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Omega Nebula 11053 1920
Demand destruction
For many investors, there will be a turning point when the market pivots from worrying about price inflation, to growth deflation.

In reality such pivots are a process rather than a single trading day, but yesterday’s China lockdown news felt like it had some of those characteristics.
Yesterday’s price action in government bonds, commodities, energy & material stocks would appear to support that potential pivot.

Perhaps the best illustration is Copper which is often perceived to be a barometer for the global economic cycle.

The chart below shows a sharp fall in copper that, in Qi’s z-score metrics, has now taken it back to trend growth. On this picture, the 2022 commodity super-cycle was unwound in very short order.
Dr Copper
For bears, this is the start of the next phase & the onset of recession. For those thinking this is overdone, RETINA™ is flagging a series of bullish Relative Value signals on US Energy.

XLE is cheap versus Financials XLF, Industrials XLI, Health Care XLV, Consumer Discretionary XLY & the broader market SPY.

All show XLE around one sigma cheap, & all are posting pronounced divergence patterns. Energy’s recent underperformance is in sharp contrast to macro model value which points to further outperformance.
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