Spot oil is trading more than $30 above the futures price. That's the highest premium ever recorded.
But what does this mean?
The note below is from Albert Edwards, global strategist at Societe Generale. It goes to the bank's institutional clients and he let me share it here.
His case is that inflation is coming back through the corporate sector rather than the labor market. Corporate price inflation jumped to 4.3% after two years at 2%. Refiners are absorbing a record spot premium and passing it straight through. Crack spreads are at all time highs. And the market is still pricing one of the shallowest Fed tightening cycles in history.
If he is right, the Fed has to move far harder than anyone expects, and the only thing holding equities up is a profits forecast that has to keep going vertical.
You know me, I have been saying energy is the trade and the AI earnings story is stretched. This is the macro case for both:
Global Strategy Weekly
Peak Nonsense: 1999, 2007… and Now
Albert Edwards · Societe Generale Cross Asset Research
We’ve reached the stage in the equity bull market where I actually laugh out loud reading some of the arguments used to justify the equity bull market. I felt the same bemused incredulity in 2007 and before that in 1999. It’s that time in the cycle again!