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War, Oil & Liquidity - What’s Driving Markets Now! | Macro Monday: April 20, 2026
00:28:08
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A
New week, Big moves.
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B
You ready? Andreas? On the data maker on the floor. Turn the headline into trade. You can know from yields to inflation, every chart, every trend. Get the story, get this set up. From the open to the end. They try to be as actionable and as honest as possible. But keep in mind that their predictions might be sometimes maybe good, sometimes maybe good. Sometimes maybe sometimes maybe.
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Summertime, it may be good. Summertime it may be.
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It's Macro Mondays. Big picture Clear play. Stock bonds, fx, crypto, all the way. Get context. Strategy right now on your screen. Macro Mondays. Level up your week.
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C
Oh yeah, it's Monday again. Welcome to Real Vision. Welcome to Macro Mondays. My name is Mik Rosenl. I'm joined as usual by my co host, Andreas Steiner. We have a great show for you today. Is the war back on? Do we have jet fuel storage shortages in Europe? And what is keeping markets afloat? Anyhow, welcome to the show. Andreas, how are you this morning?
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A
Feeling a little bit better. You know, I've had a rough weekend
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C
so
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A
I actually at some point couldn't care less about the Iran war during
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C
Saturday and Sunday because I was in bed.
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But, well, I think on Friday afternoon I managed to tweet, the crisis is over, period. Looks a little bit wobbly that message today, doesn't it? But let's see.
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C
Yeah, we'll get back to that. Andreas, I have to say I'm in a great mood today, mostly due to psychedelics. We had a great weekend as investors in definium, CYB Encompass other Compasses companies as well after Joe Rogan stepped into the White House and Donald Trump delivered an executive order. Obviously we don't do legislation anymore in the us so an executive order on psychedelics. So a great mood for me here. Anyway, it's going to look quite neat on our portfolio as well, but we will touch on that in our Macromeach micro show. I can't remember if that's next week prepared that. But anyway, enough about psychedelics. Andreas, perhaps as you mentioned, things have been really, it's been quite the roller coaster over the weekend in Iran and you know, I had some of the same feelings on Friday and now we're here. So that's perhaps a good occasion to just mention our usual catchphrase here, Andreas, that our takes even on crises might
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be summertime, it may be good summertime, it may be shit.
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Yeah, I think we got that. So, Andres, before we get started, just a quick rundown of some of the great content we have for you this week on Real Vision. I released the Drill article today and tomorrow I'm doing and ask me anything for Alpha members at Real Vision. So not only the approach here, but also for Alpha members. It's mostly going to be geopolitics, but take your shot, ask whatever you want. I'll see if I can answer. Happy to talk psychedelics as well, clearly. So get your questions in there and join us tomorrow at 11 Eastern for that. Thursday at 9am Eastern we have the very first charting macro show with Joe Bland for free on YouTube. So if you're one of those guys just following Macro Mondays on free every week, you can go watch Joe Bland's great chanting macro show. He's been doing some banger trades lately and you can track these episode by episode if you get into it. So do check that out. Thursday at 9am Eastern and finally Friday at 10:30am Eastern, Eastern we have Jim Bianco joining Ash Bennington and that's for the Alpha group and above. So lots of great stuff. We have a couple of articles coming up, Andreas, including our Friday portfolio update, which is always one to look out for. So lots of great content. Andreas. Wow, what a weekend. Andreas, I want to start maybe going back to Friday a little bit because we had had two and a half weeks of complete, almost building ecstasy, you know, a rally culminating in announcement that now the Iranians were going to open the Strait of Hormuz. And I had much of the same feeling as you, Andreas, that at least for markets, this was mostly over. We still had a peace deal to get signed, but that was mostly it then. We don't know exactly what happened over the weekend. It's likely that we had some internal disagreements in Iran or maybe the Iranians discovered that when you're in a sort of, I think it's called a Mexican standoff, where you're like in a Western movie when you have two guys holding a gun at each other, it's a really bad idea to put down your gun unilaterally. And that is essentially what the Iranians did by opening the strait without the US lifting their blockade. So the Iranians somehow realized this or made the decision to close the strait again. And we even had ship on ship or attacks on ship over the week in the U.S. reportedly, we don't have all the details yet. An Iranian tanker as well. So in my opinion, Andreas, we're actually at a worse point than we were before Friday because now we've actually seen action, kinetic action, as we like to use that phrase, against ships. That's not good. We're heading into the deadline and the ceasefire on Wednesday, we're not really hearing a lot about positive movements on talks and it's getting late in the day in Pakistan as we speak here, Andreas. So did we jump the gun too early or what's your take on take on the situation here?
