Please find below our latest Weekly Trend
Report.
Have a nice start of the week.
Marc Bentin,
Bentinpartner GmbH
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Monday, October 06, 2025
US stocks continued
their relentless rally last week albeit with a fly in the ointment as cracks
continued to appear in the private credit boom amidst the collapse of First
Brands, a US auto parts company that appears to have accumulated more than
USD4bn in opaque debt by tapping all sorts of non-bank lenders.
This is occurring within
a context where companies borrowed a record USD207bn in US investment grade in
September at the same time as a wave of high yield debt issuance showed no sign
of abating, also reaching a near record.
In this context, the
share price of private credit firms underperformed meaningfully last week (KKR
sank 15% over 7 days, Apollo -12% and Areas Management -17% over the same
period).
Short seller Jim Chanos
(known for exposing Enron accounting chicanery and benefitting from its
ultimate collapse) in an interview to the FT said he was predicting more First Brands
fiascos in private credit.
Chanos likened the
near USD2trn private credit apparatus fueling Wall Street’s lending boom to the
packaging of subprime mortgages that preceded the 2008 financial crisis due to
the layers of people in between the source of the money and the use of the
money. “There is going to be hell to pay when lending standards tighten,
speculative flows reverse, deleveraging commences and credit becomes less
freely available”, Chanos opined.
The bitter taste of
First Brand was “peppered” by Monday’s announcement of the USD55bn take-private
of video game maker Electronic Arts by a consortium including Saudi-Arabia
sovereign Wealth Fund and Silver Lake Management, run by the son in law of D.
Trump.
The real concern, might
be around what happens next to the private credit boom and fast developing “vendor
financing” scheme observed in the AI space which we have covered in our remarks from last Friday. Those concerns also led to the AI trade (and
MAG7) to underperform last week.
Some were reassured by
Goldman Sachs Most Short Index rallying another 9% last week while Biotech also
squeezed nearly 8% but it could also be an indication of trouble in some Long
/Short hedge fund strategies.
Also, Goldman noted a
bizarre phenomenon that VIX has actually recently increased due to “call”
buying (instead of the traditional “put” buying seeking protection), possibly
indicative of a “peak momentum chasing” frenzy as calls in relation to puts
option buying volumes reached an all-time high last Wednesday,
In any event, we raised
our level of awareness last week to the possibility of a near term correction and
added some equity hedges to our core long trend and momentum strategy in US and
European markets (while reinforcing our exposure to precious metals).
On the economic side,
the non-release of the US Non-Farm Payrolls report due to the government shutdown
left investors to rely on private reports evidencing more job weakness ahead, contributing
to make the outlook more uncertain.
While US bonds closed
mostly unchanged, and Japanese bonds just 1bp higher, European bonds rallied
last week by 5 to 8 bps across the board with Spain and Italy outperforming
German bunds by 3 bps.
The Dollar Index
declined -0.4% last week (-9.9% ytd) while Gold
surged 3.4% to a
fresh record (and more gains overnight). WTI dropped on supply and growth
concerns while copper surged 7.1%
D. Trump said “a lot
of good” could stem from the government shutdown, threatening to oust federal
workers and eliminate programs that are favored by Democrats. Democrats said they
were ready to battle, assuming the republicans have more to lose or to be
blamed for, from a government shutdown.
The US President also
faced more pushback last week as White House nominees to lead the BLS and CFTC
were withdrawn after both ran into political resistance (E. J Antoni was deemed
unqualified to lead an agency releasing key economic data).
Same on his trade
policy …after South Korea said Washington’s terms of the trade deal were unrealistic.
“We are not able to pay USD350bn investment pledge as part of a broader deal to
lower US tariffs to 15% from 25%”, South Korea’s officials said.
Taiwan’s top trade
representative also pushed back on the idea that the island will shift more of
its chip production to the US.
The willingness of D. Trump
to “negotiate” with China (without a hammer) is also demonstrating that the US
is no more in a position to unilaterally weigh against China without fears of
painful retribution (not least in the field of exports of rare earth minerals).
