monthly non-farm payroll gains below ~100,000 and/or weekly jobless claims above +270,000 would constitute a break in labor markets. Given the backup in bond yields on Friday, one should also keep an eye on this week’s planned bond auctions with a 3-year auction tomorrow and a 10-year on Wednesday.

NVDA CEO Jensen Huang will give two keynote speeches this week (June 9 and June 11), which will likely add support for AI themes. The outcome of today’s US/China trade meeting in London could be a positive for the broader market, while an inline CPI print would keep bond yields in check as the SPX looks to test the all-time high. Equity positioning suggests a new high would likely come from a combination of winners extending gains (positioning light here) and a short squeeze from the higher beta areas of the market (short positioning high).