Francis Hunt
Trading Education, Hunt Volatility Funnel & Capital Preservation
Crude oil should trade lower because the UAE has left OPEC and can now pump as much as it wants without quotas. As a US-aligned producer, the UAE adds supply that helps the US push oil down to cool inflation before the midterms and ease pressure on incoming Fed Chair Kevin Warsh to hike. @CryptoNobler argues more UAE oil means falling prices, cooler inflation and faster rate cuts. x.comÂ
Renewed inflation raises the risk of a December rate hike and downside for the Nasdaq 100. Per Wall St Engine, core PCE reached 3.1% year over year, up from 3.0%, and rose 0.3% month over month, up from 0.2% previously. CPI, PPI and PCE are all rising again; a December hike is the bet. x.comÂ
Crude oil's spike is a textbook transitory supply shock that turns deflationary once it runs its course. Historically such shocks drive inflation for just 2-3 CPI prints before the effects are absorbed and demand softens, much like the 2007 oil surge before the 2008 crisis and 2009 deflation, and the market has not fully priced this in. The labor market is clearly deteriorating, so a deflationary shift comes next and defensive positioning beats chasing highs. x.comÂ
Crude oil should rise if the Federal Reserve raises rates next week, because a hike would send the stock market crashing. PPI came in line with expectations, leaving that game plan unchanged, and markets now price a 62% chance that Kevin Warsh's Fed hikes. x.comÂ
Another interest-rate hike this year should bring crude oil prices down. The call responds to Fed official John Williams saying one more hike is appropriate this year. x.comÂ
Economic projections for falling inflation and rising unemployment leave December as the only window for another Fed hike, exposing long-dated Treasuries to more selling as yields rebound. Treasury buying has cooled yields ahead of the midterms, but yields should rise again with stocks and crypto through year-end. The subsequent liquidity shift should bring bearish volatility at first; then TLT should break above 81-82 as the Fed turns to cuts of at least 50 basis points by March 2027. x.comÂ
Crude oil stays elevated as long as there is no deal with Iran, feeding a vicious cycle in which higher oil keeps inflation sticky and pushes rates higher, breaking the bond market. To bring yields down, Trump must either convince the market oil flows are normal or end the war. x.comÂ
US stocks face a tougher stretch ahead, warranting patience. A hawkish Warsh caused a bear flattening of the yield curve, and the 30-year yield recently hit its highest since 2007. A Fed hike on September 16 looks likely because the October meeting falls just before the midterms. September has the worst seasonality, midterm years are worse than normal, and bipartisan pushback on data-center expansion pressures AI infrastructure. A Venezuelan oil deal may lower oil prices near term. x.com x.com … Show more
Extreme bullishness about an oil shortage is a warning because oil has tended to return to around $50 within 12-18 months after such talk. Calls for a 'great oil repricing' appeared today, though they may not be widespread enough yet to mark the same setup. x.com x.comÂ
Oil now matters more for markets because the Fed is considering oil in its reaction function, no longer looking through supply shocks. Once the Fed reacts to oil, yields react to oil. x.comÂ
Crude oil should keep moving lower even after the midterms, because 2027 economic projections point to lower inflation. Around $100, oil was a good short since policymakers wouldn't let it break out ahead of the midterms and risk voter confidence. Some volatility is likely at first. x.comÂ