Escape from Hormuz

My friend Jon Krinsky put out a piece today magnifying just how much of an outlier this price action has truly been. On his chart, below, we can see that 2026 would be the only year in at least thirty years that had zero 80% downside volume days.

Of course, the year is far from over, as we head into tomorrow morning's CPI inflation print. 

But his point is that this market has been defying gravity in many respects due to "dispersion," or constant rotation attempts. Thus, even as leadership groups like the semiconductors topped out back on June 22nd, the S&P, Dow, and small caps are all close to their recent highs due to the dispersion trade.

The critical issue now is whether this dispersion will suffice as an alternative to a major downside day (or worse). The bull case for many hinges on just that, which likely requires endless liquidity. 

But with oil and rates sticky of late, and the Yen wobbly after the latest intervention, coupled with brutal seasonality until mid/late-October, a viable case can still be made that all of the attempts to escape both the Strait of Hormuz and a bear market recession will do more harm than good over time. 

As they say, you might be able to change the route, but you cannot change the destination of markets.