Stocks oscillate while silver appreciates and oil vacillates.
Hello. It’s Friday. Thanks for signing up. I’m Brent Donnelly.
The About Page for Friday Speedrun is here.
friday speedrun
An ounce of silver is worth more than a barrel of oil
Here’s what you need to know about markets and macro this week
Global Macro
Despite some eye-watering intraday volatility, an aggressive late-November swoon, some revulsion around OpenAI and Oracle, questions about the US labor market, a Fed no longer seen to be very dovish, higher global rates, hikes priced in for many countries, and extremely weak cryptocurrency vibes… Here we are. An 18-foot putt away from ending the year at the all-time high in stocks. The S&P 500 cash all-time high is 6920.34, and we closed yesterday at 6901.01. Wild.
For now, the Andrew Ross Sorkin bell ringer high remains in place and there has been significant selling each time we get back near it.
In macroland, China’s exports have already exceeded $1T USD in 2025; this is the first year ever that number begins with a T, not a B.
My father was a relentlessly self-improving boulangerie owner from Belgium with low-grade narcolepsy and a penchant for buggery. My mother was a 15-year-old French prostitute named Chloe with webbed feet. My father would womanize; he would drink. He would make outrageous claims like he invented the question mark. Sometimes, he would accuse chestnuts of being lazy.
This, despite a strengthening CNY, higher tariffs, and a slow unwind of the Old World Order. China and the US remain as inextricably linked as ever and while Trump attempts to decouple from China, he’s learning it’s harder than he thought. Despite some promises to the contrary, US consumers remain dependent on Chinese exports, US teens remain dependent on TikTok, and US manufacturers remain dependent on Chinese rare earths.
And the on again/off again/on again NVDA chip export bans are off again.
Jerome Powell’s fourth-last meeting ever came and went and ‘twas the nothingburger before Christmas as we await the coronation of Kevin Hassett as the New Fed Chair. That process continues to drag on, with 100s of interviews and pointless headlines along the way.
Importantly, the market is slowly coalescing around the view that Hassett might not be as unorthodox as once thought. My view is that the administration is slowwwwwwwwwwwwly realizing that Americans care much more about affordability and inflation than they do about mortgage rates or another 250 handles in the S&P. Inflation continues to annoy most Americans, even as Trump attempts the exact same failed gaslighting strategy that doomed Biden.
The politics of inflation do not demand lower interest rates.
It’s that time of year again.
The fourth annual handbook has arrived…
The 2026 Spectra Markets Trader Handbook and Almanac is live
Use The Spectra Markets Trader Handbook and Almanac as a trading journal/day timer, and as your guide to seasonal patterns and key economic events throughout the year. It will anchor your process on proper journaling and planning—and help you thoughtfully assess your performance at the end of each month. Goals and plans written down are much more likely to come true than a flurry of ideas and thoughts and hopes swirling around in your head.
Stocks
Time Magazine has jinxed the AI behemoths:
You can read my complete analysis and see the contrarian history of Time Person of the Year covers here (free):
https://www.spectramarkets.com/amfx/jinx-time-person-of-the-year/
The obvious takeaway if you believe in the Time Cover Jinx is that you should move out of index products into equal weight products. If you own the index, you are massively overweight technology. That has worked well, obviously, and concentration has no predictive value. But it’s fair to worry about concentration risk once the dominant sector gets jinxed.
This week saw further bludgeoning of the AI Capex heavyweights as ORCL and AVGO both plummeted despite okay releases. The market is rotating out of those stocks and into software, banks, industrials, healthcare and energy. Anything close to OpenAI continues to see capital flight. This is the heatmap this week:
Via finviz.com
Here is this week’s 14-word stock market summary:
The 6920 Sorkin Bellringer Top holds for now. Rotation out of exposure to OpenAI.
https://www.spectramarkets.com/subscribe/
Interest Rates
Powell has three meetings left, and barely anything is priced for those meetings. The June 2026 meeting is obscured by so much fog that all we have are two probabilistic cuts priced for 2026. Those could be zero or four. It depends on the data. When we finally emerged from the fog of the April 2025 policy shock, we entered the fog of the US Government Shutdown. So, nobody has a clue what’s going on with the labor market or inflation. Everything changes in 2026 as AI Capex starts to generate jobs, massive tax refunds and tax cuts percolate through, midterms loom, and so on.