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So I just saw headline coming in three, four minutes ago. Trump was asked whether Iran is doing the talks and he says he don't know, but they're supposed to be there. Those are the headlines from PBS here. So let's see.
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It's comforting.
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Let's have a look at the actual flows through the straight first M. Because, yeah, we did actually have a new peak post war during this weekend. So there was a window of opportunity. It wasn't long, but it was there
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C
and had a cruise ship going through, apparently.
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And I take some comfort in the fact that they do not destroy these ships. They either bought them, seize them or fire some guns at them, get them to turn around, but in the early stages of the war, they destroyed them. So I still think there's sequential progress here. But as I said last week, we obviously need the flow to improve, say over this week or next week to continue this narrative. Having said that, I've spent countless hours trying to figure out how severe the scarcity is of various products of energy. I still think it's manageable and we can get back to a few concrete examples in a second. But I'd like to start with a chart that I've taken tremendous amounts of insult from tweeting on page five. What I wrote, and I stand by every single word of it, is that the U.S. economy, the Western economy overall, is less dependent on oil than it once was. I'm not saying that it's not dependent on oil, just to underscore that, but it is less dependent on oil. Look at how much GDP we create per energy unit today compared to, say, two or three decades ago. Obviously, a part of this is that we've moved manufacturing out of the west and we've created service economies instead. And I mean, you and I, we don't use a lot of oil doing our daily jobs miggle. Right? Of course, at some point we'll feel the heat from various import scarcities and import price hikes. But the domestic economy is not particularly sensitive to energy anymore. And I stand by every word of that. And that is probably also the reason why $100 a barrel is not particularly harmful right now. So in that sense, to get the domestic consumption down, you probably need even
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C
higher prices to the US economy. At least, yes, we are seeing damages across the globe, especially in developing countries. But I mean, talking about the US economy as the engineer and there are sort of two layers to this, Andreas, as well. Just a quick side note here that the US economy is less dependent on energy and the US is less dependent on oil because the US has built up alternative, their own oil production and alternatives in form of shale gas and what have you. So that's us. Fair enough, Andreas. But what about Europe? We keep hearing about jet fuel shortages and I'm traveling to Italy in a few weeks time here, a month and a half. But should I feel my vacation or what's the situation?
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No, you're safe. Thankfully you ordered an early vacation.
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I did actually.
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I actually asked you to go on early vacation because we have a project coming up 1st of August. Enough about that for now. But if we look at the jet fuel currently on water, you can basically see the trend over the past six weeks, right? So two things here. First of all, this is obviously a symptom of storage is being drawn upon, right? When there's scarcity of supply, you obviously use what's already being supplied, right? That's point number one. Point number two is that look at last year, you typically see a tick up in the amount of jet fuel on water over the course of the travel season, right? Because essentially from six weeks from now and then the subsequent eight weeks there, you basically have the peak jet fuel consumption season there, right? How severe is the scarcity? The European Commission talks about an issue already in six weeks from now, but they need to. So let me highlight that when you're an institution in charge of the supply or being held accountable for the supply of fuel, you obviously need to sound the alarm now because you want people to take action, right? So they make it worse than it is. If you look at the jet fuel consumption in Europe and the origin of the jet fuel, 70% ish, is refined within Europe, often with imported crude, but refined in Europe. And I don't see any hiccups there. We do import some jet fuel from the us. The green bar here will likely grow in size over the course of the summer. But the issue is obviously the orange one here. So roughly 20, 25% of the consumption of jet fuel stems from Hormuz or the Strait of Hormuz, right. Not much is leaving currently. We just have to accept that fact. So worst case, roughly 1/5 of the jet fuel used in Europe will not be available this summer. Is that manageable? It sounds like a lot. It is a Lot. But I had a look at the airfare prices for a two hour flight to France. I've booked the holiday home already in July, but I haven't booked the plane tickets which was, that's the game. Which was probably a big blunder. But having