GM. This is Milk Road, the newsletter that once a week turns in a macro update that knows that nothing will create situational awareness like a margin call on your wedding day.
Here’s what we’ve got for you today:
- ✍️ I repeat: proceed with caution.
- ✍️ Out of breadth.
- 🎙️ The Milk Road Show: The Biggest Crypto Market Nobody Is Paying Attention To.
- 🍪 Hey, I know that guy!
Europe's biggest blockchain conference, European Blockchain Convention, is back in Barcelona on September 16-17. Milk Road readers get 15% off tickets with code “MILKRO_15”.
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I REPEAT: PROCEED WITH CAUTION
The headline allocation posture of the Milk Road Macro Index is at -0.16, CAUTION, 75% exposure.
Our indicator has been holding at CAUTION a lot lately despite the strongest cross-pillar growth alignment in weeks.
Why!?
Settle down, I just got started. You gotta read the rest of the letter.
July ISM Manufacturing printed 55.6%, best since May 2022, and answered last week's central question in the clearest possible way.
GDPNow's Q3 estimate extended from 5.0% to 6.2% rather than retracing, the real economy score moved from -0.08 to +0.07, and the stress score dropped to its floor at +0.00 with the macro buffer at full strength at +0.50.
This all paints a really strong picture from the economy side of things, but what about the market?
The market side tells the same story: growth impulses moved up +0.27 on the week.
Oil held below $80, copper rose, freight costs fell, and the yield curve steepened. All of this happened while financial conditions at +0.31 absorbed the Fed's divided hold and the July jobs miss without flinching.
I know I just covered a lot of stuff really fast, but the gist of it is, the market is holding up really well.
The two pillars, the economy and the market, now seem to agree on growth. The divergence that has kept the Milk Road Macro Index in CAUTION is resolved.
SO, WHY IS IT STILL IN CAUTION!? (I put this in all caps to express frustration. I am a very creative literary master. No AI could have come up with that idea.)
EUROPE’S BIGGEST BLOCKCHAIN CONFERENCE IS BACK
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The European Blockchain Convention returns to Barcelona on September 16-17.
This is Europe's first major institutional gathering since MiCA came fully into force.
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- 5,000+ attendees from 90+ countries
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Milk Road readers get 15% off with code MILKRO_15.
OUT OF BREADTH
I regret to inform you that it seems to be because breadth on the market side fell -0.46 on the week to +0.18 and is working directly against every other gain.
Even as the equal-weight S&P 500 continues to outrun the cap-weighted index and sector rotation carries into August. The rotation is visible in the market, but the breadth score still isn't registering it, and that gap is the only thing keeping the posture from going full RISK ON.
ROUGH.
Okay, so how does this play out?
There are three things I’d like to see happen that I think would clear the way back to RISK ON.
First, not to be too obvious, but breadth stops declining and reflects the rotation signal.
Next, watch the payroll data on August 7th. Consensus 91,000 to 120,000 after June's 57,000 miss. This would confirm the ISM surge has a labor market underneath it. Which in fact does still matter until AI makes all jobs obsolete (I hope lol).
Third, CPI on August 12th leaves the six-month core CPI direction flat, because ISM Prices Paid at 71.1, still historically elevated from tariff-driven input costs, is an active pipeline warning that could turn the inflation axis positive and build stress fast if it starts bleeding through.
Sorry, that’s a lot of macro jargon. What I am saying is, we need inflation not to spike up again and ruin things for everyone. The CPI on August 12th is the thing to watch for that.
So, that’s the story for this week.
The economy and the market seem to be aligned in a bullish direction.
However, before we get the all-clear to go full RISK ON, we need to see market breadth pick up, the labor market show support, and inflation not to ruin the party by blowing out or blowing up or generally blowing.
If you want to see all the trades our analysts are making in this setup and what they’ve been buying on the dips, sign up for Milk Road PRO and get in on the alpha.
Until next time, stay safe, stay educated, and stay bullish!
THIS WEEK ON MILK ROAD 🎙️
ICYMI: The Monday before the monthly AMA, each of our analysts gets $500 dropped into their portfolio.
What they do with it is up to them; some will put it to work right away, others may sit in cash until markets feel friendlier. Either way, they have to explain their thinking.
It's the same thing a lot of you are already doing, taking a slice of your paycheck and putting it to work.
We cover all of it in a live AMA on the first Wednesday of every month.
Next up on the schedule:
- 📆 August 5 at 10:00 a.m. ET.
We go live this Wednesday with John, Melvin and Martin 🫡 Come ask them anything and get their take on what's next. Submit your questions using this form.
BITE-SIZED COOKIES FOR THE ROAD 🍪
Dave Weisberger: The Coldcard hack may actually be a gift to ETFs and custodians.
Raoul Pal: GDP = population growth + productivity growth + debt growth - and it turns out to be a specific case of the universal code.
Hey, I know that guy! Kyle went on Fox Business yesterday to layout his thesis for the everything bull market.
Get 15% off with code “MILKRO_15.” The European Blockchain Convention is back in Barcelona on September 16-17.**
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