Higher For Longer: Stocks, Oil ... AND Yields?

• Rotation Reminder

• Higher For Longer

• Nvidia Makes The Weather & Convexity Determines Its Severity

• Volatility Season

Rotation Reminder

Pls scroll to the section - The Backdraft Risks Coming For AI Trades - where I discuss the market digesting at SPX 7425.

I have also focused on the hardware into software rotation theme past few weeks which I reviewed in detail again this morning live.

Two weeks ago I focused on specifically the cyber names (CRWD, PANW, FTNT, ZS ...) within IGV that had the most momentum. They have worked better than expected:

Fast forward, HACK ETF names have continued to lead so now should rest. I highlighted a few more today that were ripe for chase/swing longs: NOW, FICO, TRI and why.

Let’s just say the momentum trade is extended but oversold software is not.

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Higher For Longer

Obviously, yields are the MAIN story - as the US30Y has just taken out the prior INTERVENTION highs of Oct 2023 and May 2025 - and Japan’s 30-year reached an all-time high. The dollar and oil have stayed bid, helping to push global yields higher on rising inflation & inflation expectations - just as the new Fed Chair, Kevin Warsh, starts his new term Friday when he is sworn in. Typical!

In particular, Japan has a Fed problem.

As the JGB 10Y tags 2.8%. the US10Y yield hits 4.6% - both driving higher odds of the FOMC hiking this year with BOJ.
Even Treasury Secretary Bessent wants BOJ to hike. Assuming the Fed will want to get in front of the curve, they will start talking tough. The irony: BOJ will be forced to hike same time as US most likely (Q3 earliest).

Many might be off-sides when Fed Chair Warsh takes the podium June 17th and warns of “an adjustment period” of ‘accommodative’ rate cuts before his preferred balance sheet reduction and rate cuts post mid-terms.

A lot depends on the continued escalation with Iran, as wars are inflationary, but even if all was resolved tomorrow, the supply chain disruptions have pulled forward higher pricing and expectations of future supply destruction that can trigger stagflationary fears - driving the market’s dreaded future tightening in liquidity which the market hasn’t priced in yet.

On top of that, this can trigger another yen carry trade unwind (recall July 2024 BOJ rate hike hit to NDX).
The damage occurs if USD falls (with stocks), but that is not base case right now.
It does, however, bear watching for July/August.

Right now, dollar is firm and bond bulls need to be defended right as the “Higher For Longer” bull case for inflation and yields takes hold.

Nvidia Makes The Weather & Convexity Determines Its Severity