According to people familiar wit the matter (and the WSJ), Xi Jinping is even
now chasing his ultimate prize; a change in US policy that Beijing hopes could
help pressing the US to formally state that the US formally opposes Taiwan’s independence.
Elsewhere in Europe,
much time was spent on trying to defend a more aggressive approach towards
Russia, the same one that failed to change the outcome of the war, except for
jeopardizing and severely impairing Europe’s competitiveness and growth
prospects at the exception of a small debt-financed growth boost from a “war
machine” preparation.
Over the past week,
the S&P500 gained 1,1% (14,2% YTD) while the Nasdaq100 gained 1,2% (18,0%
YTD). The US small cap index gained 1,9% (11,3% YTD). AAPL gained 1,0% (3,0%).
The Equally Weighed SP500 gained 1,4% (9,1% YTD, Z-score
2,2), outperforming the S&P500 by 0,3%. The
median SP500 YTD return closed the week at 8,4%.
Cboe Volatility Index rallied 8,9% (-4,0% YTD) to
16,65.
The Eurostoxx50 rallied 2,8% (18,2%,
Z-score 2,2), outperforming the S&P500 by 1,6%.
Diversified EM
equities (VWO) rallied 2,3% (24,4%), outperforming the S&P500 by 1,2%.
The Dollar DXY Index
(UUP) measuring the USD performance vs. other G7 currencies dropped -0,4% (-6,6% ) while the MSCI EM currency index (measuring the
performance of EM currencies vs. the USD) gained 0,2% (6,8% ).
10Y US Treasuries was unchanged
(-43bps) to 4,14%. 10Y Bunds dropped -5bps (33bps) to 2,70%. 10Y Italian BTPs
rallied -7bps (-1bps ) to 3,51%, outperforming Bunds by
-2bps.
10Y French OAT's rallied
-6bps (31bps) to 3,51%, outperforming Bunds by -1bps.
US High Yield (HY)
Average Spread over Treasuries climbed 2bps (-19bps) to 2,68%. US Investment
Grade Average OAS dropped -1bps (-9bps) to 0,78%.
In European credit
markets, EUR 5Y Senior Financial Spread dropped -1bps (-5bps) to 0,59%.
Gold gained 1,8%
(48,7%) while Silver rallied 2,7% (66,7%). Major Gold Mines (GDX) rallied 3,2%
(127,3%).
Goldman Sachs
Commodity Index dropped -1,8% (4,8%). WTI Crude sold off by -2,6% (-13,8%).
Overnight in Asia…
Ø S&P future +20 points;
Hong Kong -0.7%; Nikkei+4.5%; China +0.5%
Ø Japanese stocks stormed
higher (with bonds unchanged) xausueafter a
ruling-party vote positioned pro-stimulus lawmaker Sanae Takaichi (a
proponent of easy fiscal and monetary policy) to become the next prime
minister. The yen hit a record low against the euro and dropped back above 150
vs. USD.
Ø Other Asian shares climbed
in sympathy, often to a record, while Gold powered towards 4’000 (now USD3’924)
as investors bet on looser (international) monetary policy while the US government
remained shut.
Ø Oil is recovering 1.5%
from its -7% decline last week after OPEC said on Saturday it will raise its
output by much less than expected (137k vs. 500k “feared”)
Ø French President Macron’s
appointment of a broadly unchanged cabinet sparked an immediate backlash from
opposition parties, undermining Prime Minister Sebastien Lecornu’s chances
of surviving a make-or-break week in parliament, Bloomberg reported. Far-right
leader Marine Le Pen said that Macron’s continuity was “pathetic”
and leaves her National Rally party “speechless.” The Socialist Party repeated
warnings that it would support a motion to topple Lecornu unless he marks a
clear adjustment in direction, Bloomberg also reported.
Ø President D. Trump is
pressing Israel and Hamas to seal a settlement to the two-year conflict. For
Trump, a truce in the coming days and the freeing of the hostages could boost
his campaign to win the Nobel Peace Prize, with the next winner being announced
on Oct. 10.
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Our Trend following Models
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