Weak ADP, surging yields: the broad market's easy trade is over.

Transcript

Tom Morning, everyone. The easy trade is officially over — weak jobs, surging yields, and a market that can't decide which way is up. Buckle up, buddy.

Marie Good morning, and welcome back to Investment Flash, London Edition for September third. I'm Marie. With me are Tom and Gerald. We've got a lot to unpack, so let's get into it.

Tom Before we dive in, Gerald — your sell on long-duration Treasuries from yesterday? Looking prescient. Those yields are not done.

Gerald Ha, I'll take it. But don't let it go to your head.

Marie Alright, first up: Treasury yields. ADP printed just thirty-eight thousand private jobs, the weakest since January, and yields surged anyway.

Tom Wait, what? Williams called that a strong economy? That's the Fed for you — always sunshine.

Gerald To be fair, the yield surge is global. And JPMorgan says five percent Treasuries would put equities at risk in September. That's the real tension.

Tom So the trade is sell long-duration, hold the S&P 500, sell Bitcoin. Higher yields hurt all of those.

Marie Hold on, not so fast. That's the bull case for yields, but if next week's payrolls follow ADP lower, yields could collapse. Then the long-duration shorts get run over.

Gerald Exactly. It's a two-way trade. But right now, the signal group leans toward higher yields, so we go with it.

Gerald Now the dollar. Bloomberg says pension funds and insurers own huge U.S. assets with thin currency hedges. That makes the dollar prone to a fast slide.

Tom And gold? Higher yields push it down, weaker dollar lifts it. That's a coin flip, buddy.

Marie I'm going to push back here. The under-hedged exposure is structural. If EM central banks start diversifying, that's not a coin flip — that's a freight train.

Gerald Yeah, and if the dollar slides, emerging markets are the biggest winner. That's why the signal says buy the emerging markets ETF.

Tom Emerging markets love a weak dollar, for real.

Gerald Totally.

Marie One hundred percent.

Tom Okay, this is my favorite story. The Journal says venture capital is rotating into sports, casinos, and travel because they can't be automated. That's the anti-AI trade.

Marie Tom, it's a theme in search of a portfolio. They don't name a single company or valuation. But the logic is hard to argue with.

Gerald Honestly, the idea is fine, but the multiples matter. MGM Resorts and Royal Caribbean are not exactly cheap after the run they've had.

Tom Come on, Gerald. You can't automate a blackjack table or a cruise ship. That's real cash flow, not some software promise.

Marie See, THIS is what I mean. When early money is buying the anti-AI trade, it says more about how crowded AI multiples are than about sports teams.

Tom Broadcom has shed about five hundred twenty billion dollars of market value since June. That's brutal. It needs an Nvidia-style print to stabilize.

Gerald Yeah, and the bear case looks priced in at this point. The real question is whether AI capex keeps compounding.

Marie This is the same repricing we're seeing everywhere. The market is done paying for growth at any price.

Tom I still think the AI infrastructure cycle has legs, but you have to be selective. Watch Broadcom earnings, for sure.

Gerald Europe angle: BNP Paribas handled half of a record four point two billion dollars in MSCI India trades through the new closing auction. That's a solid franchise win.

Marie And it confirms heavy foreign positioning into Indian equities. That's why the signal is hold India, not buy.

Tom India's been the best emerging market story this year, but if the dollar strengthens, those flows could reverse fast.

Gerald Right, so BNP is a buy on execution, but India equities you hold because they're already crowded. Fair enough.

Tom Two supply shocks, same direction: cocoa first deficit in three years, and Russia pauses grain export duties. Prices are going up.

Gerald Cocoa deficit means chocolate makers like Hershey are going to feel the squeeze. That's the sell side of the trade.

Marie And Russia's pause because Black Sea lanes are blocked — that's over seventy percent of wheat exports. That's a massive supply hit.

Tom So buy wheat futures, buy the wheat ETF, sell Hershey. That's a clean basket.

Gerald Buying agricultural futures because a war and an El Niño walk into a bar... this is why I love macro.

Tom Ha, fair enough. I'll take that.

Marie Energy is split. U.S. diesel hit its highest since April, but Todd Gordon warns crack spreads may roll over. That's the tension.

Tom So buy heating oil futures, sell Valero and Phillips sixty-six? Betting against the refiners feels risky.

Gerald Yeah, the complex is split. Product is tight, but margins are soft. I'd rather hold broad energy and avoid the refiners.

Marie That's exactly the signal: hold the energy sector, don't oversize refiners.

Tom Berkshire is doubling down on Japan trading houses. Itochu, Marubeni, Mitsubishi all rallied. The Berkshire put is real.

Gerald These are value names, low multiples, tons of cash flow. I actually like this story. It's the one time I can quote value investing without rolling my eyes.

Tom Ha, see Gerald? Value isn't always boring.

Marie Greg Abel signaled long-term commitment. For a market scared of higher rates, that's a stability anchor.

Tom Buy all three, easy.

Marie Finally, Evercore published negative-beta S&P names for September. The idea is stocks that rise when the market falls. Low-vol and utilities are the proxies.

Gerald It's a positioning trade, not a fundamental one. But given seasonal weakness, it's not a bad hedge.

Tom I hate defensive trades, but even I'll admit utilities look decent if yields stabilize.

Marie Buying utilities in September is like buying sunscreen after the burn. It still helps.

Tom Ha, that's a fair one.

Marie Alright, as always, none of this is investment advice. But here's our view: today's tape is a rates story wearing a growth costume.

Tom Exactly. Weak ADP, yields up. The whole bad news is good news trade is repricing.

Gerald The case against us: this could be a liquidity and positioning squall in a thin, holiday-shortened tape. If payrolls disappoint, everything reverses violently.

Marie And don't sleep on what's missing: no one is talking about private credit and leveraged balance sheets if yields hit five percent. That's the next crack.

Tom Plus, EM central banks are the biggest holders of that unhedged dollar exposure Bloomberg flagged. Their next decisions could be the first cracks.

Gerald The cleanest expression isn't a single ticker. It's the AI-proof physical experience trade — casinos, travel, sports — plus the dollar watch.

Marie Right.

Tom Exactly.

Gerald Spot on.

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

Marie We're back with the New York Edition, later today at nine a.m. New York time. Until then — stay sharp.

Gerald See you then.