A Smooth Reversal

Fed's aggressive tightening and challenging our assumptions... Silver Banana goes to... [image]( Market Snapshot The 10-year yield is once again flirting with 3%. The futures yesterday pointed higher initially but turned negative about an hour and a half before the opening bell. The recent market selloff appears to have the Fed’s hawkishness priced in, and we will learn more about that this week. The yield curve has continued to steepen of late. Gold has given up strength, and the major crypto benchmarks have circled the drain just like the Nasdaq. The markets had another interesting day. After moving negative in the morning, all three major indices closed in positive territory. The Nasdaq was yesterday’s winner, up 1.63%. The S&P and the Dow were relatively flat, ending up 0.57% and 0.26%, respectively. Property owners can quickly and efficiently generate extra rental income on Neighbor, a free online storage and parking marketplace. Some properties earn an extra $10k/month. Neighbor even brings you renters. [Check it out here](=) Let’s get into it. Banana Bits - The big, bad 10-year topped 3% for the first time since 2018, potentially scaring [homebuyers and refinancers]() - Israel is demanding an apology from Russia after Lavrov’s [Hitler faux pas](=) - Retail traders are now ganging up on [$HOOD](, lol - Americans have so much stuff we need help storing it; you can help your [neighbor]() and make a buck in the process - Trade Alert: [WSO Alpha’s](=) chief investor has loaded up on another 200 shares of $KCE Macro Monkey Says Macro Fatigue — In today’s tight labor market, not only is finding the right candidate for the job a tough nut to crack, but locking them down is expensive. According to the Employment Cost Index, wages and benefits have grown more in the last year than any other one-year period in 38 years. To put this more succinctly, hiring good people is getting even more expensive. At the same time, the cost of goods and services is through the roof; but inflation is taking money out of the workforce’s pocket at a pace faster than wage growth. This is leading to the poor consumer sentiment numbers we have been seeing in recent months. Regular people aren’t happy with how far their dollar is going, and low- and middle-income families are feeling the financial squeeze in many facets of their day-to-day lives. The inflation fatigue that consumers are demonstrating is an indicator that rough times could be on the horizon. There comes a point in economic cycles when inflation gets so bad that producers slow production to moderate costs while consumers forego consumption when their perceived opportunity cost influences them to do something else. When this happens, the economy contracts and economic growth goes in the wrong direction. Enter Daddy JPow. I don’t know about you, but I’m on the edge of my seat for Wednesday’s FOMC meeting and subsequent guidance from the Fed. The market has gotten extremely hawkish in the last month. According to Refinitiv, there’s a 100% chance of at least four 50 bps rate hikes by the Fed through September. That’s, uh, aggressive tightening. Treasury yields in the last month have seen their most aggressive steepening since 2009. This is kind of a big deal, as it shows that the broader market is coming to grips with the idea of higher inflation and rising interest rates. If I were a betting man, I’d put my money on a 50 bps rate hike this week and then a kind of a “wait and see” period from the Fed. But we don’t gamble, and this isn’t financial or any other kind of advice. If inflation actually is somewhat curbed following this second rate hike of the year, we will watch the Fed continue to slowly unwind its balance sheet and raise rates for the rest of the year. If we don’t see inflation retreat, I’d expect Daddy JPow and the rest of the Fed to ratchet up the hawkishness in the coming weeks. Looking at this as a potential outcome, I’d argue that this isn’t priced into the markets just yet. Increase Profits with Neighbor Storage [image]( Neighbor is a free online storage and parking marketplace where commercial property owners can generate additional rental income. Some properties earn an extra $10k/month per location. They even bring you renters. Neighbor provides $1mn in liability protection, and they will help find your ideal renters. Have an empty parking lot? Let Neighbor help you introduce an Uber fleet to your town. [Click here to learn more](=) What's Ripe Moderna ($MRNA) — As vaccine and booster approvals continue to roll out to cover more age groups across the world, investors have a suspicion that Moderna might be a touch undervalued, especially going into its earnings announcement later this week. Shares of the biotech giant climbed higher by 5.71% on Monday. You can expect to hear about $MRNA’s quarter tomorrow. SPDR S&P Capital Markets ETF ($KCE) — Well, it turns out there aren’t a lot of places to hide as interest rates go up and the market shifts to risk-off. Our chief investor at WSO Alpha thinks that the SPDR Capital Markets ETF is one of the few places. While not exactly an outsized bid, WSO Alpha increased its stake in $KCE by more than 50% on Monday. Shares of the ETF were up by 1.62% during yesterday’s session. What's Rotten Global Payments ($GPN) — Even after slightly beating expectations for earnings, coming in more or less in line with consensus expectations for revenues, and bolstering guidance for the remainder of 2022, the Street absolutely crushed shares of $GPN on Monday. While Global Payments had been in positive territory YTD by a hair in excess of 1%, shares slid 9.21% on Monday. Better luck next time, fintech. Vertex Pharmaceuticals ($VRTX) — Shares of the biotech traded lower yesterday after the company received some bad news. The FDA, in a bit of a shocking decision, paused a diabetes study of interest to the drugmaker. Results so far in the type 1 diabetes medication clinical trial had seemed promising. The Street interpreted this decision as Vertex getting kneecapped out of the blue. On the news, $VRTX retreated 4.12%. Thought Banana Planning for the Future — The characteristics of a short-term stonk gambler’s trading plan are not unlike those in a long-term investment strategy. When you look at a trader versus an investor, there’s one core tenet these cats follow: discipline. Successful traders and investors typically have a plan. They keep some objectives and goals in mind, and then they stick to them. The big difference between these two groups is the timeline. Amongst those who put their money in the Wall Street casino, arguably the most successful are those who also outline what their assumptions are that drive their objectives and different components of their trading or investing plan. Once an assumption is challenged or even becomes invalid, a great trader or investor recognizes that it’s time to go back to the drawing board. As we continue through a period of elevated volatility and strong macroeconomic headwinds, now might be a good time to challenge your own assumptions. It looks like we are moving away from growth and towards more of a risk-off broader market posture. That’s only natural, and some would argue that it was predictable. But a bear market and a potential r-word might cause you to really question your trading or investing plan. I know our team at WSO Alpha is considering a pivot away from generating outsized returns toward capital preservation. We can’t tell you what to do; we literally don’t even give you advice. But hopefully, this Thought Banana really makes you think about your approach regardless of whether or not it’s time to make a change. Wise Investor Says “Sometimes by losing a battle, you find a new way to win the war.” — Donald Trump Happy Investing, Patrick & The Daily Peel Team Was this email forwarded to you? Sign up for the WSO Daily Peel [here](). [ADVERTISE]( // [WSO ALPHA](=) // [COURSES]( // [LEGAL](=) Don't want The Daily Peel? [Unsubscribe here](). Click to [Unsubscribe]( from ALL WSO content IB Oasis Corp. (aka "Wall Street Oasis") 20705 Saint Charles St Saratoga, California 95070 United States (617) 337-3353