Take a long EUR/USD (short US Dollar) position to capitalize on a more hawkish European Central Bank stance and incoming US Treasury liquidity measures starting around September 9th.

Look for opportunities to enter a short Crude Oil (OIL) position immediately following geopolitical price spikes, as energy markets historically overshoot during initial conflict headlines before cooling off.

Watch the September 9th expanded Treasury buyback operations closely to guide positioning in US Long-Term Treasuries (TLT) as long-term yields face upward pressure.

Prepare for choppy, range-bound performance in broader US Equities (SPY) heading into the midterm elections before looking for clearer upside momentum post-election.

Maintain exposure to AI infrastructure and semiconductors, which remain resilient and continue to drive upside surprises across cyclical manufacturing and construction sectors.

Crude Oil & Refined Products (OIL)

• Geopolitical tension around the Strait of Hormuz (including recent strikes on Larca Island) continues to impact crack spreads and energy prices.
• Energy prices and crack spreads historically peak right around major escalation announcements and fade as markets digest the news.
• Refinery disruptions remain split: Russian refinery offline capacity is around 50% (impacting diesel), while Middle Eastern issues impact jet fuel.
• Potential diplomatic agreements or restored shipping flow through the Strait of Hormuz could release refining bottlenecks, potentially unlocking 4 to 5 consecutive months of headline disinflation.

Takeaways

• Consider a short oil stance following geopolitical escalation spikes rather than chasing rallies, as market pricing frequently overshoots on initial conflict news.

Euro / US Dollar (EUR/USD)

• The European Central Bank (ECB) is expected to adopt a more hawkish policy stance than the Federal Reserve in September due to higher energy and natural gas inflation in the Eurozone.
• Market positioning has been heavily crowded into long US Dollar trades.
• Anticipated US Treasury liquidity measures starting around September 9th, specifically expanded long-term bond buybacks, are expected to exert downward pressure on the dollar.

Takeaways

• Favor a long EUR/USD (short US Dollar) position, supported by transatlantic monetary policy divergence and incoming Treasury buyback liquidity.

US Long-Term Treasuries (TLT)

• The Federal Reserve under Kevin Warsh has reaffirmed its focus on the PCE index over CPI, keeping the potential for a 25 basis point rate hike in play.
• If the Fed refrains from acting against inflation signals, the market faces the risk of yield curve steepening where long-term bond yields rise.
• To counter long-end yield pressures, the US Treasury is scheduled to launch expanded bond buyback operations on September 9th, potentially doubling or significantly multiplying buyback volumes.

Takeaways

• Watch the September 9th Treasury buyback announcement as a pivotal signal for bond yields and fixed-income positioning.

US Equities & AI Infrastructure (SPY)

• Large-scale artificial intelligence and data center construction continues to move forward without major disruption from current interest rate levels.
• Strong semiconductor demand and data center development are spilling over into the broader manufacturing and construction sectors, supporting employment.
• The ISM Manufacturing index is projected to beat consensus expectations (55.2 expected), with forecasting models pointing toward a print near 58.
• Broader equity markets are expected to remain wobbly and lack clear direction in the period leading into the midterms, with a more favorable risk environment likely to emerge post-midterms.

Takeaways

• Prepare for choppy, range-bound equity price action ahead of the midterm elections before looking for clearer upside momentum.
• Monitor cyclical manufacturing and infrastructure data for upside surprises driven by ongoing AI data center build-outs.