Hawkish Fed, Iran deal spark vicious rotation to AI.

Transcript

Tom Hawkish Fed, Iran deal — markets are doing the splits. Capital's pouring into AI bottlenecks and out of everything else. We're breaking it all down right now.

Marie Good morning, welcome to Investment Flash. New York Edition, Thursday June 18th. I'm Marie, with Tom and Gerald. Yesterday the Fed flipped the script; today we're watching the rotation accelerate.

Marie So the Fed held rates but the dot plot now implies a hike to three-point-eight percent by year end. And Chair Warsh called the two percent inflation commitment unanimous.

Tom Yeah, and then Trump signs an Iran deal lifting equities. So stocks up, bonds and crypto down. Gerald, your short on long-duration Treasuries from yesterday — looking pretty smart, buddy.

Gerald Up only four-tenths of a percent on the week but hugging the fifty-two week low. I'm not breaking out the champagne, Tom, but the pivot is real. Intermediate Treasuries fell half a percent, the dollar index ripped.

Marie And the S&P 500 actually down a percent and a quarter last session despite the deal. That's the split. Crypto sold off hard — Strategy fell five percent. CoinDesk flags this divergence perfectly.

Tom So buy the dollar, sell long-duration Treasuries. That's the macro trade.

Gerald Exactly. The dollar's rate advantage just widened big time.

Marie But the real action is the violent rotation from megacap tech and crypto into AI enablers. CoinDesk and MarketWatch both flag it. The semiconductor ETF rallied one-point-three percent while the Nasdaq 100 fell one percent — a two-point-three percentage point gap.

Tom For real? Semis are back? The chip ETF near a fifty-two week high, up sixty-seven percent year to date. And memory stocks like Micron, even the space ETF getting a look. This is a bottleneck trade.

Gerald Micron's at nine-point-one times forward earnings, Tom. That's actually interesting to me, even if I'm suspicious of hype. But the chip ETF is crowded — only four percent off the high. If earnings miss next month, that's a nasty unwind.

Marie That's the counter, Gerald. But MarketWatch ties it to Apple's price hikes — chip costs forcing higher iPhone prices, which lifts EM chip stocks to records. TSMC up one-point-five percent. The supply chain is pricing real demand, not just momentum.

Tom Right — buy TSMC, buy emerging markets. The broad EM ETF down just a touch but up twenty-two percent year to date. Tons of room.

Gerald Look, no one's talking about the dollar headwind. The dollar index up one-point-two percent this week could cause FX stress. And Taiwan equities at all-time highs, not pricing any geopolitical risk.

Marie That's a separate topic, Gerald. But for this rotation, the signal is clear: fade the Nasdaq 100, buy the chip ETF, buy TSMC. The capital is fleeing the Mag 7.

Tom One hundred percent.

Gerald Yeah, that's the move.

Marie Exactly.

Marie And CoinDesk's exclusive today: Strategy's preferred stock STRC hit a record low below par. That's freezing their ability to sell above-par equity to fund bitcoin buys. They had to sell bitcoin for the first time this month just to cover dividends.

Tom Wait — Strategy actually sold bitcoin? That's a huge red flag. The common stock down five percent, seventy-five percent off the high. This thing is in trouble, buddy.

Gerald Honestly, I've been saying this corporate bitcoin model is a house of cards. Forced asset sales because the preferred is underwater. If STRC stays below par, the institutional bid for bitcoin from this major buyer could dry up completely.

Marie And this adds to the crypto sell-off from the Fed. So our call: sell the preferred, sell Strategy common, sell bitcoin. This is a structural unwind, not just macro.

Tom Yeah, that's — that's rough. But isn't there a chance they refinance or something?

Gerald Maybe, but the market's saying no confidence. The stock's near a fifty-two week low. I'd rather short it than hope.

Marie Meanwhile, the Trump administration is paying seven hundred sixty-five million dollars to cancel offshore wind projects, redirecting to natural gas and geothermal. The natural gas fund up three-point-seven percent this week.

Tom So buy natural gas, buy the energy sector? But wait — oil is cratering on Hormuz hopes. CNBC says flows through the Strait of Hormuz may resume sooner than feared. The oil fund down eleven percent this week!

Gerald Alroit, the energy sector's down over four percent on the week even with gas up. The sector's getting pulled both ways. I'd pick my sub-sector carefully. Natural gas is policy-driven, oil is supply fear fading.

Marie Right, it's a pair trade. Buy natural gas, sell oil. But keep an eye on clean energy — the clean energy ETF down one-point-six percent last session. That's a sell.

Tom Oil down hard. Gerald, yesterday's sell oil call? Absolutely nailed. Oil fund down eleven percent since then.

