Bear Steepener; China’s Death Spiral; and Your Crack(Spread) is Showing

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In this episode of The Week Ahead, Tony Nash hosts a discussion with Tony Greer, Albert Marko, and Tracy Shuchart, covering various market events and trends.
Tony Greer explains the concept of a bear steepener, which is causing a necessary rotation in the market, with tech stocks and the AI bubble deflating while natural resources and energy hold their ground.
The panel discusses the current market pullback, viewing it as orderly and temporary. They mention the spike in the VIX, indicating increased fear, but not impending doom. Tony Greer expresses bullishness in the oil market, citing tightening gasoline spreads and the strength of the physical oil market.
Tracy Shuchart agrees with Tony Greer’s assessment of the oil market, emphasizing extreme backwardation and market tightness. Tony Greer expects a continuation of the rotation out of tech stocks and a potential further pullback before finding a comfortable bottom for the S&P 500.
Tony Greer discusses his bullish view on the equity market, expecting a pullback in the tech sector due to bubble sentiment. Albert agrees and believes China will act decisively to address the current situation. They mention China’s potential sale of treasuries and discuss various developments in China, including domestic weakness, deflation, and Evergrande’s bankruptcy filing.
The episode also touches on the potential impact of selling Chinese treasuries and the belief that other countries, including the US, would buy them. They discuss China’s potential sale of overseas assets and domestic political dynamics. The conversation briefly mentions the depreciated Japanese yen and its impact on China’s export competitiveness.
The discussion then shifts to crack spreads and refinery capacity, with Tracy explaining their significance and the underlying issues caused by underinvestment. Tony Greer expresses bullishness on energy due to strong gas demand and potential disruptions in refining capacity. Tracy mentions the potential impact of companies requiring employees to return to the office on gasoline demand. Albert adds that a potential slowdown in China could temporarily bring oil prices down.
Key themes:
1. Bear Steepener
2. China death spiral
3. Your crack(spread) is showing
This is the 76th episode of The Week Ahead, where experts talk about the week that just happened and what will most likely happen in the coming week.
Follow The Week Ahead panel on Twitter:
Tony: https://twitter.com/TonyNashNerd
Tony Greer: https://twitter.com/TgMacro
Albert: https://twitter.com/amlivemon
Tracy: https://twitter.com/chigrl

Watch this episode on Youtube: https://youtu.be/j-rtq4xFd6U