Trust bonds not equities on growth

Charlie McElligott of Nomura sees a hard landing now:

• As markets continueratcheting-up their Terminal Rate projectionsfrom the Fed in reaction to the Core CPI upside surprise(April23 FF now implying a peak of 4.43%, adding~44bps of hikes to the near-term Fed path in less than a day!),theprobabilities of the left-tail US economic “hard landing” scenario continue to explode higher
• A “hike until it breaks” accident is now the most likely outcome,following the shock Inflation reacceleration month-over-month(not just Core Services, but Core Goods)into an overheating Labor market with dangerously strong Wage Growth,which disturbingly hints at the Fed’s “Entrenched Inflation” worst-case scenarios:1) Wage-Price Spiral and2)Unanchored Inflation Expectations Accordingly, the market did the “violent tightening of US financial conditions” work for the Fed, sending the US Dollar and Real Rates surging, which remains pure-poison for Risk-Assets
• Simply put, an impulsive surge higher in “Real Rates” means a rate-of-change shock in the “Cost of Capital,” and that risks slamming the breaks on the US economy via punitive borrowing costs on both Corporates and Consumers, which spills over into lower demand for goods and services
• A look at Quant-Insight confirms this: the violent “FCI tremor” of surging Real Rates means higher borrowing costs, which translates into wider Credit Spreads…and as you can see below, the “Real Rates” (higher) into “Corp Credit” (spread widening) daisy chain matters, as either one- or both- of the two largest negative macro factor price drivers for Assets across the spectrum, from Equities (multiple destruction from higher rates AND earnings lower from slowdown = Valuation death blow)to High Yield Credit ETF to Rates Curves to EURUSD to Copper to Bitcoin.
• Unfortunately at this juncture,this intentional “crash-landing” of the economy has seemingly now become the lone path left available for the Federal Reserve in order to killthe “demand-side” of their idioyncratic Inflation disaster,which likely1)necessitates a Recession going hand-in-hand with2)requiring a markedly-higher US Unemployment rate…and it seems clear now that the market “gets the joke”
• As spoken-about ad nauseum, the recently extremely “mechanical” drivers behind the sharp rally /move off the lows in Risk-Assets last week simply reversed, as yesterday’s“Negative FCI Shock” spun-off into a cacophony of uneconomical / unemotional “sell” flows
• The largest “Crash” in Spot SPX (-4.3%) seen since June 2020 was in large part a function of swing back into “Short Gamma” territory in US Equities Index / ETF Options, coming just days ahead of Serial / Qtrly Op-Ex—i.e. Dealers were / are HIGHLY sensitive to changes in Price (Gamma) and iVol (Vanna), meaning those two normally“stabilizing” flows INTO Op-Ex then became two massive DESTABILIZING flows ahead of the expiration
• Across US Eq Index / ETF “big three,”there was an absolutely remarkable -$15.6B 1d surge back deep into “Negative $Gamma”(a 3%ile rank of all 1d moves since 2013—last occuring Dec ’21), shocking lower again after the prior week’s Spot rally and Vol crunch had just seen SPX/SPY and QQQ recover into “Long Gamma vs Spot” territory

My take on this is threefold: