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Excuse My French...

BentinPartner Weekly



Last week turned out as a difficult week that saw stocks drop most since March with more economic data pointing towards recession risks and several central banks delivering additional tightening and the Fed more hawkish rhetoric.


Still, bonds rallied across the board with yield curves inverting the most in decades suggesting strong market expectations of a coming recession in a not too distant future and a Fed pivot of some sort. Fed Chair Powell in his semi-annual testimony threw some cold water on the idea and risk appetite, saying the Fed need to deliver one or two additional rate hikes while other Fed commentators also pushed back against market expectations for rate cuts.


On the macro side, US PMI dropped to 46.3 (from 48.4), the lowest reading since December.

Data in Europe (Germany and France) were also lacklustre, causing a small weekly drop in EURUSD and bond yields to drop despite the SNB and BoE delivering rate hikes on Thursday.

The IFO Institute said the German economy will contract more than expected this year with sticky inflation talking its toll on German consumers.


Weekly investment flows showed investors as part of the quarterly rebalancing sold USD5bn …and bought USD5bn bonds.


Saturday was eventful with a mercenary uprising in Russia that ended a few hours later with its leader offered exile in Belorussia. The fun part is the coverage of the events on the side of those defending the forces of “good” to describe how bad news this is for the Kremlin.


As Nassim Taleb tweeted today, “If you are making any assertion about the plot in Russia, you are either a bullshitter or an insider to the conspiracy”. This where we stand…


In that context, kudos should be given to French news channel LCI which is not known for being compromising or sympathetic in any ways towards the Russian cause for setting some (past) records straight on the application of double standards Excuse my French (Swiss)


After JPY weakened further this morning, Japanese officials said they were not ruling out any option on FX which is creating more volatility but as we suggested last week, Central Banks are judged by what they do not what they say and with the current benign neglect policy of the BoJ (ZIRP wherever inflation goes or stands), there is not much to expect in terms of upside potential for the JPY, in our view.

 

Over the past week, the S&P500 sold off by -2,1% (13,3% YTD) while the Nasdaq100 sold off by -2,1% (36,1% YTD). The US small cap index sold off by -3,7% (3,6% YTD). AAPL gained 0,4% (43,7%).

Cboe Volatility Index sold off by -7,3% (-38,0% YTD) to 13,44.

The Eurostoxx50 sold off by -2,9% (15,5%), underperforming the S&P500 by-0,8%.

Diversified EM equities (VWO) sold off by -4,6% (3,0%), underperforming the S&P500 by-2,5%.


The Dollar DXY Index (UUP) measuring the USD performance vs. other G7 currencies gained 0,9% (1,9%) while the MSCI EM currency index (measuring the performance of EM currencies vs. the USD) dropped -0,8% (1,4%).


10Y US Treasuries rallied -3bps (-14bps) to 3,73%. 10Y Bunds dropped -12bps (-22bps) to 2,35%. 10Y Italian BTPs rallied -6bps (-74bps) to 3,98%, underperforming Bunds by 6bps.

US High Yield (HY) Average Spread over Treasuries climbed 25bps (-43bps) to 4,26%. US Investment Grade Average OAS climbed 2bps (-1bps) to 1,42%.

In European credit markets, EUR 5Y Senior Financial Spread climbed 4bps (-8bps) to 0,92%.


Gold dropped -1,9% (5,3%) while Silver sold off by -7,3% (-6,4%). Major Gold Mines (GDX) sold off by -3,9% (3,9%).


Goldman Sachs Commodity Index dropped -1,2% (-9,9%). WTI Crude sold off by -2,1% (-13,8%).


 

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Marc Bentin serves as Economic Advisor to Blue Lotus Management,

a specialist multi-manager investment firm, which seeks to provide investors a compelling alternative to the traditional 60/40 equity and bond portfolio by targeting higher returns without amplifying equity risks.


BentinPartner GmbH is Advisor to the Phi Funds AIF, an umbrella Alternative Investment Fund registered and regulated in Lichtenstein, specializing in the management of Funds focused on physical precious metals.

 

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