Monday, February 24, 2020

 

Dear Reader,

 

Please find below our latest Weekly Trend Update Report covering major asset classes and currencies.

Have a nice week.

 

Marc Bentin

Bentinpartner GmbH

 

 

       

Trend Status Update

 

Over the past week, the S&P500 dropped -1,1% (3,6% YTD) while the Nasdaq100 dropped -1,6% (8,3% YTD). The US small cap index dropped -0,9% (0,9% YTD). CBOE Volatility Index rallied 20,7% (23,9% YTD) to 17,08. US stocks dropped from their perch on Thursday as the Dow shed some 500 points intraday on no apparent reason other than Goldman Sachs warning that an equity markets correction could be imminent. This adverse technical development was partially reversed the same day but impacted psychology so that stocks dropped again on Friday. While both stocks and Gold closed the week comfortably “trending higher”, Thursday and Friday served as a wake-up call that stocks can still occasionally fall even with the implicit backstop of central banks.  There was no hiding in tech last week. AAPL sold off by -3,6% (6,6%). FB   dropped -1,4% (2,4%). LYFT sold off by -5,0% (3,9%). AMZN sold off by -2,5% (13,4%). NFLX dropped -0,3% (17,5%). GOOG dropped -2,0% (11,1%). MSFT sold off by -2,8% (13,2%). INTC sold off by -4,6% (7,5%).

The Eurostoxx50 dropped -1,0% (2,0%) matching the S&P500. Diversified EM equities (VWO) dropped -1,5% (-2,8%), underperforming the S&P500 by-0,4%.

 

The Dollar DXY Index (UUP) gained 0,2% (3,3%) while the MSCI EM currency index (measuring the performance of EM currencies vs. the USD) dropped -1,0% (-2,0%).

FX markets came out of hibernation last week with EURUSD slipping below 1.10, accelerating a month-long decline in a self-reinforcing negative trend. Doing so, the common currency dropped out of its Bollinger band (defined as a 4 std band centred on a rolling 20 days mean) before staging a modest rebound-on Friday as the European Markit Manufacturing and service index for February came out stronger than expected (to 49.1 and 52.8 respectively from 47.4 and 52.3 expected.  

 

At the same time, JPY hit a brick wall on Wednesday in a delayed response to Japan’s sharp 6% Q4 GDP decline as the country also returned to a trade deficit situation. JPY is generally considered as a safe haven but did not act as such last week as EURJPY gained 1,5% (-0,8%). Increased FX volatility is worth noting as it could be the harbinger of things to come in other asset classes as investors seek to mitigate risks. AUDUSD dropped -1,6% (-5,9%, Z-score -2,1). Most EM currencies dropped last week. USDBRL rallied 2,2% (9,0%). USDRUB gained 1,3% (3,8%). USDMXN rallied 2,8% (0,8%, Z-score 2,8). USDINR gained 0,5% (0,4%, Z-score 2,8). USDCNY gained 0,8% (1,1%). USDZAR gained 0,6% (7,7%).

 

 

10Y US Treasuries rallied -11bps (-45bps, Z-score -2,3) to 1,47%. 10Y Bunds dropped -3bps (-25bps) to -0,43%. 10Y Italian BTP’s dropped -1bp (-50bps) to 0,91% matching bunds.

US High Yield (HY) Average Spread over Treasuries climbed 15bps (23bps) to 3,59%. US Investment Grade Average OAS climbed 4bps (9bps) to 1,10%.

In European credit markets, EUR 5Y Senior Financial Spread climbed 2bps (-3bps) to 0,49%. IEF (ETF invested in 7-10 years US Treasuries) gained 1,1% (3,7%, Z-score 2,1). LQD (US investment graded bonds with an average duration of 9 years) gained only 0,8% (3,0%, Z-score 2,3). JNK was unchanged (0,5%) as yield spreads increased.

 

During each of the past five trading days while the technically significant FX developments occurred on EURUSD and JPY, gold climbed with an accelerating momentum, overtaking the USD1’600 resistance and leading precious metal to make significant headway vs. all currencies. Gold rallied 5,2% (9,6%, Z-score 2,8) while Silver rallied 5,8% (4,8%, Z-score 2,4). Major Gold Mines (GDX) rallied 8,2% (4,7%, Z-score 2,8). Gold in CHF along with Gold in USD are the last two gold pairs still trading below their all-time highs dating from 2012. Gold in CHF is now gunning for and getting fairly close to this milestone. Once crossed (in about 2%), it will invariably draw some attention and likely fuel another leg-up for gold, in our view.

 

Goldman Sachs Commodity Index gained 1,1% (-8,9%). WTI Crude dropped -0,4% (-15,1%).

 

Over the week end…

 

The Nikkei dropped -0.4%, the CSI300 dropped -1%, the Kospi shed -3%  and US S&P 500 futures dropped 1.4% (Nasdaq -2%) overnight while gold gained 1% after the number of coronavirus cases outside of China increased (20 fold increase Korea in 5 days while Italy also cancelled the Venice Carnival and other events after the number of cases increased to 140) and concern grew that global economic growth could take a larger and more sustained hit. Finance chiefs and central bankers from the world’s largest economies said they were seeing downside risks to the global economy persisting.

