Despite a failed last run on  Friday, US stocks recovered about half their losses this past week, climbing every day after investors decided that the recent inflation spike is “just good growth” and nothing to worry about. It was clearly a short squeeze as reflected by the fact that the most shorted stocks had the best run. We are growing more cautious from here, not least because the correlations between the S&P 500, 10-year U.S. Treasury yield, gold and oil remain too high and higher than they have been over the past five years on average which means the next correction will hurt again. The  speed at which inflation expectations are picking up, combined with sky-high equity valuations and the speed of the recovery are further reasons for us to take a more defensive posture, after lifting hedges early this week.

Friday’s numbers...

Last Week’s numbers...