Sunday, January 26, 2020
Please
find below our latest Weekly Trend Update Report covering major
asset classes and currencies.
Have
a nice week ahead.
Marc
Bentin
Bentinpartner GmbH
Trend
Status Update
The consensus at the Davos Forum is often looked at as a contrarian
indicator. Some suggested that this year’s broadly shared opinion in Davos was the
exceptional resilience of equity markets to economic and political uncertainties
and disruptions, supported by the umbrella of extremely accommodative Central
Banks’ monetary policy. It is too early to judge but the outbreak of the corona
virus is an unexpected “curve ball” with the potential to unsettle the resilience
of consumers beyond China with their behaviour likely to be affected by a diminished
appetite to spend and travel. History also showed that the outbreak of SARS in
2003 caused a (temporary) 10% stock market correction before moving on… On the
other side of the coin, there is the possibility that these serious health (and
growth) related concerns will accelerate the Fed’s easing cycle, encouraging it
to cut rates, possibly all the way to zero (but not beyond). Last week brought
a dovish ECB and speculation that the yearly review could lead to a revision of
the ECB inflation objective (see FT article of this week end). The Fed will meet this week. The Wall Street Journal over the week end suggested the way forward for the
Fed could be to consider yield curve anchoring. This would likely imply further interest rate
cuts and the resumption of genuinely called QE, as the only question would then
be how far on the curve (but beyond Tbills!) the Fed
would be buying bonds in order to cap rates.
Over the past week, the S&P500 dropped -0,6% (2,1% YTD) while the
Nasdaq100 gained 0,2% (4,7% YTD). The US small cap index sold off by -2,4%
(-0,2% YTD). CBOE Volatility Index rallied 18,2% (5,7% YTD) to 14,56. AAPL gained 1,0% (8,4%). FB dropped -1,7% (6,2%). AMZN dropped -0,9% (0,7%). NFLX rallied 4,3% (9,1%, Z-score
2,4). GOOG gained 1,0% (9,7%). MSFT dropped -0,7% (4,7%). INTC rallied 14,8% (14,4%,
Z-score 3,7). IBB
(ISHARES NASDAQ BIOTECHNOLOGY) sold off by -4,5% (-3,0%, Z-score -2,5). On the macro side, in the latest indication that
lower mortgage rates are helping the housing market, US home sales jumped in
December to a 2 years high while existing home sales that make up 90% of US
home sales, jumped 10% in December on a year over year basis. The Eurostoxx50
dropped -0,6% (1,3%).
Diversified EM equities (VWO) sold off by -2,9% (-0,4%), underperforming
the S&P500 by-2,3% with Chinese shares understandably, hit the hardest by
the outbreak of the corona virus. On the week, CSI300 Chinese equity index
(ASHR) sold off by -6,0% (-3,4%). Indian shares (EPI) dropped -1,4% (1,3%). Russian
shares (RSX) dropped -1,3% (3,6%).
The Dollar DXY Index (UUP) measuring the USD performance vs. other G7
currencies gained 0,6% (1,6%) while the MSCI EM currency index (measuring the
performance of EM currencies vs. the USD) dropped -0,5% (-0,2%).
Including with this morning’s move, 10Y US Treasuries rallied -18bps (-28bps, Z-score -2,5)
to 1,64%. 10Y Bunds
dropped -12bps (-15bps, Z-score -2,2) to -0,34%. 10Y Italian BTPs rallied -14bps (-18bps, Z-score
-2,7) to 1,23%, underperforming Bunds by 2bps.
Quite noticeably, US High
Yield (HY) Average Spread over Treasuries climbed 36bps (20bps, Z-score 3,0) to
3,56%. US Investment Grade Average OAS climbed 2bps (3bps)
to 1,04%. In European credit markets, EUR 5Y Senior Financial Spread climbed
2bps (2bps) to 0,53%.
Gold gained 1,2% (4,1%) while Silver gained 0,8% (2,1%). Major Gold
Mines (GDX) gained 1,9% (-0,2%).
Commodities were the hardest hit sector last week. Goldman Sachs Commodity Index
sold off by -4,8% (-6,8%, Z-score -2,5). WTI Crude sold off by -7,4% (-11,3%,
Z-score -2,2).
While we cut most of our FX Model’s risks last week, we are sticking
with an overweight on RUB (vs. USD) as RUB
remains likely to benefit from its higher yielding status, Russia’s solid
fiscal stance and the rising backing of its currency by Gold which itself remains
supported by an array of reasons going well beyond the current corona virus crisis
(those were outlined in Ray Dalio’s and P. Tudor Jones interviews last week in Davos). IMF’s Georgieva warned about
the debt build-up reaching a danger point while US Treasury S. Mnuchin talked
about the Trump’s plan for tax cut 2.0 (targeting the middle class), positing that
growth would pay for it.
Over the week end…
The headlines on the spreading of the corona virus were not particularly
reassuring with the death toll rising to 80 and global cases brought to 2500 with
increased concerns that the 8 days incubation period during which contamination
occurred (and can still occur) without detection (and prior to China’s decision
to quarantine 13 cities ), significantly increased the risks of spreading the virus.
The initial market response overnight is for the S&P futures to drop
of 1.3%, 1%, 0.8% (and counting) from
Friday’s close with bonds, gold and safe haven currencies slightly higher and
EURUSD mostly stable (despite having suffered a technical setback last week
more as a result of a dovish ECB than following USD safe haven purchases). Oil
is marked 2% lower and is more unlikely to rebound (unlike stocks perhaps).
Trend Score Card
Click here for technical annotations.
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?
Trend following offers guidance
as to when to join and when to leave an asset class with changing trend
characteristics. A disciplined and rule-based trend following investment approach
can serve as an effective portfolio insurance technique. Our purpose, beyond tracking
economic, political and monetary developments is to assist readers investing in
global markets with a keen focus on trend formation covering major asset classes.
To receive a Daily Trend Status
Update and round the clock market and economic instant messages, join a
free trial of our premium research.
To learn more about our premium research:
https://www.bentinpartners.ch/research
To join our free trial and choose your delivery
preferences:
https://www.bentinpartners.ch/subscribe
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.
Join us on Linked In
To be removed from the list,
please send us an email by clicking here, mentioning “unsubscribe” in
the title.
To ensure that our emails reach
your inbox and not your spam folder, please consider adding Marc.Bentin@BentinPartner.ch,
Marc.Bentin@BentinPartners.ch and our alternate address Bentinpartner@gmail.com
to your safe address book. If you are using Microsoft Outlook, simply right
click on our email address, choose "add to Outlook contacts" and then
"save".
Important Disclaimer
© 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.
#fx #forex #investing
#markets #riskmanagement #bankingindustry
#finances #money #traders #quants