said that, four tickets. So two tickets for my wife and I and then for two kids above €6,000 now for a two hour flight. And I'm, you know, I'm used to traveling these two 3 hour flights during the peak season every summer. This is 3 to 4x the usual price. So the situation takes care of itself largely because if airfares are up 3 to 400%, you'll obviously see less traveling, you'll see more people deciding on a staycation and so on and so forth. So I think the most vanilla takeaway here for Europe is that southern Europe will have a bad summer, Northern Europe will have a pretty decent summer because northern Europeans travel south and they'll stay home to a larger extent than usual and spend domestically and hey, thereby you use less jet fuel. So yes, there will be flight cancellations. We already see them incoming in Europe. And that's how you solve this. Is this a macro driver? Is it something that we should expect to see in gdp? Sure, to some extent. I mean, if you look at tourism, tourism is probably worth 1/5 of GDP or something like that in many of the southern European economies, say Portugal, Greece, those countries, while it is a nothing burger in the northern part of the union. So some countries will face a few rough quarters as a consequence of this, but the region as a whole will likely get through this without any major issues. I, I did some calculations on the current state of the storages of jet fuel in Europe on pitch line here. And assuming a 50% blockade of the straight from now and until August to September, the dotted line here in red will probably get to depleted storages by August. And remember, you cannot run storage fully empty. Right. So we will run into trouble unless there is a demand side drawdown. And there will be a demand side drawdown. If we see a reopening this week, everyone will probably get on vacation, but still at higher prices. I think that's the fair takeaway here. One thing I'd like to remind people of, when you look at it from a macro perspective, the broader context of this on page 10. Remember, we have a very good empirical study of what happens when we see a sudden scarcity of energy in Europe or elsewhere from just a couple of years ago in 2022, after the invasion of Ukraine the imports of gas to Europe. So NAT gas, right, dropped more than 25%. So worse than what I'm depicting for jet fuel here. And remember, NAT gas is substantially more important to the economy than jet fuel overall. Europe got through 2022, 2023 with admittedly some initiatives in place to limit the demand for NAT gas, et cetera, but we didn't even have a recession. So that was clearly worse than what we're currently faced with. And that was not enough to prompt the recession or to trigger a recession. And that's why pundits like Luke Gromen keep replying to all of my tweets saying the economy cannot stand energy prices at current levels. And that is part of my French, empirically speaking, utter nonsense, lots of nonsense. We had a way worse situation in 22 and the recession didn't arrive. Sure, it wasn't a good year, but it wasn't the landslide. It was. So what I'm trying to say here again, and I want to reiterate that this situation is manageable.
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C
I agree with you, Andreas. You know as well, you know me, I'm in the recessions have been outlawed camp, essentially. That is to some extent what we saw in 2022. We're already seeing European companies subsidizing to keep energy prices low. We will see more of that in the coming weeks. That's obviously going to work against the demand thesis, but let's see if we get close to holiday season. But I agree with you completely. I mean, we probably should have had a recession for this, but we solved it. And then obviously there's a bill to pick up at some point, then we'll pick it up as inflation or fewer vacations. But yeah, I agree with you. This is not the doomsday scenario. It's laid out to be. So big disruption, big bill to pay, but probably not a catastrophe. Especially also as the US economy should be relatively okay out of this. Andreas. And so the big question right now, Andreas, we've had a rally for two and a half weeks here. We called the bottom quite well. I'm confident that we're going to see a lot of volatility over the next few days. A lot of fear mongering around these negotiations. If we look aside from that, what's your feeling? Can this rally go on?
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Yes. So, okay, but it's. It's one of those very used phrases, right, that this is a hated rally. But I actually think it is.
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It feels like it.
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Yeah. A lot of people are not on board this train. First of all if you look at the most recent bank of America fund manager survey from mid month, we had the most bearish allocation since June 25th. So basically right in the aftermath of the tariff debacles and all of that, we see the cta. So the trend following funds buying equities in basically all scenarios here. So they've been wrong footed and now their trend following strategy will have to buy into this whether they like it or not. That's basically by design. And if you look at various long short books, for example from UPS or Goldman, the prime books, the net allocation to equities among long short hedge funds is incredibly low.
