Rising equity supply signals market top
The guest argued that a combination of massive upcoming equity supply, high leverage, and market-priced rate hikes points to a sustained and meaningful decline in risk assets.
The argument
The guest pointed to indicators of a major market top, including widespread public speculation and a surge in equity issuance from major tech firms and upcoming employee lockup expirations. This supply wave, coupled with hawkish Fed expectations, is expected to pressure valuations.
The thesis, stress-tested
✓ What validates it
- ✓Heavy selling volume following employee lockup expirations
- ✓Increased frequency of secondary equity offerings by major tech firms
- ✓A sustained downturn in major indices or chip stocks
▸ Risks discussed
- ▸The guest admitted to previously misjudging market resilience after the Iran war
- ▸Momentum and leverage can sustain high valuations longer than expected
Hear it yourself
"Now going into this meeting, I actually would not have expected it to be this hawkish. The reason being that if you listen to what, Kevin has been saying when he was auditioning to be a Fed Chair, he was doing everything he could to try to justify rate cuts. Right? First, it was about AI productivity, and then it was like, you know, the CPI, PCE, that's just not a good measure. A really good measure is trimmed beam PCE, guys, and it's telling you that inflation is coming down. So he was doing everything he can to do that. And then you had all these other people who"
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