The Tide Is Changing (Part 2)

Please read Part 1: The Tide is Changing

We published part 1 of this WCTW series two weeks ago, and since then, price action has confirmed our theory. We are starting to see tech favorites like Nvidia and Tesla show signs of peaking, while energy stocks and oil have marched on higher.

We are once again reaffirming this view that the tide is changing. Investors must realize that a seismic shift is happening beneath our feet. In part 1 of this series, we pointed to how oil is the variable that will change the calculus of where inflation is headed. Just as the market looks to lower CPI print as a sign that inflation is ending, we look at the incoming underlying oil market tightness as a sign that low inflation will be a false alarm.

But it is not the market's fault for missing this seismic shift. The oil market has always been a specialist's domain and without years of following the OPEC+ policy, you wouldn't even know where to start looking.

For us, the voluntary cut announcement by the Saudis in early June was that seismic shift. And we are so thankful that the market shrugged it off like it was nothing. In all of our years of following the Saudis, when they make a verbal commitment as strong as the one they did in June, you would be a fool to ignore it. Instances that we can immediately point to from the past include:

• Oct 2014 - no production cut

• Dec 2016 - production cut

• May 2017 - targeting crude exports to US

• June 2018 - helping Trump keep oil prices lower in exchange for sanctions on Iran

• March 2020 - Oil price war because of Russia's unwillingness to participate