Monday, March 30, 2020

 

Dear Reader,

 

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

Have a nice week and stay safe.

 

Marc Bentin

Bentinpartner GmbH

 

Friday’s Snapshot

 

Global Chartbook PDF

 

 

 

Trend Following

 

       


 

Trend Status Update

 

The S&P started “limit down” at the beginning of last week (-5% in the overnight session) after the US Congress failed to agree on the expected fiscal support stimulus package before US markets opened last Monday. This precipitated the Federal Reserve into action on Tuesday with a massive liquidity infusion and miscellaneous backstop programs, dating from the 2007 crisis (and new ones set in place). They extended over the corporate debt market, the commercial paper market, the municipal bonds and more broadly to the ETF market habitat as a whole which suffered a massive stroke with several ETF’s trading at a deep discount to their NAV, across asset classes, unable to cope with liquidation pressures. The unleashing of the different programs (PMCCF, SMCCF, MMLF, CPFF, MSBLP, TALF…) by the Federal Reserve last week essentially did not equate to QE4 but QEinfinity and was accompanied by the US Congress ultimately agreeing on Thursday to a USD2.2trn fiscal support program. The ECB also unleashed a EUR750bn (PEP) support program, lifting regulatory limits to grant it maximum flexibility to reduce spreads widening in the European periphery.

All these measures averted for now the worst of the consequences of a potentially massive deleveraging and fuelled a powerful rally which was brought to end on Friday when indices dropped -3 to -4%.

These support programs are massive but we may still get more of them later on, as the COVID-19 situation evolves and in response to the economic fallout of locking down half of the world population. We saw last week the first impact on US “jobless claims” which blew out all expectations coming out at 3.3mn. More data will come as shockers whatever we expect in the coming weeks. A harsh recession this quarter and possibly a depression the ensuing quarter will keep policy makers on their toes.    

Among the catalysts to look forward (more than a 20% reflex rally on a “shock and awe” monetary and fiscal bazooka) will be the end of this lockdown and the flattening of the pandemic curve. Some triage will be necessary as the current pandemic is unlikely to be a “one off event”. That being said, not everybody will be bailed out. Cruising companies will not be included in the US bailout as it appears that they are not American for the most part and are domiciled in offshore financial centres for tax optimisation purposes.   

There will be long term consequences from changed social distancing habits which will affect sport, restaurants and tourism perhaps for longer than currently estimated. Others aspects will have a silver lining to it. Less cruising and flying should have a have will command a lighter ecological footprint. Supply chains will also be radically altered, rebalancing job opportunities around the world.    

 

Over the past week, the S&P500 rallied 11% (-21% YTD) while the Nasdaq100 rallied 9% (-13% YTD). The US small cap index recovered 11% (-32% YTD).

CBOE Volatility Index dropped -01% (376% YTD) to 65.54. The Eurostoxx50 rallied 7% (-27%), underperforming the S&P500 by-4%. Diversified EM equities (VWO) rallied 6% (-26%), underperforming the S&P500 by-5%.

 

The Dollar DXY Index (UUP) measuring the USD performance vs. other G7 currencies sold off by -5% (3%) as funding dollar problems eased while the MSCI EM currency index (measuring the performance of EM currencies vs. the USD) gained 1% (-6%).

 

10Y US Treasuries rallied -14bps (-127bps) to 0.64%. 10Y Bunds dropped -15bps (-29bps) to -0.48%. 10Y Italian BTPs rallied -30bps (-9bps) to 0.95%, underperforming Bunds by 15bps.  After spiking 44 bps the previous week, investment-grade spreads this week dropped 40bps to 112 bps. LQD (investment graded ETF) rallied 14.7%, supported by intervention more than reversing the previous week’s 13.3% decline and closing the fund at a premium of 1.6%. JNK (High Yield short term ETF) closed with a premium of +1.2%.

 

Gold rallied +5% (+7%) while Silver rallied 9% (-19%). Major Gold Mines (GDX) rallied 19% (-17%).

Gold rose on the heels of massive QE programs and exploding fiscal programs.  Goldman issued on Thursday a “buy recommendation” on the old relic which helped at the margin but the most noteworthy development were the growing strains between physical and paper gold (exposed here) in response to both a supply (Swiss refiners had to stop their operation as well) and a demand shock. This translated into a spread a USD40 to USD80 at some point between the spot paper gold price and the CME futures price going into the delivery of the March contract (but persisting today in the next maturity) as the shipment of gold remains impaired by the sanitary situation.  Over the near term, the scarcity of physical gold may draw some attempt to weaken the price of paper gold but this will likely be met with more buyers for which there will be no product at this reduced price, likely exacerbating the difference between paper and physical gold price.

 

Goldman Sachs Commodity Index dropped -1% (-41%). WTI Crude sold off by -11% (-66%).

 

Over the week end…

 

Bill Gates who is completely on top of all issues related to pandemics around the world with his philanthropic activities urged a Nationwide 10-week lockdown to mitigate the spread of the virus, on fear of nightmare scenario (now unfolding in New York, it would seem) as he called the initial US response slow and chaotic.

 

Futures are dropping -0.8%, well off their worst levels, on corona virus related fears and following a further decline in oil prices but with the decline mitigated by expectations the Fed could also end up intervening officially in equity markets as well (like Japan) if need be.

 

The People’s Bank of China reduced the interest rate on the 7-day reverse repurchase agreements to 2.2% from 2.4%, as it injected 50 billion yuan ($7.1 billion) into the banking system. On Friday, China said it will increase its fiscal deficit as a share of GDP, issue special sovereign debt and allow local governments to sell more infrastructure bonds as part of a package to stabilize the economy, Bloomberg reported.

 


Trend Score Card

 

 

 

 

Click here for technical annotations.

 

 

Trend Scorecard   

 

 


US & International Equities

Check out US and International Stocks’ Technical Trend Status.

 

 

Stocks   

 


Sector Trend & Momentum

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

 

Sector Analysis   

 

 


Fixed Income

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

 

Fixed Income

 

 


US Recession Risk Radar

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

 

US Recession Risk Radar

 

 


The Dollar

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

 

The Dollar

 

 


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).

 

Precious Metals

 

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

 

Gold vs. USD vs. SPX

 

 


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.

 

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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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