Corporate earnings and the 10-year Treasury yield will meet at dawn near Wall Street, with the AI trade standing in as earnings' second.
Corporate earnings and rising bond yields will settle their differences with a dawn duel near Wall Street on Tuesday. Debbie Downturn explains why a strong earnings season is the scariest thing she has ever seen.
"...fourteen paces, then they both turn, and whoever is left standing sets the price of every cloud-computing stock," said a strategist organising Tuesday's duel between corporate earnings and the 10-year Treasury yield.
The showdown, flagged this week by MarketWatch, will take place at dawn on Broad Street. Earnings arrive undefeated. Yields arrive armed. The AI trade has agreed to act as earnings' second, which I find deeply alarming.
Let me be clear about what a strong earnings season really is. It is a crowded long, meaning everyone has made the same bet at once. Profits are up, margins are fat and guidance keeps rising. That is exactly how the deck chairs looked before anyone rearranged them.
(The tulips, I would note, also had a terrific quarter.)
Bulls insist the AI trade is immune to borrowing costs. The strategist in the original report says that isn't quite right, and so does the duel's seating chart. Every front-row ticket was bought on margin, which is borrowed money at rising rates. The audience has already lost.
Insiders say earnings plan to fire into the air. This is the most bearish signal I have seen since a yield curve inverted in my presence. Nobody aims at the sky unless they expect to need the bullet later.
