PERFORMANCE CHASE This weekend in the @LumidaWealth we wrote about the possibility of a Monday decline and a 'performance chase'. Here's the situation. Hedge funds have high gross long exposure, but low net exposure. They have lots of short in small caps. Small caps are rallying more than any other category. So, hedge funds are forced to cover those shorts. That propels those names higher. And the cycle repeats. There is nothing pre-ordained about a performance chase. Those conditions don't require a performance chase. But, the Trump admin talking up markets and pivoting on tariffs is enough to ignite Animal Spirits and light these markets. What you have here are retail investors squeezing hedge funds. (We also discuss this topic in the Lumida Non-Consensus Investing podcast.) Further, major indices are now above their 200 day moving averages. That's an important technical level. More trend followers will step into the market. The best analogy for this market is January 2019 -- the month after the end of the Q4 '18 Trump 1.0 trade war which had a 19% decline in the S&P. Market conditions are overbought...but crucially, staying overbought. This is a new dynamic. So long as Trump stays the course you can see 6,000 by June. (By July, if the 10% tariffs stick, then you would get a bout of stagflation starting around then.)

3/ Imagine you are Bridgewater listening to Trump here: Bridgewater, the largest macro hedge fund, is short equities...