Over the past week, the S&P500 dropped -2,0% (15,3% YTD) and the Nasdaq100 shed -3,2% (19,9% YTD). The US small cap index dropped -2,4% (17,0% YTD). Last week’s worst sector was semis XSD (SPDR S&P SEMICONDUCTOR ETF) which sold off by -4,6% (29,7%). Utilities (relatively immune to trade war risks) fared best with XLU dropping only -0,6% (9,5%). Although US stocks managed to recover late on Friday (on optimistic trade talks conveyed on the Trump Twitter feed…that were deceived in the same Trump Twitter feed over the week end in a modus operandi that has become only too familiar and which is aimed at saving the US equity market in relative terms) to finish into the green, the tech sector nursed heavier losses last, dragged down by poor Intel guidance and the IPO of Uber (the biggest ever IPO of a non-profit making company) which fared as one could have feared given the global context exacerbated by the poor value proposition of Uber, leaving IPO investors nursing a 5% loss on introduction day (LYFT also dropped 8% bringing its cumulative loss to 29.2% since going public two months ago). As opposed to what prevailed in the past (for example when AOL went public) where IPO’s served their capitalistic purpose of tapping public markets at a relatively early stage, it seems that the avalanche of grossly overvalued Unicorns now treat the public market as sort of a dustbin for VC companies and entrepreneurs that only sell to the general public when the fruit has matured to the point of rot. The Eurostoxx50 sold off by -3,7% (12,7%), underperforming the S&P500 by-1,6%. Diversified EM equities (VWO) sold off by -4,8% (9,4%), underperforming the S&P500 by-2,8%. Last week, the focus has been on Sino/US trade negotiations. Next week will likely bring more news on the Europe/US trade front as well, hopefully better ones. The hope is that the worst is never sure. CSI300 Chinese equity index (ASHR) shed -7,4% (+23,3%). Indian shares (EPI) sold off by -5,4% (-0,2%, Z-score -2,1). Russian shares (RSX) resisted best in the EM segment, dropping -2,9% (11,6%). The Dollar DXY Index (UUP) measuring the USD performance vs. other G7 currencies ended the week unchanged (2,8% YTD) while the MSCI EM currency index (measuring the performance of EM currencies vs. the USD) dropped -0,5% (0,9%). The dollar could not benefit from global markets turmoil last week (despite downward growth revisions brought to Germany and Italy). Perhaps, the growing US unilateralism coupled to a toughening and broadening of its sanctions regime (now applying to Venezuela, Iran, North Korea, Russia and possibly soon China) will ultimately and possibly sooner than one might think, lead to dollar weakness and growing geopolitical instability. 10Y US Treasuries rallied despite a poor 10-year auction on Wednesday with 10Y yields shedding -6bps (-22bps) to 2,47%. 10Y Bunds dropped -7bps (-29bps) to -0,05%. “Growth in global commerce has slowed sharply since the US-China trade dispute escalated in mid-2018, and an array of economic indicators suggest that the year-long row is having an increasing effect on the global economy”, the FT commented on Wednesday ahead of the failure of trade negotiations on Friday. Jeffrey Gundlach opined that “People are starting to realize that the deficit and debt are totally out of control”, noting that the ‘main reason’ the yield curve between 3-year and 5-year Treasury notes is steepening is the ballooning deficit. Last year, US national debt increased by more than 6% of GDP, he said also flagging trouble in the corporate bond market, which got “dragged down” in the ‘economic mess that we're in.’ “The corporate bond market is so much worse today than it was in 2006” he said. The Fed also warned in its semi-annual financial stability report last week about excess in the corporate market (and leveraged loans in particular). 10Y Italian BTPs underperformed with yields rising 12bps (-6bps) to 2,68% after Italian growth prospects for the year were revised to 0.1% and the budget deficit expectations raised to 3.5% for next year. We still believe that stimulating the European economy beyond the strict orthodoxy of the European Treaties is the right thing to do. Now an option and perhaps soon an obligation. As for the Italian budget deficit and to paraphrase an observation from UBS Chief economist last week, Italian grandmothers could finance it several times over and it is probably a wrong thing to worry (most) about. Credit markets traded lower last week. US High Yield (HY) Average Spread over Treasuries climbed 28bps (-144bps YTD, Z-score 2,7) to 3,82%. US Investment Grade Average OAS climbed 5bps (-42bps, Z-score 2,2) to 1,30%. In European credit markets, EUR 5Y Senior Financial Spread climbed 10bps (-31bps, Z-score 2,5) to 0,79%. Gold gained 0,5% (0,3%) while silver dropped -1,0% (-4,6%). Major Gold Mines (GDX) were unchanged on the week (-3,8%). Speculators last week likely saw into Bitcoins the improbable chance of a safe haven against market turmoil, geopolitical tensions and growing talks of MMT (or long-term rate targeting as was aired for a second time by the Fed last week as well), rallying 10,6% (71,2%, Z-score 2,4). ECB President M. Draghi over the week end said “Cryptocurrencies or bitcoins, or anything like that, are not really currencies - they are assets. A euro is a euro - today, tomorrow, in a month...”. The head of the ECB also said cryptocurrencies “are not significant enough in their entity that they could affect our economies in a macro way.” Central Banks may not care so much about what they do in the near term. In our opinion, Cryptos are neither currencies and nor and even less so “assets”, simply an intrinsically worthless object of pure speculation in troubled waters that will in fine protect no one against inflation and/or currency debasement over the long term. Goldman Sachs Commodity Index dropped -1,3% (14,0%). WTI Crude dropped -0,5% (35,8%). 

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