Broadening equity trade resumes as oil falls
The bull case for a broadening equity market trade has been reignited by falling energy prices and stabilizing Fed rate expectations, according to Mike Wilson.
The argument
Wilson argued that the spike in oil prices and subsequent hawkish Fed pricing earlier in the year temporarily halted the broadening trade. With WTI crude resetting lower, real rates should decline, supporting small caps and equal-weighted indices over the summer.
The thesis, stress-tested
✓ What validates it
- ✓Continued outperformance of the Russell 2000 relative to the S&P 500
- ✓WTI crude remaining anchored in the $60s or low $70s
▸ Risks discussed
- ▸A resurgence in oil prices or geopolitical shocks could halt the trade again
- ▸Higher volatility in the bond market during the Fed's adjustment period
Hear it yourself
"Cruise decline, massive reset crew from triple digits down to the sixties on wti's Does that open the door within the equity market and let's talk about the stock market exclusively. Does that open the door to the broadening trade again."
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