TMTB Weekly

Happy Sunday. Quite a day to end the week last week as SOX had its 3rd worst day ever down 10%+.

We were lucky to be traveling Friday and not in front of our screens, which allowed us to avoid the hyperbole that typically accompanies a decline of such magnitude.

Why the sell off and what comes next?

We’ll tackle the former question first. We think a mix of multiple things. First the macro: fed expects shifting in a more hawkish direction over the past couple weeks exacerbated by the hot NFP print on Friday (market now expecting 27bps worth of hikes this year); yields across the curve moving up; continued concerns around Iran war and oil inventories running out shortly and what that means for oil and headline inflation; USD ripping which creates EPS headwinds for multinationals.

Second, positioning, sentiment & leverage: we were extremely extended with the SOX up 95% since the end of March and RSI at 80 by Wednesday. Everyone has been piling into semis. No need to mention the froth …