Breaking Good News, The Whole World is Watching Monday 6:01

Source: Wall Street Intelligence Circle

Everyone is watching the first minute of the global market open on Monday (6:01am GMT+8):

First, although the news is positive, it may not be the market’s main concern—the primary focus right now is whether the global bond market sell-off can be halted on Monday, and whether AI-related stocks are overheating.

The essence of the AI rally is a highly crowded consensus trade. An AI bull market requires low interest rates, but in reality, rising oil prices, risks in the Hormuz Strait, and resurging inflation are pushing long-term rates back up. The 30-year US Treasury yield has already surged past 5%, and the 10-year US Treasury yield is approaching 4.6% (4.5% is the “danger zone” for the stock market)—long-term rates are essentially the “price of capital” for the entire world. If these high levels persist, the market will eventually reprice.

Next week will be a showdown between AI and the bond market. Either AI leads the market in another surge and bond yields fall, or bond yields continue to rise, dragging down the AI narrative. The main players (investors) are racing down the AI and tech stock highway in Ferraris, going full speed ahead, everyone cheering; but in the rearview mirror, a “US Treasury yield” semi-truck is approaching with its high beams on.

Second, in past Monday opens, oil prices were closely watched first, followed by stocks. This time, the order has shifted to US Treasury yields first, oil prices next. If both spike, there’s no point in watching other assets—they will inevitably accelerate their declines. Previously, the most important time was the first hour after Monday’s open, as volatility would calm down afterward. Next Monday, however, the entire day will be important, from Asia to Europe to the US, as global bond markets face a sell-off.

Third, according to our latest survey, investors have shifted to bearish on gold and US stocks (while last week they were strongly bullish), and have turned bullish on crude oil—this is an initial shift in market sentiment.

Currently, part of the market feels like the eve of the 1999 internet bubble, and part like the end of the 2021 liquidity boom. But it’s not exactly the same, because this time, AI is truly real, yet the market has already overdrawn too much of the future.