5/5/25 Charts & Ideas: What Markets Are Telling Us

05/09/2025 | Unsubscribe

Good Morning!

Here are some important charts and ideas capturing the latest trends in US markets to help you understand what is happening from multiple different perspectives:

🔍 Corporate Leaders Are Flashing Recession Warnings

• 🛫 Airlines Sound Alarm: Southwest says aviation is in a recession — early consumer weakness.

• 🌯 Chipotle Sees Anxiety: Visits dropping due to economic fears.

• 🥤 Even Staples Hit: PepsiCo warns of sentiment softening — a rare red flag in “safe” sectors.

🧭 Apollo's Recession Timeline

• 📦 April Tariffs Bite: Freight slows → container activity stalls.

• 🚚 May–June: Trucking declines, layoffs begin, inventories fall.

• 📉 Summer 2025: Apollo expects a recession triggered by trade shocks + demand collapse.

💼 What This Could Mean for You

• ⚠️ Recession Odds Rising: Leaders across sectors now confirm real demand erosion.

• 🧱 Go Defensive: Favor staples with pricing power, utilities, and short-term bonds (assuming yields decline).

• 📉 Prepare for Earnings Cuts: Q2–Q3 cyclical sectors are most at risk.

• 💼 Barbell Strategy: Combine safe assets with select high-quality growth for a Fed pivot (inflation catalyst).

🔁 Alternative Views to Consider

• 🟢 Soft Landing Still Possible: Rapid inflation cooling or supply normalization could ease pressure.

• 🛑 Tariff Walkback?: Post-90 day tariff pause could delay or reverse the downturn.

• 🧪 Watch Guidance: May–June earnings + shipping data will validate or challenge this narrative.

🔍 Positioning Divergence: Retail vs. Systematic Funds

• 📉 Systematic Funds Underexposed: Equity exposure at multi-year lows — these funds buy weakness, not strength.

• 📈 Retail Is All-In: Net retail buying at 12-month highs — historically poor timing.

• 🧠 Risk Transfer Setup: Pros on the sidelines, retail near peak exposure — classic setup before volatility.

💼 What This Could Mean for You

• 🚨 Watch for Volatility: If markets dip, retail could fuel the selloff — systematic funds may buy the dip later.

• 💡 Stay Flexible: Hold cash or rebalance — avoid panic buying from better-informed sellers.

• 📊 Beware Momentum: Popular retail trades may unwind fast — avoid crowd favorites for now (depending on your time horizon).

🔁 Alternative Views to Weigh

• 🟢 Retail Confidence Could Pay Off: Strong earnings + change in trade policy may validate current bets.

• 🟠 Pros May Pile In Fast: Systematic funds can re-risk quickly if volatility drops.

• 🔄 Retail ≠ Dumb Money: Some flows may be passive or hedged, not purely speculative.

🔍 U.S. Dollar Still Rules Global Finance

• 💵 USD = King:
  ~60% of FX reserves, ~65% of global debt, ~90% of FX turnover, dominant in SWIFT trade payments.

• 💶 Others Lag:
  Euro, yen, and renminbi are far behind, while RMB remains minor despite China’s efforts.

• 🔒 Built-In Dominance:
  Dollar strength comes from global infrastructure — contracts, clearing, and trust, not just sentiment.

💼 What This Could Mean for You

• ✅ Dollar Strength Endures:
  Expect USD to stay the safe haven in global turmoil.

• 🌐 Crisis = USD Demand:
  Treasuries, blue-chip U.S. assets, and USD cash thrive during shocks.

• 💡 EM Currency Risk:
  Dollar-debt countries face pain if the USD strengthens.

• 📉 Ignore De-dollarization Hype (for now):
  Real shifts are years/decades away, not imminent.

🔁 Alternative Perspectives to Consider

• 🟣 Gradual Reserve Diversification:
  Gold, yuan, and euro are gaining modest ground in non-Western blocs.

• 🧱 Fragmented Future:
  BRICS and others may build parallel financial rails.

• 📦 Commodity Deals Bypass USD (A Little):
  Some oil/metal trades now use other currencies, still limited in scale.

🔍 U.S. Market Cap Now >50% of Global Total

• 📈 Historic Peak: U.S. makes up over half of the global equity market cap (early 2025).

• 📉 Signs of a Top: The Share has started to decline after decades of tech-driven outperformance.

• 🧠 Fidelity’s Take: A return to ~40% (long-term average) may be a smart benchmark for global investors.

💼 What This Could Mean for You

• ⚠️ High U.S. Exposure = Risk:
  Portfolios concentrated in U.S. megacaps may underperform if global rotation begins.

• 🌍 Diversify Internationally:
  Reduce U.S. weight, increase exposure to Japan, India, LatAm, and EMs.

• 💸 Tailwinds for Foreign Equities:
  Weaker USD + cheaper valuations could fuel non-U.S. equity gains.

🔁 Alternative Perspectives to Consider

• 🟢 U.S. Still Best-in-Class:
  Profitability, governance, and capital depth remain unmatched.

• 🛡️ U.S. = Global Safe Haven:
  In turmoil, flows still favor U.S. assets.

• 🟠 Reversion Could Be Slow:
  Structural growth stories abroad still lag — U.S. dominance may persist.

🔍 FX Hedging at Lows: Foreign Buyers Fully Exposed

• 📉 FX Hedge Ratios ≈ 20%: Near decade lows for foreign investors in U.S. equities.

• 💱 Most Are Unhedged: Fully exposed to USD moves.

• 🔻 2025 Example: S&P -6% = -14% loss for euro/yen investors due to dollar drop.

• 🧨 Double Hit Risk: Falling equities + weak USD compound foreign losses.

💼 What This Could Mean for You

• 🌍 Non-U.S. Investors:
  Consider partial FX hedging to reduce volatility and downside risk.

• 🇺🇸 U.S. Investors:
  Watch for foreign outflows and megacap volatility as losses mount abroad.

• ⚖️ Diversify Smartly:
  Adjust allocations based on your base currency — local assets or hedged ETFs may help.

🔁 Alternative Perspectives to Consider

• 🟢 Quick Snapback Possible:
  Dollar strength or equity recovery could benefit unhedged holders.

• 🛡️ Hedging Has Costs:
  FX hedging can reduce returns in calm markets.

• 🧭 Capitulation = Opportunity:
  Forced foreign selling may open dip-buying chances for others.

That’s it for today!

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Best Regards,

Ultimate Alerts Team

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