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  • Marc Bentin

Weekly Trend Status Update


Weaker US and Chinese data could not keep stocks down for long last week as they were jolted instead by another iteration of “China and the US nearing a trade deal” statement from L. Kudlow on Thursday. On these negotiations, the reality is (also?) that Chinese negotiators seem to be resisting a request to provide monthly, quarterly and annual targets for purchases of agricultural products at the same time as China insists that the two sides should agree to rollback tariffs in phases, should a deal be reached… On the US economy, US industrial production plunged to its lowest in 10 years while US freight volume dropped for the 11th straight month and real gross private domestic investment dropped for the second consecutive quarter. Looking forward, the Federal Reserve of Atlanta GDPNow economic growth model projected a 0.3% Q4 growth, down from 1.0% the week before (and 1.9% reported for Q3). Idem for the New York Federal Reserve forecast from its “Nowcast” model which presently projects 0.4% Q4 growth (from 0.7% last week). Chinese data came out uniformly softer than expected as well with exports falling, factory output slowing, investment growth coming at a record low and consumption softening as well. Industrial output rose 4.7% from a year earlier, versus 5.4% expected... Retail sales expanded 7.2%, (7.8% expected). Fixed-asset investment slowed to 5.2% in the first ten months, the lowest reading in comparable data back to 1998. Certain things don’t matter until they start to matter and then they are the only things that matter. Social unrest worldwide could easily fall into this category and remained a concern but not for stocks at least not for now. Still, the wave of social unrest from Chile and Ecuador to Lebanon -- had Moody’s worried saying last week that its 2020 outlook for global sovereign credit was negative, given unpredictable domestic and geopolitical risks and a push for populist policies that weaken institutions, help slow growth and boost the risk of economic and financial shocks. “Escalating global and regional trade tensions increase the risk of financial or economic shocks, and the weakening of multilateral institutions dents policy makers’ ability to deal with those shocks.”, the rating agency said. Despite this cloudy economic and social backdrop, the breadth of the ongoing bull phase of US stocks remained impressive last week with only the energy sector of the S&P500 trading below its 200dma and only the utilities and Gold shares trading below their 50dma. Also, 76% of all shares in the S&P500 are presently trading above their 200dMa along with 74% of shares from the MSCI World. Over the past week, major US indices printed fresh all-time highs with the S&P500 adding 0,9% (24,8% YTD) while the Nasdaq100 rose 0,8% (31,5% YTD). The US small cap index lagged dropping -0,1% (18,7% YTD). CBOE Volatility Index was further depressed selling off by -5,3% (-52,6% YTD) to 12,05. AMZN sold off by -2,6% (15,8%, Z-score -2,2) while MSFT rallied 2,7% (47,7%) after Microsoft won a USD10bn US government cloud program over Amazon (which had the best offer on paper and will appeal to the decision!). GOOG gained 1,8% (28,9%, Z-score 2,1). XLV (HEALTH CARE SELECT SECTOR) stood out last week gaining 2,4% (12,7%, Z-score 2,3). The Eurostoxx50 gained 0,3% (26,4%), underperforming the S&P500 by-0,7%. Diversified EM equities (VWO) dropped -1,3% (11,0%), underperforming the S&P500 by-2,3%. Subdued Chinese data led Chinese stocks into a correction with the Shanghai Composite dropping 2.5% last week while the Hang Seng dropped by a more severe 4%, dragged down by local protests becoming more violent and some tensions appearing on the currency and interbank rates as well. CSI300 Chinese equity index (ASHR) dropped by -2,8% (28,5%). Indian shares (EPI) dropped -1,4% (-2,5%). Russian shares (RSX) dropped -1,0% (31,9%). The Dollar DXY Index (UUP) dropped -0,3% (5,3%) while the MSCI EM currency index (measuring the performance of EM currencies vs. the USD) dropped -0,1% (1,3%). V. Putin warned about the dollar politization leading to a weaker dollar fairly soon. 10Y US Treasuries rallied -11bps (-85bps) to 1,83%. 10Y Bunds dropped -7bps (-58bps) to -0,33%. 10Y Italian BTPs climbed 4bps (-151bps) to 1,23%, underperforming Bunds by 11bps. Bonds from the European periphery underperformed early last week flowing inconclusive elections in Spain and the “risk off” couple of sessions that prevailed early last week. Still, consumer prices rebounded more than expected in October and underlying inflation picked up, which together with abating trade tensions and fears of a recession, support the Federal Reserve’s signal for no further interest rate cuts in the near term. In the 12 months through October, the core CPI increased 2.3% after rising 2.4% in September. For what it is worth, global debt is on course to end 2019 at a record high of more than $255 trillion, three times the world economic output, the Institute of International Finance estimated on Friday or $32,500 for each of the 7.7bn people on planet. US Investment Grade Average OAS climbed 2bps (-55bps) to 1,17%. US High Yield (HY) Average Spread over Treasuries climbed 10bps (-147bps) to 3,79% while the worst quality of US High Yield (HY) Caa Average Spread over Treasuries climbed 15bps (-72bps) to 9,17%. In European credit markets, EUR 5Y Senior Financial Spread climbed 2bps (-50bps) to 0,60%. Gold rose 0,7% (14,3%) while Silver rose 0,5% (9,3%). Major Gold Mines (GDX) gained 1,9% (26,8%). Goldman Sachs Commodity Index was unchanged on the week (10,9%) while WTI Crude gained 0,8% (27,1%). CPER dropped -1,6% (1,0%). Over the week end… …D. Trump tweeted... “Dow hits 28,000 - FIRST TIME EVER, HIGHEST EVER! Gee, Pelosi & Schitt have a good idea, “lets Impeach the President.” If something like that ever happened, it would lead to the biggest FALL in Market History. It’s called a Depression, not a Recession! So much for 401-K’s & Jobs!” While D. Trump trumpets every record high in stocks, perhaps the one statistic to remember from last week was this one…The U.S.’s historic economic expansion has so enriched one-percenters they now hold almost as much wealth as the middle- and upper-middle classes combined. The top 1% of American households have enjoyed huge returns in the stock market in the past decade, to now control more than half of the equity in US public and private companies, according to the Federal Reserve. To receive our daily updates and market reviews, consider our premium research: https://www.bentinpartners.ch/research And join our free trial. https://www.bentinpartners.ch/subscribe 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 


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