The big story in rates these days is that most countries’ curves have flipped from cuts to hikes in 2026. For example, Canada.
And Europe and Australia:
These are meaningful shifts as global rate markets acknowledge that
- The economies of the world are not as bad as once thought. Canada and NZ data, for example, point to a rebound.
- Central banks are not as dovish as before. ECB and RBNZ both sounding much more hawkish of late.
- Commodities are ripping. That’s inflationary.
- Inflation is sticky in many countries (has been for ages).
Global rate moves have stopped the U.S. bond buyers in their tracks as the 4.0% level seems to be where the sellers emerge again in US 10’s. And while the recessionistas continue to squint in an attempt to find bad data (Chicago PMI, LOL) … The US economy is about to complete its third straight year in soft landing mode.
It will be interesting to see what 2026 brings on inflation as the one-time impact of tariffs will dissipate (disinflationary) and deficits continue to balloon (inflationary). The low, low, low price of oil is keeping any inflationary fears in check for now.
Fiat Currencies
The USD is a bit weaker but in familiar ranges. I would like to repost something from am/FX because I think non-am/FX subscribers might find it interesting. The trade idea that pops out is somewhat esoteric (bullish Chinese yuan (CNH, CNY) for 2026)… But the more important takeaway is the release of Perscient. If you do systematic trading in any way, shape, or form, this will probably be of interest to you. Even as a discretionary trader, I find the data I am seeing and extracting from Perscient to be super useful. Here’s the full write up.
—
excerpt
Data Smorgasbord
I mentioned a few weeks ago that I have onboarded the Perscient data system and I have started working with it this week. The system is a new product from Ben Hunt and Rusty Guinn of Epsilon Theory fame. The machine collects millions of news stories, TV broadcasts, social media posts, and other forms of media and measures the density of semantic signatures of various stripes. The dashboard I use is customized for FX and macro. There are tabs for every central bank, currency, and macro theme/narrative of relevance. The page for CNY includes these measures:
The blue bar shows the current reading; the green dots and bars show the individual readings and median zone. There are hundreds of these data sets, but today I will focus exclusively on the data surrounding the yuan.
These readings are interesting to me because the CNY (and CNH) are primarily driven by just two factors: The overall direction of the USD, and the PBoC’s policy preference. You can export the data to create a time series, and here is the net of “Government wants stronger currency” and “Government wants weaker currency”.
Anyone following China could tell you that the general vibe is towards a stronger currency these days, but I was surprised that the density of media reports is at its highest level ever. To see how the government preference evolves over time with the value of the CNH, we need to look at the CFETS basket because USDCNH has so much USD beta. I use CNH and CNY interchangeably here.
This chart shows a red bar any time the series plotted above gets above +25 or below -25, overlayed with the CFETS RMB Basket (using BIS weights for the currency basket). A higher number is stronger CNY vs. the basket. I used the >25 filter to reduce the noise a bit.
If you spend a bit of time staring at that chart, you can see that the government preference mostly comes true. When they stopped preferring a weak currency in 2016, that was the bottom. Their preference for stronger CNY came true in 2017. Weak in 2019. Strong in 2020/2021. Weak in 2024. It’s not perfect, but it’s pretty solid.
To test it, I ran a simple strategy. Go long if they want it strong / go short if they want it weak. Here’s the result:
Pretty good! The CFETS is virtually unchanged vs. where it was in 2015, while the strategy caught the major trends in both directions and generated pretty solid returns for something with a 90-day realized volatility around 7%.
Trading the CFETS is a bit complicated as you need to execute a basket of currencies against CNH. It’s a hassle. The good thing is, if you’re bearish USD (I am) and bullish CNH vs. the basket (I am)… Short USDCNH works. This trade idea will only work for institutional clients, but I really, really like this put fly.
