Monday, June 29, 2020
Please
find below our latest Weekly Trend Update Report covering major
asset classes and currencies.
Have
a nice week.
Marc
Bentin
Bentinpartner GmbH
Trend
Status Update
Over the past
week, the S&P500 sold off by -2,8% (-6,8% YTD) while the Nasdaq100 dropped
-1,6% (13,0% YTD). The US small cap index shed -3,1% (-17,5% YTD). XLP (CONSUMER STAPLES SPDR) sold
off by -4,2% (-9,3%, Z-score -2,2). Lat Friday’s COT report showed that
speculative net shorts on the S&P500 future (non-commercials net shorts)
had been largely closed as per last Tuesday’s close (used for Friday’s report)
which may explain part of last week’s correction (combined with the bad news on
Covid, the IMF grim forecasts and a worse than expected
jobless claims report on Thursday).
CBOE Volatility Index dropped -1,1% (152,0% YTD) to 34,73.
The Eurostoxx50 dropped -1,8% (-12,9%), outperforming the S&P500 by
1,1%.
Diversified EM equities (VWO) dropped -0,7% (-11,1%), outperforming the
S&P500 by 2,1%.
The Dollar DXY Index (UUP) measuring the USD performance vs. other G7 currencies
dropped -0,1% (1,5%) while the MSCI EM currency index (measuring the
performance of EM currencies vs. the USD) dropped -0,1% (-4,5%). For an
interesting summary of where we stand in terms of debt sustainability, FX and
currency regime changes at similar junctures in history, we highly recommend
reading this piece of Indosuez of which some excerpts are reproduced below:
“Lastly, shifts in economic regime have
historically led to changes in exchange rate regimes (the gold standard from
1879 to WWI, the currency areas of the 1930s, the Bretton Woods system from
1944, the end of the gold/dollar convertibility in 1971). There is huge uncertainty
as to the possible scenarios of a reconfiguration of our existing currency
regime. A key factor of the period into which we are entering is probably that
of a calling into question of the value of currencies against gold if all of
the central banks increase the size of their balance sheets. The second
characteristic of this new paradigm will possibly be the acceleration of the
rise of the yuan to reserve currency status, and potentially an anchor currency
for other currencies in the region. In this context, the euro is set to remain
a reserve currency but will continue to be at the mercy of the improvement in
fiscal coordination and the perpetuation of the role assumed by the ECB in a
still incomplete monetary zone.
Is there a risk level in terms of the debt-to-GDP
ratio?
Carmen Reinhart and Kenneth Rogoff, in their book
entitled This time it’s different (2009) and their paper Growth in a time of
debt (2010), argue that for levels of debt in excess of 90% of GDP, governments
run a higher risk of seeing a lasting decline in GDP growth, losing control of
the debt-to-GDP ratio and, in some cases, losing control of inflation. The
basic rule of sustainability of the debt-to-GDP ratio is expressed through the
difference between the real interest rate (i.e. net of inflation) and the
economic growth rate. In certain configurations, the increase in debt makes the
markets more distrustful, leading to a rise in the interest rate at which the
country in question is financed, which automatically results in a deterioration
in budget balances, requiring fiscal adjustments that are painful for growth:
this was the case for several countries in the European Monetary System (EMS)
in the 1990s and the case of the southern European countries from 2011
onwards.”
10Y US Treasuries rallied -7bps (-128bps) to 0,64%. 10Y Bunds dropped
-7bps (-30bps) to -0,48%. 10Y Italian BTPs rallied -7bps (-12bps) to 1,29%,
matching Bunds.
US High Yield (HY) Average Spread over Treasuries climbed 37bps (279bps)
to 6,15%. US Investment Grade Average OAS climbed 10bps (59bps) to 1,60%.
In European credit markets, EUR 5Y Senior Financial Spread climbed 7bps
(33bps) to 0,85%.
Gold gained 0,9% (16,7%) while Silver gained 0,9% (0,1%). Major Gold
Mines (GDX) rallied 4,9% (20,2%).
Goldman Sachs Commodity Index sold off by -3,8% (-33,8%). WTI Crude sold
off by -5,7% (-37,5%). DBA
(INVESCO DB AGRICULTURE FUND) sold off by -2,4% (-20,5%, Z-score -2,5).
Over the week end…
Ø Trump’s Twitter feed ran hot calling fake all bad
news related to Covid’s second wave and his personal
unfavourable polls. His 14 points lag according to the latest polls is not too dissimilar
from where he stood 4 years ago at the same time of the campaign. Trump
referred to the “silent majority” supporting him which will certainly express
itself more confidently in the boots than in the polls… He must be praying
crossing his fingers that a few more statues of founding fathers will be
brought down (despite his heroic efforts to keep them standing) as this could
also be self-defeating to the cause of those who believe that the world cannot
afford another 4 years of a Trump Presidency. Everything that is excessive is
useless (and counterproductive to the original noble cause) … and this applies
to “Black Life Matters” even if the hypocrisy of the day pretends otherwise.
The point of view of BET founder on the matter is well worth considering as well.
Ø After a 0.5% initial decline, the S&P500 future
recovered overnight, now trading with a slight positive tone, supported by a
Golden cross technical formation on China’s CSI300 index.
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).
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:
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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
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predefined maximum “value at risk” envelope. Most of the portfolio’s
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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.
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(TM) mandate, builds a diversified “All Weather” investment portfolio and
applies a rule-based Trend/Momentum methodology to adjust this “trend neutral”
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your portfolio in a semi automatic (there is always a pilot in the plane)
fashion applying trend changes signals.
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