Monday, July 13, 2020
Please
find below our latest Weekly Trend Update Report covering major
asset classes and currencies.
Have
a nice week end.
Marc
Bentin
Bentinpartner
GmbH
Trend
Status Update
Overall, markets focussed on the intensifying economic recovery (the US economic surprise index going parabolic shows most
metrics of recovery beating expectations) and declining mortality rather than
on rising infection rates. The IPO market seemed to be catching a bid as well
as companies rushed to bolster their balance sheet.
After wobbling for two days, US stocks squeezed on Friday despite
Chinese stocks ebbing back this time on official comments tempering the
week-long rabid enthusiasm for Chinese stocks. A parallel was drawn with what happened in 2015 with the last
Chinese stocks rally that ended in tears. Today’s situation is fundamentally
different, with China on a firm path to assert its financial, technological and
geopolitical clout while only coming off from three years of underperformance.
That being said, there are causes for concern regarding Beijing which
has moved to de facto seize control of Hong Kong. It also mobilised its
military against Taiwan threatening of an invasion and it made several military
incursions into India that killed several Indians in borders incidents, in all
impunity and no fear of retorsion. No doubt that China is in an accelerating
power grab and that Western powers have been naive to think that China shared
more democratic than hegemonic inclinations. The covid situation proves to be a
catalyst for this but it started with Western consumers buying Chinese goods,
Western companies producing locally and accepting technology transfers in
exchange for a (sometimes) elusive access to the promised land and the pursuit
of higher profits. It continued with Western shareholders accepting to sell
out, most often to government controlled public companies, hundreds of billions
worth of Western companies and key technology with freshly printed Chinese
money (Syngenta being a USD50bn case in point).
Where does that leave us as an investor? Should we refrain from
investing in China or Russia which are both rising and increasingly dominant
geopolitical and economic powers? Just like we should filter out anything that
is not 100% ESG compliant?
Each and every one should decide for herself/himself ...but as a
European I feel more comfortable owning a mix of stocks including EM names from
Russia and China because the disorderly action on US tech is not reassuring
either (not to speak about the way the US has been treating its traditional
“allies”). Perhaps, there are only two genuine monopolies worth their dollars;
Microsoft and Google with everything else more or less beatable, breakable and
replicable.
In any case and before even considering that Chinese shares could be in
a “bubble”, we should look at investors piling over each other to buy Tesla, an
average quality car producer sold and priced as a perfect software company with more “silly” valuation a distinct
possibility in the future, now that the company seems set to enter the S&P500
with trillions of passive investment following this equity benchmark.… For what
it is worth, Tesla added 28% last week, accruing month to date gains to +51%
and YTD gains to 269%.
Over the past week, the S&P500 gained 1,7% (-1,3% YTD) while the
Nasdaq100 rallied 4,7% (24,2% YTD). The US small cap index dropped -0,8%
(-14,7% YTD).
Cboe Volatility Index dropped -1,4% (98,0% YTD) to 27,29.
The Eurostoxx50 gained 0,2% (-10,2%), underperforming the S&P500
by-1,5%.
Diversified EM equities (VWO) rallied 4,8% (-3,1%), outperforming the
S&P500 by 3,1%. CSI300
Chinese equity index (ASHR) rallied 10,6% (16,2%). Indian shares (EPI)
gained 1,5% (-15,0%). Russian shares (RSX) gained 1,0% (-14,2%).
The Dollar DXY Index (UUP) measuring the USD performance vs. other G7
currencies dropped -0,6% (0,5%) while the MSCI EM currency index (measuring the
performance of EM currencies vs. the USD) gained 0,4% (-3,7%).
10Y US Treasuries rallied -2bps (-127bps) to 0,64%. 10Y Bunds dropped
-3bps (-28bps) to -0,47%. 10Y Italian BTPs dropped -3bps (-19bps) to 1,23%,
outperforming Bunds by 0bps.
US High Yield (HY) Average Spread over Treasuries dropped -3bps (261bps)
to 5,97%. US Investment Grade Average OAS climbed 0bps (47bps) to 1,48%.
In European credit markets, EUR 5Y Senior Financial Spread climbed 1bps
(25bps) to 0,77%.
Gold gained 1,3% (18,5%) while Silver rallied 3,9% (4,9%). Major Gold Mines (GDX) rallied 6,2%
(31,1%).
Goldman Sachs Commodity Index gained 1,3% (-29,9%). WTI Crude dropped
-0,2% (-33,6%).
Over the week end…
Ø Asia tracking Wall Street's advance (Nikkei +1.8%;
CSI300 +0.95%) and U.S. futures (+16 points) is rising ahead of the earnings
season.
Ø The earnings season kicks off this week with
JPMorgan, Citi and Wells reporting before the US open on Tuesday along with a
few consumer names and Netflix.
Ø The pace of new virus infections in the U.S. slowed
to 1.7%, below the seven-day average, but Florida reported 15,299 new cases,
its biggest one-day rise, as Disney World reopened its gates.
Ø OPEC+ meets on Wednesday to consider curbs of 9.6
million barrels a day or taper to 7.7 million as planned. The aim is to avoid a
"taper tantrum" of the sort the Fed faced when it proposed tightening
monetary policy in 2013.
Ø Business
optimism and consumer prices are due out on Tuesday, Industrial production on
Wednesday and June retail sales on Thursday (expected at -4.5% mom).
Ø Several Fed speeches including from New York Fed
President Williams and St. Louis Fed President Bullard are due.
Ø EU leaders
will meet in Brussels on Thursday for a summit to formalize agreement on the
EUR750bn pandemic recover plan.
Ø D. Trump is trailing in the polls; caught between
the scissor’s effects of a pandemic (he was seen wearing a mask this week end)
and a radical drift. The former largely has been detrimental to him but the
latter is largely positive. Should equity markets hold (or inflate further)
with anything but a total disaster unwinding on the sanitary front, D. Trump
will gather his political instincts to capitalize on the repulsion caused among
“a majority” of Americans by a movement that attacks American national symbols.
The more statues will fall, the more votes he will grab…
Trend Score Card
Click here for technical
terminology.
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.
Get the Score card of all major currency pairs in
terms of Trend, Momentum, Carry, GDP and Current account differential
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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