BentinPartner Weekly
Dear Reader,
Please find below our latest Weekly Trend Report.
Have a nice start of the week.
Marc Bentin,
Bentinpartner GmbH
US stocks posted modest further gains last week despite economic reports showing that inflation remained sticky, challenging D. Trump’s promises to lower the cost of living of every American and more importantly postponing expectations of the next rate cut to October. US retail sales also came in weaker than expected towards the end of the week, although January is seasonally never a strong month for consumer spending.
US Bonds took a relaxed attitude to the hot inflation report (with 10Y yields dropping -2bps) printing a headline inflation yoy increase of 3% (from 2.9% last month) and a MoM increase at 0.5% (vs. 0.3% expected). Fed Chair J. Powell reminded on that occasion that the central bank has made substantial progress towards taming inflation but that there is still some work to do and that interest rates will remain elevated for a foreseeable future.
EU bonds underperformed and saw yields increase by 6bps last week.
The US dollar index dropped last week, driven by a rallying JPY and a recovering EUR as investors recognized the undervaluation of JPY (and potential accusations of currency manipulation by its US ally) and as investors flocked into European equities on improving prospects (against its own will, it seems) to end the war in Ukraine. EM currencies were also broadly stronger.
The gold steamrolling rally continued (except on Friday when it met some profit taking) amidst lingering supply and liquidity concerns. The whole precious metals complex gained, including gold shares which remain, along with Chinese stocks perhaps, unloved or at least under owned, after years of underperformance.
Also supportive of gold last week were comments from Trump’s new Treasury Secretary S. Bessent, former star macro hedge fund manager (and presumably a large holder of gold) who said that “within the next 12 months, we are going to monetize the assets side of the US balance sheet” . This could serve the purpose of creating a new sovereign wealth fund which led to some speculation that a gold revaluation is the offing (the Fed’s gold is valued at …$42.2 per fine Troy Ounce) which could be done at current prices and lead to a strengthening of the US balance sheet and potential liquidity injection. It would also add USD800bn to the revaluation account to start with, reducing near term funding needs by as much and raise the prospects of gold taking more importance in a new monetary system where gold would enjoy renewed confidence that would encourage more gold ownership.
Two other key events last week were D. Trump’s announcement of a blanket tariff suffering no exception or exemption imposed against all US trading partners for steel and aluminium imports, followed later in the week by the Munich conference which US Vice President Vance used as a platform to slam European censorship laws using confrontational comments that surprised many officials, making it explicit the US is seeking to end the war with direct and bilateral talks between the US and Russia, likely to bypass Europe (and the Ukrainian leader).
More details of the US intentions were laid out in Munich with P. Hegseth, the recently confirmed US Secretary for Defense saying;
“We want a sovereign and prosperous Ukraine but we must recognize that returning to Ukraine pre-2014 borders is an unrealistic objective. Chasing this illusionary goal will only cause more suffering. A durable peace for Ukraine must include robust security guarantees to ensure that the war will not begin again. This must not be Minsk 3.0. That said, the US does not believe that NATO membership is a realistic outcome of a negotiated settlement. Instead our security guarantee must be provided by robust European and non-European troops.”
Over the past week, the S&P500 gained 1,5% (4,0% YTD) while the Nasdaq100 rallied 2,9% (5,3% YTD, Z-score 2,3). The US small cap index was unchanged (2,3% YTD). AAPL rallied 7,5% (-2,3%, Z-score 2,4).
The Equally Weighed SP500 gained 0,5% (3,3% YTD), underperforming the S&P500 by-1,0%. The median SP500 YTD return closed the week at 3,4%.
Cboe Volatility Index sold off by -10,7% (-14,9% YTD) to 14,77.
The Eurostoxx50 rallied 3,4% (12,3%, Z-score 2,1), outperforming the S&P500 by 1,9%.
Diversified EM equities (VWO) rallied 2,2% (4,2%, Z-score 2,4), outperforming the S&P500 by 0,7%.
The Dollar DXY Index (UUP) measuring the USD performance vs. other G7 currencies dropped -1,1% (-1,0%, Z-score -2,1) while the MSCI EM currency index (measuring the performance of EM currencies vs. the USD) gained 0,4% (1,3%).
10Y US Treasuries rallied -2bps (-9bps) to 4,48%. 10Y Bunds climbed 6bps (6bps) to 2,43%. 10Y Italian BTPs underperformed rising 6bps (0bps) to 3,52%, matching Bunds.
US High Yield (HY) Average Spread over Treasuries dropped -4bps (-27bps) to 2,60%. US Investment Grade Average OAS dropped -4bps (-1bps) to 0,86%.
In European credit markets, EUR 5Y Senior Financial Spread dropped -3bps (-8bps, Z-score -2,6) to 0,56%.
Gold gained 0,8% (9,8%) while Silver gained 0,9% (11,1%). Major Gold Mines (GDX) gained 0,5% (21,1%).
Goldman Sachs Commodity Index gained 1,6% (5,0%). WTI Crude dropped -0,4% (-1,4%).
Overnight in Asia…
S&P future +10 points; Hong Kong +0.7%; Nikkei 0%; China +0.2%
Chinese are moderately higher this morning, supported by the strong Us close, Japan’s stronger than expected GDP report and prospects for more Chinese stocks gains as a potential meeting between President Xi and Jack Ma was said to be a potential catalyst to extend China’s rally and a signal that China’s communist party is taking a more supporting stance towards private companies and is well aware that that innovation is a key driver of productivity. It could also be a pivotal moment for Alibaba, Bloomberg commented. The company is scheduled to post its results on Thursday.
Japan reported overnight that its economy rose more than expected for Q3 2024 at an annualized 2.8% rate (vs. 1.1% expected), giving more ammunition to the BoJ to unwind its ultra-low interest rate policy (expectations are for two rate hikes for the base rate to 1% later this year). The Japanese economy grew 0.1% for the whole of 2024, also higher than expected.
Ireland's Prime Minister said the EU needs to innovate more and regulate less to compete with the US and China on technology. The EU is in crisis mode, with economic woes deepening and threats of tariffs from the US, and needs to act quickly to boost productivity.
Showing his sense of compromise (or provocation) on some desire in the EU to continue the fight until the last Ukrainian, President Trump said that “he was open to allow Europe to buy more US weapons to give to Ukraine”, allowing Ukraine to use US weapons even as the US withdraws its own support to the country, Bloomberg reported.
A post from ZH went viral over the week end, suggesting that an audit of the Fed’s gold holdings should be conducted to ensure that the reported 4’580 metric tons are actually there (and not lent out to China, or rehypothecated 5 times, melted in 1kg bars…that will never be returned to the Fed). It was picked by E. Musk who seemed under the impression that such an audit is conducted …every year which is not the case as the last (and superficial) audit dates from 1973. Either the gold is there and the audit will take place or the suspicion, controversy or even the “conspiracy” will grow only louder.
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