Is The Oil Still Flowing? w/ Andreas Steno | Macro Mondays

Key Concepts

• Macro Regime Shift: A transition from an inflationary environment to a disinflationary one, driven by falling energy prices.
• Strait of Hormuz Flow: A critical maritime chokepoint for global oil supply; currently experiencing partial, though volatile, reopening.
• War Premium: The portion of commodity prices (specifically oil) attributed to geopolitical instability; currently estimated at ~25%.
• Liquidity Channel: The flow of capital into markets, expected to remain benign through early August.
• Nowcasting: Using real-time data (via NowcastIQ) to predict economic trends before official reports are released.
• Self-Feeding Feedback Loops: A concept applied to MicroStrategy’s leveraged Bitcoin model, where market conditions can either amplify growth or force asset liquidation.

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1. Global Energy and Geopolitical Landscape

• Strait of Hormuz: Despite recent Iranian rhetoric regarding negotiations, oil flow has resumed to near pre-war levels as of late last week. While Sunday saw a dip in cargo volume, the Strait remains partially open.
• Commodity Prices: Energy prices have shifted from a straight-line upward trajectory to a rapid decline. Jet fuel prices in Singapore have halved since their April peak.
• Fertilizer Market: Contrary to early-war alarmism regarding famine and shortages, products like urea in the US Gulf are now trading below pre-war levels.
• Investment Strategy: Andreas Steno advises against shorting oil, noting that the "bear case" is already well-telegraphed and the market is crowded with record-high short positions.

2. Macroeconomic Outlook and Inflation

• Disinflationary Trend: Data from NowcastIQ indicates that inflation is decelerating across the entire basket, not just in energy. Core goods and housing-related metrics are showing benign developments.
• Central Bank Disconnect: Central banks (ECB and Federal Reserve) remain hawkish, with inflation forecasts that appear disconnected from current market realities. Steno argues that the "under" on central bank inflation projections is a high-probability bet.
• Liquidity: A positive liquidity environment is expected to persist until the first week of August, as tax tariffs are returned to corporations. This is viewed as supportive for equity multiples and the front end of the yield curve.

3. Sector-Specific Analysis

• AI and Semiconductors: The AI trade remains robust. South Korean export data shows a 60–65% year-over-year acceleration, and DRAM spot prices are rising. Micron is expected to show significant bottom-line improvement (projected ~1,000% vs. last year).
• UK Political/Economic Shift: Following the resignation of Keir Starmer, there is potential for a "post-Brexit premium" correction. Steno suggests that sterling assets and gilts may become attractive if the incoming Prime Minister acknowledges current fiscal realities.
• Biotech/Psychedelics: Cybin Therapeutics (formerly MindMed) saw a ~55% surge following positive Phase 3 results for their LSD-based depression treatment. This remains a core holding in the Real Vision Pro portfolio.

4. MicroStrategy and Bitcoin

• Leverage Risks: While MicroStrategy’s use of AI-designed financial instruments to purchase Bitcoin is innovative, it creates a potential "self-feeding negative feedback loop."
• Refinancing Reality: Steno clarifies that there is no immediate danger to the Bitcoin market from MicroStrategy, as their next major debt obligation is not until 2028. He dismisses current bearish arguments based on liquidity concerns as "misguided" for the near term.

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Synthesis and Conclusion

The primary takeaway is that the global macro regime has decisively shifted toward disinflation. While central banks have yet to adjust their rhetoric, the data suggests a cooling of price pressures. Investors are encouraged to shift their focus from the direct impact of energy prices to the "second-order effects" of this shift, specifically looking toward cyclical industrials and the continued growth in the AI/semiconductor space. The current market environment favors a rotation into under-owned assets, such as those in the UK, while maintaining a cautious but optimistic view on high-growth sectors like biotech and technology.