 

France’s Francois Villeroy de Galhau speaking at the Group of 20 meeting of central bankers and finance ministers in Riyadh said “If we don’t see a rapid V-shaped effect there must be some decision to act in a coordinated way,” on the sidelines of the G-20. “There was the feeling that if the policy mix needed to be strengthened in the face of coronavirus, it couldn’t be only monetary policy. There is still monetary space but it is more limited than before “. “It is even true in the US, so therefore questions of fiscal space and structural reforms are back in force.” Italy’s I. Visco said “We must use fiscal policy because monetary policy is already very very accommodative around the world, and it’s uncertain that we can do more on that.”

 

The Democratic presidential debate in South Carolina is on Tuesday.

 

Chancellor Angela Merkel’s party plunged to a post-World War II low in a state election in Hamburg. Merkel’s Christian Democratic Union took 11.2% of the vote on Sunday. The biggest gainer was the Green party, which doubled its share to a projected 24.8%

 

Trend Score Card

 

 

 

 

 

 

US & International Equities

Check out US and International Stocks’ Technical Trend Status.

 

Sector Trend & Momentum

Check equity sectors’ trend and performance …and when they break out!

 

Fixed Income

Check out 10Y US Treasury and Bund yields, their trend, expected Fed rate moves and speculative positioning in 10-year Treasury Futures.

 

US Recession Risk Radar

A comprehensive list of economic indicators to compare the current situation with previous recessions.

 

The Dollar

Check out where the Dollar stands Trendwise and Breakoutwise vs. G7 and EM counterparts.

 

Precious Metals

Check out where precious metals stand Trendwise and Breakoutwise. Get a sense of options (cumulative open interests on calls and puts) and futures traders’ sentiment (non-commercials open positions).

Check out how precious metals, the dollar and the Stock market correlate with each other and speculative futures positioning on Gold and the Dollar.

 

Why Trend Following Matters and How It Can Help You?

 

A disciplined and rule-based trend following investment approach can serve as an effective portfolio insurance technique.

 

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Our Portfolio Management and Advisory Services

 

BentinPartner GmbH is a Swiss registered independent financial adviser. We offer four different portfolio management mandates:

 

- The “Global Strategic” (GS) mandate invests your portfolio according to an optimized strategic benchmark. This allocation delivers the “beta” (or markets related) performance of your portfolio while we seek to generate additional “alpha” (“skills related) performance with tactical adjustments, using a predefined maximum “value at risk” envelope. Most of the portfolio’s performance is derived from the strategic Benchmark (beta).

- The “Global Tactical” (GT) mandate invests your portfolio without tracking a strategic asset allocation (or benchmark) and pursues a “total” as opposed to “relative” return objective. With this mandate, we seek to beat the best of “cash” or of the MSCI World Equity index, applying mostly tactical considerations, using a predefined maximum “value at risk” envelope and targeting not to exceed a predetermined overall portfolio volatility.

- The “Trend/Momentum” (TM) mandate, builds a diversified “All Weather” investment portfolio and applies a rule-based Trend/Momentum methodology to adjust this “trend neutral” allocation. We track trends across asset classes on a daily basis and adjust your portfolio in a semi automatic (there is always a pilot in the plane) fashion applying trend changes signals.

- The “Currency Overlay” (CO) mandate seeks to generate “alpha” applying a currency overlay with a limited leverage (not exceeding 100% of NAV). You control the portfolio allocation (which can be a pool of cash, stocks, bonds or gold) and we manage in overlay the FX exposure of your portfolio, seeking to add a total FX return of 4% to 7%.

 

For more information on our risk management and investment methodology, please check our web site.

 

We deliver transparent, professional, tailor-made, and competitive asset management services, seeking to fulfill our fiduciary duty at all times.

 

 

Please visit our web site or call us at +41615444310. We’d love to hear from you and see how we can further assist you.

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© Copyright by BentinPartner llc. This communication is provided for information purposes only and for the recipient's sole use. Please do not forward it without prior authorization. It is not intended as a recommendation, an offer or solicitation for the purchase or sale of any security or underlying asset referenced herein or investment advice. Investors should seek financial advice regarding the suitability of any investment strategy based on their objectives, financial situation, investment horizon and particular needs. This report does not include information tailored to any particular investor. It has been prepared without any regard to the specific investment objectives, financial situation or particular needs of any person who receives this report. Accordingly, the opinions discussed in this Report may not be suitable for all investors. You should not consider any of the content in this report as legal, tax or financial advice. The data and analysis contained herein are provided "as is" and without warranty of any kind. BentinPartner llc, its employees, or any third party shall not have any liability for any loss sustained by anyone who has relied on the information contained in any publication published by BentinPartner llc. The content and views expressed in this report represents the opinions of Marc Bentin and should not be construed as guarantee of performance with respect to any referenced sector. We remind you that past performance is not necessarily indicative of future results. Although BentinPartner llc believes the information and content included in this report have been obtained from sources considered reliable, no representation or warranty, express or implied, is provided in relation to the accuracy, completeness or reliability of such information. This Report is also not intended to be a complete statement or summary of the industries, markets or developments referred to in the Report. 

 

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