Monday, July 20, 2020

 

Dear Reader,

 

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

Have a nice week end.

 

Marc Bentin

Bentinpartner GmbH

 

Friday’s Snapshot

 

 

FX Overlay Model

 

 

Global Tactical Model

 

 

 

Trend Following

 

       


 

Trend Status Update

 

Over the week end and in a pattern that has become familiar, financial markets chose to ignore the bad news of the unfolding second wave of corona infections to focus on the imbedded good news resulting from the bad news which is the prospect of more global central banks and fiscal stimulus.

There was some good news reported with a widening range of potential vaccines in 2d and 3d stage. It is difficult to report on accumulating evidence that do not seem to have any lasting market impact but the risks of a second wave are becoming hard facts. The number of infections around the world hit 13mn, with 1mn added in just five days. WHO warned there would be no return to the “old normal” for the foreseeable future and that many countries were heading in the wrong direction. This applied to several key US states such as California, Texas and Florida that are being forced to partially unwind the reopening of their economy. There were also some disturbing new revelations that permanent immunity to the corona may not be possible, jeopardizing vaccine developments with several international studies indicating that the human body does not retain the antibodies building up during the infections, meaning serial contamination are a risk to contend with.

 

Over the past week, the S&P500 gained 1,3% (0,0% YTD) breaking even for the year while the Nasdaq100 dropped -1,7% (22,0% YTD). The US small cap index rallied 3,7% (-11,5% YTD).

While US stocks rose further, there were signs of nervousness with tech underperforming last week, as Netflix, one of the darlings of “stay at home” tech names, suffered a 7% correction (reducing its YTD gains to a still comfortable high double digit gain after new account openings  only reached half of Wall Street estimates). The absurdity of Tesla trading at 350+ times earnings continued nonetheless as short sellers got and keep getting squeezed. Let’s see what Wednesday brings when the company reports earnings. Before the company joins the S&P500 it will have to print four consecutive quarters of profits but the talk is already that the S&P is ready to make an exception for Tesla. The best time to lighten up on Tesla (for lack of better word) will be (in our admittedly perma-bear view) when it enters the S&P. At that point, the hoard (millions) of passive investors holding their one or two shares at distorted prices… will hold that share at an insane top plus the 40’000 new account holders at Robin Hood who reportedly added to their Tesla holdings during a single four-hours span on Monday as well. Smart money is already lightening up on tech and these new holders will have no lasting power when the correction genuinely starts…(imho).

Last week’s Banks results were mixed with large loan loss provisions contrasting with an explosion in investment banking results (for those banks involved in this activity).

Another illustration that markets have become detached from reality came with loss making “small caps” now outperforming money making ones by a large margin. As insolvency risk subsides, investors have flocked to unprofitable companies. As of the end of last year, 38% of Russell 2000 constituents were losing money. Since the market’s trough in March, their stocks have rallied about 79% on average. That compares with 47% for those that are profitable.”, Bloomberg wrote.

 

CBOE Volatility Index sold off by -5,9% (86,4% YTD) to 25,68.

The Eurostoxx50 rallied 2,2% (-8,2%), outperforming the S&P500 by 0,9%.

Diversified EM equities (VWO) dropped -1,3% (-4,4%), underperforming the S&P500 by-2,6%.

 

The Dollar DXY Index (UUP) measuring the USD performance vs. other G7 currencies dropped -0,7% (-0,2%) turning the dollar red for the year while the MSCI EM currency index (measuring the performance of EM currencies vs. the USD) dropped -0,1% (-3,7%).

The US Federal deficit incurred its largest monthly deficit in history reaching USD864mn in June, exceeding most “annual” deficits of the nation’s history. The 12month deficit came at 14% of GDP last month (beating the second largest 10.1% deficit of February 2010). That is without counting the new round of emergency stimulus being discussed by Congress and the White House at the moment. Technically, although EM currencies had a rough week, the Dollar index further weakened technically last week. Ray Dalio and Hugh Henry gave two recent interesting interviews on why they think the dollar is set to fall. We share their view that FX volatility is too low and set to rise.

 

10Y US Treasuries rallied -2bps (-129bps) to 0,63%. 10Y Bunds climbed 2bps (-26bps) to -0,45%. 10Y Italian BTPs rallied -6bps (-24bps) to 1,17%, outperforming Bunds by -4bps.

The number of Americans filing for jobless claims last week rose more than expected (+1.3mn last week, the 17th straight week when jobless claims rose more than 1mn). American Airlines warned it could furlough up to 29% of their workforce (while some others reported a larger 50% planned job cuts).

There was intensifying talks of the Fed contemplating some anchoring of the yield curve, not least supported by former Fed Chairmen B. Bernanke and J. Yellen.  

US High Yield (HY) Average Spread over Treasuries dropped -41bps (220bps) to 5,56%. US Investment Grade Average OAS dropped -7bps (40bps) to 1,41%.

In European credit markets, EUR 5Y Senior Financial Spread dropped -3bps (19bps) to 0,71%.

 

Gold gained 0,4% (19,2%) while Silver continued to catch up adding 1,4% (8,4%). Major Gold Mines (GDX) rallied 2,4% (34,3%). The slow grind higher in precious metals seems relentless. An interesting development emerged with investors in the gold futures market, reducing positions (some brokers also suspended trading in the gold emini future that allows to trade a smaller size than the full CME contract due to dwindling open interest and rising illiquidity) while investors continued to expand physical gold hoarding, suggesting a shift in the balance of power in the gold market. Gold ETF holdings rose to their highest level ever exceeding 3’000 tons while Gold in dollars still traded (for a little while) below its all-time highs.

Goldman Sachs Commodity Index gained 0,2% (-30,1%). WTI Crude gained 1,1% (-33,6%).

 

Over the week end…

 

After EU Leaders argued on how to roll out their recovery fund of EUR750bn. European Council President floated a proposal reducing handouts to EUR400bn (from EUR500bn originally). Dutch and Austrian Prime Ministers rejected the new offer, standing by a pledge to limit grants to EUR350bn.

 

Some polls are showing Biden leads by 14%...which had D. Trump irate…and branding polls showing him trailing as "fake". "Biden can't put two sentences together," Trump said when he was told about the poll. "They wheel him out. He goes up – he repeats – they ask him questions. He reads a teleprompter and then he goes back into his basement." Ugly enough not to relate what he said next….

 

Overnight action

Ø  Nikkei -0.3%; CSI300 +1%; S&P500 -11 points

Ø Three Tech IPO’s stocks debuts soared (some of them more than 200%) in China overnight.

Ø Export data in Japan declined -26.2% in June (vs. -24.7% expected) while imports dropped -14.4% (from -17.6% expected).

 

Next week…

Ø IBM will report on Monday and Tesla on Wednesday 

 


Trend Score Card

 

 

 

 

Click here for technical terminology.

 

 

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

 

Get the Score card of all major currency pairs in terms of Trend, Momentum, Carry, GDP and Current account differential

 

FX SCORECARD

 

 


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?

 

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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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