Growth isn’t dead, but there has been rotation happening, particularly into cyclicals. Bank stocks have gotten a nice bump from the decline in interest rates, but the macro backdrop still looks very weak. If I’m right about the credit event, junk bonds have even more downside now than they did just a month ago. Lumber and gold prices remain fairly balanced here.

The overall retail sector outlook is still questionable, but it’s possible the consumer is able to hang on for longer. If inflation continues making further progress towards deflation and we start to see cracks in the labor market, then I think the flight to safety trade will be on. The recovery in lumber prices and a big reason why the lumber/gold signal has flipped back to risk-on has been changes in interest rates.

Last week marked the return of a trend we’ve seen all throughout 2023 - the domination of mega-cap growth and tech. Despite volatility, long-dated Treasuries are still posting gains here and shouldn’t be viewed as out of favor. Small-caps and emerging markets have the greatest potential in a turnaround, based on valuations if nothing else, but this is starting to look like outright capitulation.