Buy 6.98 USDCNH put
Sell 6.88 USDCNH put (X2)
Buy 6.78 USDCNH put
1X2X1 this is. The cost is around 15bps off 7.0550 spot and if you get to 6.88 it pays 150bps. So that is 9:1 payout and it’s realistic that it could happen, I think. You spend $250,000 and if you pin the 6.88, you make $2.2 million.
The strikes are chosen because 2.5% in two months is a big move. It’s a fairly realistic move, but it’s near the maximum you might expect. Here is the 2-month change in USDCNH over the years. Current spot 7.0550 X 0.975 = 6.88.
Also: The number 8 is considered lucky in Chinese culture because its pronunciation, bā, sounds similar to the word fā (发), which means “to prosper” or “to get rich”. This phonetic similarity links the number 8 to wealth, success, and good fortune, leading people to incorporate it into important events, business practices, and daily life. And this structure has a ton of 8’s in it. So there’s that.
I think this is an excellent structure and I am adding it to the Current Trades. This is effectively doubling down on the short USD trade I put on yesterday. If you have a relationship with Spectra FX, please ping me on Bloomberg and I can price this up for you.
If you are curious about Perscient… Here’s the dashboard I look at. There are tabs for Central Banks, Growth, Geopolitics, Fiscal, Trade, and Currencies. Then you click through and there are a zillion reading for the semantic signatures; they all look like the graphic on page 1.
I was worried it would be overwhelming, but you kind of know what is relevant and what isn’t at any given time, so it’s pretty easy to zoom in on the factors you’re interested in.
My guess is that this enormous trove of data would be pure gold for systematic trading strategies, so if that’s your business, you might be interested too. I realize this is starting to sound like an ad for Perscient, but I am more than happy to vouch for it as Ben Hunt is probably the first person in the world I would trust to build something like this, or to babysit my kids if they were still little.
If you would like to learn more about Perscient, please email me or [email protected].
end of excerpt
Crypto
As we move towards new all-time highs in equities, and explode higher in precious metals, crypto is one of the least-loved risky assets of them all, besides ORCL.
These decouplings have generally not lasted this long. So this is getting a bit concerning for the crypto bulls, I suppose. I don’t see a trade in crypto these days as it’s way too scary to be short and it makes no sense to be long. MSTR is a perfect BTC proxy as it nears 1:1 and the other DATs are kind of boring / waterlogged as well. So I have not been doing anything in crypto of late.
Tom Lee is doing well.
https://x.com/TheShortBear/status/1999234338609635349?s=20
Charlie Munger once said: “Show me the incentives and I will show you the outcome.” To spell it out. The outcome will be clickbait topside targets for ETH.
Commodities
Craziness is silver. Last week I typed: As long as silver is above $56, the bull trend is extremely strong, and you can use your imagination when thinking about possible price targets. A week later it’s $64. That is insane.
An ounce of silver is now worth more than a barrel of oil for the first time ever (with the exception of when oil went negative in April 2020, obv).
Nothing’s gonna stop us now.
That’s it for this week.
Get rich or have fun trying.
Some stuff
*************
Yardeni is highly credible and he has been correct throughout this cycle while most bigger picture prognosticators have been consistently way too bearish on the economy and on stocks. He’s going to equal weight. I like it. And he did this before the Time cover. Details here:
https://x.com/neilksethi/status/1997999606920098261?s=20
*************
*************
I was chatting with Scott Wednesday night and he told me about Ryuichi Sakomoto, so I listened on my drive home from NYC to CT. Sakomoto is quite famous, but I had never heard of him, and as a non-lover of classical music (generally) – I was impressed and moved. Here are a few samples, for your listening pleasure:
Energy Flow
Merry Christmas, Mr. Lawrence
Snooze (contemporary South Korean rap over Sakamoto piano)
*************
Thanks for reading the Friday Speedrun! Sign up for free to receive our global macro wrap-up every week.
