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FedEx Sinks...

BentinPartner Weekly

Stocks were hit last week by the twin arrows of a hotter than expected August CPI report and from Fedex taking out its guidance last Friday (before the release of its earnings report later this week) and as the option expiration added to the volatility on Friday.

The “core CPI” came out at 0.6% on Tuesday (7% yoy), about double the estimates raising the spectre of persistent and broadening of inflationary pressures. This led to a twin sharp equity downdraft and bond sell off on Tuesday which had ripple effects for most of the rest of the week, as some investors started to consider the possibility of a 100bps tightening by the Fed (80bps currently priced) this week. US high yields rose 57bps on the week back to the highs from last July.

Fedex on Friday suffered its largest plunge ever, shedding 21% as the CEO pulled out guidance and warned about a world-wide recession. There was a positive way of reading this news, however, judging from the company also losing market share to its competitors (including amazon) rather than focusing only on what the revised guidance could imply for the health of the world economy.

The macroeconomic landscape remained a confusing and confounding puzzle in many respects as Morgan Stanley noted in its weekend note to justify rising inflation that year to date the US economy added 3.5mn jobs while US manufacturing activity expanded every single month (in contrast to the situation in Europe which is more uniformly bleak), leaving the Fed in a tough spot to figure what to do next to tame inflation. Morgan Stanley made another interesting point saying that half of the US income earned by households makes more than 100k annually with this category also owning their homes, most often without a mortgage or one that was refinanced at cheap rates for the next 20-30 years while their average wage growth stands at 6.5% which may explain why inflation remains so sticky. Tina has clearly left the building, Morgan Stanley opined, noting the possibility for investors to stay in cash and earn a decent income at least in USD while chasing stocks remained for some other analysts as dangerous as licking honey from a knife’s hedge, judging from this summer’s rally, increased volatility, declining earnings and sudden drawdown last week.

FX volatility remained high last week with GBP dropping to its weakest level since 1985 and JPY only recovering slightly on BoJ jawboning as USDJPY approached 145, set for its worst year on record so far. EURUSD recovered slightly however as speculative traders reportedly cut some of their large EUR underweight last week.

Commodities remained in a corrective mode, slumping by 1.5% while precious metals ended mixed with Gold dragged down by higher yields and silver up confronting a supply shortfall and what some deemed could be the omen of an epic squeeze.

Bitcoin dropped along with equities.

Over the past week, the S&P500 sold off by -5,2% (-18,8% YTD) while the Nasdaq100 sold off by -5,8% (-27,3% YTD). The US small cap index sold off by -4,5% (-19,5% YTD). AAPL shed -4,2% (-15,1%).

Cboe Volatility Index rallied 15,4% (52,7% YTD) to 26,3.

The Eurostoxx50 sold off by -2,0% (-16,6%), outperforming the S&P500 by 3,1%.

Diversified EM equities (VWO) sold off by -3,3% (-19,8%, Z-score -2,1), outperforming the S&P500 by 1,9%.

The Dollar DXY Index (UUP) measuring the USD performance vs. other G7 currencies gained 0,7% (14,7%) while the MSCI EM currency index (measuring the performance of EM currencies vs. the USD) dropped -1,0% (-6,8%).

10Y US Treasuries underperformed with yields rising 14bps (194bps) to 3,45%. 10Y Bunds climbed 6bps (193bps) to 1,76%. 10Y Italian BTPs climbed 1bps (286bps) to 4,03%, outperforming Bunds by -1bps.

US High Yield (HY) Average Spread over Treasuries climbed 38bps (204bps) to 4,87%. US Investment Grade Average OAS climbed 3bps (58bps) to 1,58%.

In European credit markets, EUR 5Y Senior Financial Spread climbed 4bps (66bps) to 1,21%.

Gold sold off by -2,4% (-8,4%) while Silver rallied 3,9% (-16,0%). Major Gold Mines (GDX) sold off by -4,4% (-25,1%).

Goldman Sachs Commodity Index sold off by -2,3% (26,4%). WTI Crude dropped -1,9% (13,2%).


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Over the past week, the S&P500 rallied 2,6% (-14,4% YTD) while the Nasdaq100 rallied 2,6% (-22,8% YTD). The US small cap index rallied 3,3% (-15,8% YTD). AAPL dropped -0,4% (-11,4%).

CBOE Volatility Index declined by -10,8% (32,3% YTD) to 22,79.

The Eurostoxx50 gained 0,7% (-14,8%), underperforming the S&P500 by-1,9%.

Diversified EM equities (VWO) gained 0,2% (-17,1%), underperforming the S&P500 by-2,4%.

The Dollar DXY Index (UUP) measuring the USD performance vs. other G7 currencies dropped -0,6% (13,9%) while the MSCI EM currency index (measuring the performance of EM currencies vs. the USD) dropped -0,2% (-5,9%).

10Y US Treasuries underperformed with yields rising 12bps (180bps) to 3,31%. 10Y Bunds climbed 17bps (188bps) to 1,70%. 10Y Italian BTPs underperformed rising 18bps (285bps) to 4,02%, underperforming Bunds by 6bps.

US High Yield (HY) Average Spread over Treasuries dropped -44bps (166bps) to 4,49%. US Investment Grade Average OAS dropped -5bps (55bps) to 1,55%.

In European credit markets, EUR 5Y Senior Financial Spread dropped -10bps (62bps) to 1,17%.

Gold gained 0,3% (-6,1%) while Silver rallied 4,5% (-19,1%). Major Gold Mines (GDX) rallied 8,8% (-21,6%).

Goldman Sachs Commodity Index rose 0,4% (29,5%). WTI Crude gained 0,2% (15,4%).

Overnight in Asia…

  • S&P500 +5 points; Nikkei +1.1%; CSI300 +1.4%; Hang Seng +2.6%

  • Important events this week include the US CPI report tomorrow (with inflation yoy expected to come at 8% (from 8.5% previously) and a PPI report the following day.

Have a nice week ahead and be good to yourself !

Marc Bentin, BentinPartner GmbH

Chief Investment Officer


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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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