MacroVoices #310 Alex Gurevich: The Trades of March 2020

Episode Summary

Executive Summary: Macro Voices Episode 310 centers on rising inflation, tightening central banks, and volatile cross-asset moves. Hosts debate whether the current inflation shock is peaking or secular, while guest Alex Gurevich argues the bond bull market is not over and that flattening curves point to an easing cycle in 2023. The post-game chartbook reinforces a still-fragile equity setup and broadly strong commodity trends.

Main Topics: Inflation and the debate over transitory vs. secular (Priority: 5/5): Eric argues inflation may be secular and still early, while Alex sees current inflation as largely supply-driven and temporary, not a spiral. Both focus on whether February is a peak and what would confirm a lasting regime shift. Bond market selloff and yield-curve interpretation (Priority: 5/5): The 10-year yield breaks toward/through 2%, prompting discussion about whether the bond bull market is ending. Alex says curve flattening usually precedes an easing cycle and assigns high odds to Fed easing in 2023. US dollar behavior amid synchronized global tightening (Priority: 4/5): The dollar is described as consolidating after a post-Fed roller coaster, with strength versus some currencies but not all. Alex says the dollar is confusing because tightening is globally synchronized, not uniquely U.S.-driven. Equity market weakness and technical fragility (Priority: 5/5): Eric and Patrick frame equities as stuck between key moving averages, with weak breadth and the possibility of another leg down. Patrick’s chart work suggests the rally has been a retracement, not a confirmed new bull leg. Crude oil, commodities, and inflation pressures (Priority: 5/5): Oil, copper, grains, cocoa, and coffee are all highlighted as strong or breaking out, supporting the view that commodities remain in a powerful trend. Eric warns oil could still correct sharply if geopolitical risk eases. Alex Gurevich’s March 2020 trading book and crisis management (Priority: 4/5): A major segment focuses on Gurevich’s new book and his blow-by-blow experience trading through the pandemic collapse, emphasizing stress, liquidity risk, leverage, and disciplined crisis management.

Key Arguments: Eric Townsend argues inflation may be secular and not yet near a true peak; if February is not the high, markets could reprice sharply when that consensus breaks. Alex Gurevich argues inflation is mainly a temporary supply bottleneck and that there is no evidence of a runaway wage-price spiral or fiat-currency collapse. Alex says the bond market’s curve flattening is a strong historical signal that an easing cycle is likely in 2023, making current bond weakness potentially an opportunity. Eric and Patrick argue equities remain technically vulnerable because the SPX rally is only a retracement and market breadth is not confirming a durable bottom. Patrick contends commodity strength across crude, copper, grains, cocoa, and coffee suggests inflationary pressures are still broad-based, not fading quickly. Alex argues risk parity and bond exposure regain value once yields rise enough to restore symmetry and capital-appreciation potential. Alex views the Fed’s hawkish turn as internally inconsistent with its prior stance, especially because tightening cannot directly solve supply constraints. The March 2020 episode reinforced that liquidity and leverage management matter more than being right on macro views; preservation of capital was the key challenge.

Data Points: Episode number: 310 - Macro Voices episode identifier Recording date: February 10, 2022 - Episode recording date S&P 500 level: Around 4,500 - Market level referenced during the opening discussion after CPI U.S. CPI headline inflation: 7.48% - Eric cites the latest record inflation print 10-year Treasury yield: Near 2.0% / 200 bps - Discussed as a newsworthy breakout level WTI crude draw: 4.8 million barrels - EIA weekly inventory report Cushing inventory draw: 2.8 million barrels - Part of the EIA crude inventory data Gasoline build: 1.6 million barrels - EIA weekly inventory report Distillate draw: 929,000 barrels - EIA weekly inventory report U.S. crude production: 11.6 million barrels/day - EIA data, up 100,000 barrels/day Oil move: WTI touched about 91.60 before falling back to about 89.60 - Patrick describes the intraday reversal in crude Gold resistance: 1830, 1860, 1880 - Eric cites these as key technical levels Fed easing probability (Alex’s view): 70% - Alex says he assigns a 70% probability of easing in 2023 Stock market downside cushion (Alex’s view): 10% to 15% - Alex estimates downside before the Fed put may reassert WTI 2008 record high: $147 per barrel - Referenced as the nominal peak in 2008 Inflation-adjusted 2008 WTI record: At least $220 in today's dollars - Eric’s inflation-adjusted comparison Gold rally target levels: Above 1830, then 1860, then 1880 - Technical breakout discussion Risk parity / bond upside example: 30-year bonds could rally 60%+ from 2% to 0% and about 100% to -1% - Alex explains convexity and bond upside Market breadth threshold: Below 50% of NYSE stocks above 50-day moving average - Patrick says breadth remains weak VIX level: Around 38 at oversold peak, back near 20 later - Used to illustrate the market rebound off oversold conditions

Pivotal Quotes: "I’m kind of leaning toward the downside being the more likely case because I don’t think the Fed can back out of their tightening plan yet." — Eric Townsend: Opening market commentary on the S&P 500 after the CPI release "I would assign a probability of 70% that we will be easing in 2023." — Alex Gurevich: Alex’s view on the bond market and the likely policy path "I’m probably as bearish as can one be on a stock market. Pretty much as bearish as ever." — Alex Gurevich: Alex explains his cautious stance on equities, while clarifying that for him bearish means mostly staying out

Implications: Listeners should expect continued volatility, with bonds potentially offering asymmetric opportunity, equities vulnerable to another leg down, and commodities still acting as a major inflation signal. A regime shift in inflation expectations could sharply reprice markets.