Gerald Yeah, fair play. Hormuz reopening faster than many think, per CNBC.

Marie Nailed it.

Tom Solid.

Gerald Wasn't exactly a stretch, but cheers.

Marie And crypto gets another punch: Illinois added a last-minute zero-point-two percent tax on digital asset businesses. Unlikely to be changed per CoinDesk.

Tom On top of macro headwinds? That's salt in the wound. Sell bitcoin, sell ether — the tax raises costs and compounds negative sentiment.

Gerald Honestly, the regulatory overhang is as big as the macro. I'm not touching crypto with borrowed time.

Marie Nikkei Asia: Taiwan's president Lai said refusal to accept China's rule is not a provocation. That could escalate tensions. The Taiwan ETF is near all-time highs, not pricing any premium.

Tom Whoa, Taiwan's only two percent off the high. Markets are ignoring this completely. So sell Taiwan, sell TSMC? But earlier I was buying TSMC on the AI rotation.

Gerald You want to be long AI but short Taiwan geographic risk? Good luck. Any flare-up is a black swan. I'd rather sell China large-caps too — Chinese sentiment would tank.

Marie So the call is sell Taiwan, sell TSMC, sell China. A geopolitical hedge. But note, this is a tail risk — not a core trade yet.

Marie Nikkei Asia also has OpenAI launching a ChatGPT ad service in Japan. Directly challenging Google and Meta. Meta down five-point-four percent last session, Alphabet down two-point-five.

Tom Wow, the AI giant is monetizing. Microsoft stands to benefit big. Microsoft down twenty percent year to date but at nineteen-point-six times forward earnings — that's cheap for AI. Buy Microsoft.

Gerald Hold on, Tom. Microsoft down twenty percent for a reason — it's not a slam dunk. But I agree, sell Alphabet, sell Meta. The duopoly is under threat.

Marie Right, sell the ad incumbents. Buy the AI platform. Structural shift.

Tom Exactly.

Gerald Fair point.

Marie CNBC: Rothschild says Lyft could rise on robotaxi trend. Contrarian call. Lyft up three-point-two percent this week, forty-five percent off high, six-point-eight times forward P-E.

Tom Six-point-eight times? That's value territory, buddy. If the robotaxi narrative sticks, there's upside. Buy Lyft.

Gerald Yeah, but robotaxi is a long way off, and regulatory hurdles. I'm not buying the hope trade. But I won't argue a speculative position.

Marie So a cautious buy. Could be a turnaround play.

Marie FT Lex: Huntsman and Olin struggle with mergers and acquisitions. Huntsman down fifteen-point-six percent this week, price-to-book under one. Both value traps until deal clarity. Hold.

Gerald To be fair, chemicals mergers and acquisitions is tough. No premium, no catalyst. I'd just watch them.

Tom Pass, for sure.

Marie Bloomberg: Kingboard Laminates up five hundred seventy percent on mainland retail flows. Doubling to thirteen percent stake. AI darling, but retail extreme. Hold.

Gerald Chasing a five hundred seventy percent rally? No thanks. That's a hold at best.

Marie Agreed. Watch for spillover to China but it's stock-specific.

Marie Finally, Bloomberg: Ambani's Jio I P O promise under scrutiny. India down ten percent year-to-date. Hold Reliance, watch India.

Gerald India's been weak. A disappointing I P O could add pressure. But never bet against Ambani too heavily.

Tom I wouldn't touch it until the deal terms are out. Watch.

Marie Alright, our view: the Fed flipped the table, forcing repricing. But the twist is, capital is rotating violently out of the Mag 7 into AI bottlenecks. It's not a uniform sell-off.

Tom Exactly. S&P down but semis up. That's dispersion, and it's a big opportunity. Active long/short: long the chip ETF, TSMC; short Meta, short Strategy.

Gerald But the rotation could be a head fake if the Iran deal proves fragile or the Fed cools. Long-duration Treasuries are actually up four-tenths on the week — some are betting yields peak here. And the chip ETF is crowded.

Marie The counter is valid, Gerald. But nobody's talking about the dollar impact on EM, or the energy pair trade. The cleanest expression is not a single ticker but dispersion itself — fade crowded passive beta, go active long/short.

Tom Love it. And watch for a vol spike if next C P I keeps the hike path.

Gerald Fair enough. I'll add: the energy pair, long natural gas short oil, is worth a look too.

Marie Agree on all fronts.

Gerald And as always, none of this is investment advice — just our views.

Marie If you're just finding us, hit follow on Spotify, or check investmentflash.com for the full digest with charts and sources.

Tom We're back tomorrow at seven-thirty a.m. London time. Until then, stay sharp, buddy.

Gerald Don't fight the Fed, but do fight the consensus.

Marie See you tomorrow.