From Nvidia earnings to trade war tape bombs, a simple strategy could be

There’s a popular expression on Wall Street: KISS, which stands for, Keep It Simple, Stupid. Amid a torrent of complicated cross currents, it might present the best approach to trading this week’s news. 

More catalysts mean more potential for big moves, and if options are cheap they may present the better way to make a directional bet. At the moment, SPDR S&P 500 ETF Trust (SPY) call options look like a better way to be long in this market.

Here’s why:

Let’s start with Treasuries. The 30-year rate is at the highest level in 20 years. This was enough for Treasury Secretary Scott Bessent to try to manipulate the long end of the curve with the “Treasury twist,” buying back longer maturity debt financed with shorter-term debt. That worked for about a day. The 10-year (the rate he looks at most) dipped to roughly 4.64%, then climbed right back, finishing the week at 4.73%. This is the highest of the post-GFC era. Rising discount rates are not just a headache for government finances; they’re a headwind for every long-duration asset. Of course, that cuts both ways. I believe more concrete yield curve manipulation could occur via the Federal Reserve if 10-year yields approach 6%, but others seemingly believe rates won’t get that high. Look at the holders of IEF, for example, the 7-10 year Treasury ETF. Fisher Investments owns nearly 161 million shares, about $15 billion worth. If you share the view that it’s a good idea to own a little duration in your fixed income allocation you may also believe the S&P highs will be reached between now and year-end.

Another potential catalyst?

Nvidia reports Wednesday. It is very hard for this market to do well if Nvidia’s results disappoint; the index’s performance has been carried by AI infrastructure spending, and Nvidia is both its biggest beneficiary, its bellwether, and the largest single constituent. A modest guidance stumble would ripple through semis, hyperscalers, power, and everything else the trade touches, but even if it didn’t, the stock moves markets by itself. Over the past four quarterly earnings releases Nvidia has fallen an average of ~6%, based on its current weight in the S&P and the Nasdaq that translates to a down move of nearly .5% in those two indices. However, after a year’s worth of ho-hum post-earnings price action, this could be the one that reignites the fire. Nvidia is trading at a well below market multiple.

Now we’re also continuing to contend with trade/tariff policy. Talks with Canada have broken down again, with Mark Carney deciding retaliation is set for September 8. According to an article published by Bloomberg, the PM “see[s] little chance of resuming talks with President Trump before the midterm elections.” While we keep falling into traps of our own making, and of course, if Carney is presented with a deal he doesn’t like, the looming midterms provide an obvious pressure point. It’s worth noting that President Trump has also clotheslined shorts based on trade and tariffs. A…