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So
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by all means, this is not an over owned market, if you know what I mean. It's rather under owned still, at least if the crisis sort of thistles or dissipates slowly but surely over the next two or three weeks. And a lot of technical speak in favor of markets continuing higher here. Having said that short, we're in slightly overbought territory right now. We'll probably get a red day in NASDAQ today, but nothing to really alter the trajectory here. So I remain bullish given this, especially given the overall positioning out there. And maybe that's a good way to sort of enter the discussion on why. Why is the market actually rallying? I mean, because it is slightly odd, I have to admit to that. But it goes very much hand in hand with what nowcasting has told us basically in the run up to the war, but also amidst the war. And I'd like to start with a few considerations on liquidity. And I don't think we can, you know, I don't think we can understate how important this has been to the recent rally. For the first time in a long while we've had the so called narrow dollar liquidity back above pain levels. And what do I mean by pain levels? Well, you need a certain amount of dollars available for transactions between banks to ensure that money markets run smoothly. And we've basically been through say four or five months where we've had too few dollars. That was the exact reason why the Federal Reserve started this Reserve management program back in December. Basically a light QE program. So they're now buying and at the same time, at least up until last week where we had some big tax payments coming into the tga. The US treasury also slowly but surely added liquidity to the market by hoarding less dollars. That is the red line on the chart here. We had a big tax payment last week, but on a trend basis we will slowly but surely move lower from here. So all in all, that led to the software rates pricing below fed funds rates last week and the week before that again for the first time since the debt crisis and the debt ceiling crisis back in October and the government shut down on all that. And that is major news because essentially you can see the spread between sulfur and the effective fed funds rate in yellow at the bottom of the panel here as some sort of gauge of the price of leverage. So is it cheap or expensive to get leverage? And it is now normal, again, I'd say maybe even slightly cheap. So that is obviously big news. Once you get a direction in the market, it's cheap to add leverage to that and we'll probably see that in coming weeks on top of that. Basically something that most pundits miss the train on, except us. We've been banging the drum on this and I'm actually very proud of that. The ESLR reform went live first of April and you can already start to see some of the impacts here, right? Slowly but surely. The supplementary leverage ratio is basically a piece of legislation designed to keep the leverage of banks at certain levels. And they've now eased this regulation a lot by 1st of April, meaning that it is a lot easier for banks to hold a lot of, for example, repos on their balance sheet because it is less punitive. From a leverage perspective, a repo is not a particularly risky transaction. So when you allow more leverage, banks will take notice of that. So on page 13 you see how important this repo market has been, say since 2024. We've basically added more than a trillion in this repo market of treasury since 2024. This SLR reform will likely add another trillion worth of capacity. And what does it mean, layman terms? It basically means that banks can provide more leverage to those players actively taking positions in markets. And on top of that, it also means that the treasury market will run more smoothly since you have more players willing to take on more capacity since they can borrow with these Treasuries as collateral. So overall, the ESLR reform, slightly improving liquidity dynamics in the transactions between banks, etc. I think this has been sort of the quiet hidden driver of what's been ongoing, say over the past two, three weeks. And it's looking good. It's looking really good from a risk taking perspective. And then megal growth. I mean, someone forgot to tell the US economy that they're in a war. If you look at page 14, we've had two of the regional surveys out, thus Far so from Philadelphia and New York. And if you take those two at face value and use them to predict the ism, we'll get to plus 55ish territory. It's really should be, it's really promising. So in that sense, I mean, inflation can go up as long as growth and liquidity goes up alongside it and markets can stomach that. Right. But it does admittedly smell a little bit like a late cycle dynamic when you see all three going up at the same time. I have to admit to that.
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C
Andres, let's just round off at look at central bank's decision and the Fed here because we've also obviously had a great fear that this war will lead to inflation, would lead to hikes. Is that completely ruled out now that we have more or less got the crisis under control? If we assume that,
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yes, I can see that CNN now says that talks are planned for Wednesday in Pakistan. So that's basically right around the deadline. But if, say a few weeks ago, most people expected the European Central bank or the bank of England to already move maybe this month or in May. Right. Slowly but surely the officials from these central banks, and I've basically held the view throughout that they would like to remain in a wait and see mode. Some of the officials from these European central banks are now also they're trying to convey a message of patience here because it's a very binary outcome for inflation in a sense, when you have. It's a deal or no deal scenario in a sense. Right. So why take a decision as long as there's hope for a deal here short term? And you know, at least my base case is still that we get some sort of like deal and then they'll probably spend months trying to iron out the details.
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But that's very often.
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Yeah, but as long as we get sequential progress from here, I mean, even dated Brent and such stuff is lower than it was a couple of months, sorry, a couple of weeks ago. So the prices most urgently on top of the agenda in the European Central bank in London as well, they're currently going down and my best guess is that they'll continue going down. So the fear that central banks will swiftly end this business cycle, they're overstated by now, in my opinion.
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C
Great to hear, Andreas. That is pretty much all we had for you today. Still a positive outlook looks even better if we're actually getting talks on Wednesday and then we'll see if a deal can be done for even more geopolitics. We try to keep that relatively light in this show and keep the focus on macro for even more geopolitics. Tune into my Ask Me Anything on Alpha and Pro Tier tomorrow at Real Vision and follow all our our content on an ongoing basis. We have a lot coming on coming on on the platform during the week, so thanks to you Andreas for joining. Thanks to everyone for pitching in. We'll be back next Monday.