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Goldilocks or Something Else?

BentinPartner Daily

US stocks notched a third week of gains as cooling inflation data (Q4 Core PCE was reported at 2.0%, matching Q3) raised the chances of a first rate cut in March while at the same time the Q4 real GDP growth distilled a taste of “goldilocks”, climbing a better than expected 3.3% (some argued that the used deflator was too low, artificially giving real GDP a boost).

But manufacturing PMI also came at 50.3 (from 47.6 expected), its strongest since October 2022 and Mortgage Purchase Applications rose 8%, along with December Pending Home Sales). Personal Spending climbed 0.7% MoM (0.5% expected) in December (5.9% yoy) and have not been stronger since last January.


US stocks were further driven by the Mag6 (with Tesla now clearly lagging behind) despite some mixed bag performance from the chip sector with Intel shedding 13% on Friday (ahead of AMD results this week). The rally was seen broadening last week with Europe doing better and sector-wise, with health care and financials performance standing out along with energy towards the end of the week as tensions built up with more Houthis attacks in the Red Sea (including this past week end) which impacted oil and commodity prices (as shipping costs increase).


In contrast, bonds fared more poorly, likely driven by a “US corporate bond markets continuing to be ‘on fire’ as companies sold a record $150bn of debt since the start of this month, the busiest opening of the year in three decades as borrowers are rushing to lock in lower interest costs, the WSJ reported.


Last week delivered swift action in China with a surprise cut in the Reserve requirement ratio and talks of USD278bn in stock market support. Reuters reported that China major state-owned banks moved to support CNY on Monday, tightening liquidity in the offshore foreign exchange market as China’s A shares suffered another sharp drop on that day, pushing their discount to mainland peers to the deepest in fifteen years (at 36%). Chinese stocks rebounded strongly for the rest of the week with the Shanghai Composite rallying 6% off Wednesday’s lows ending the week up 2.8%. Hong Kong’s Hang Seng Index rallied nearly 10% off lows, ending the week up 4.2%.

It was also said that China will offer more bailout loans for its real-estate sector with the first funds expected to become available in the coming days, according to China’s housing ministry on Friday.


In a strange configuration, ECB policymaker Francois Villeroy de Galhau opined  “Regarding the exact date, not one is excluded, and everything will be open at our next meetings,” seemingly wanting to depart from ECB President Christine Lagarde who still sees it “premature to discuss rate cuts” and Board Member K. Knot of the Netherlands, who insist that the ECB will need to see a turnaround in wages before it can start lowering borrowing costs, rather suggesting June as the earliest moment for any rate cut.


The euro traded mostly lower last week (with EURCHF touching fresh lows) on expectations the ECB could start cutting rates sooner than the Fed to address Europe’s faltering economy (and before inflation can reasonably be said to have been vindicated).


The FOMC will meet on Wednesday after a Q4 marked by a strong equity rally and the market pricing at least six rate cuts this year but with bond markets suffering a setback last week. EU Q4 GDP is due out on Tuesday, along with GOOG, MSFT, AMD on that day. German CPI is due out on Wednesday and US NFP on Friday.


Over the past week, the S&P500 gained 1,0% (2,5% YTD) while the Nasdaq100 gained 0,6% (3,5% YTD). The US small cap index gained 1,8% (-2,4% YTD). AAPL gained 0,4% (-0,1%).

The Equally Weighed SP500 gained 1,1% (-0,2% YTD), matching the S&P500. Cboe Volatility Index dropped -0,3% (6,5% YTD) to 13,26.

The Eurostoxx50 rallied 4,2% (2,6%, Z-score 2,8), outperforming the S&P500 by 3,1%.

Diversified EM equities (VWO) gained 1,3% (-2,3%), outperforming the S&P500 by 0,3%.


The Dollar DXY Index (UUP) measuring the USD performance vs. other G7 currencies gained 0,3% (2,5%) while the MSCI EM currency index (measuring the performance of EM currencies vs. the USD) gained 0,2% (-1,1%).


10Y US Treasuries dropped 1bps (26bps) to 4,14%. 10Y Bunds dropped -4bps (28bp) to 2,30%. 10Y Italian BTPs rallied -6bps (12bps) to 3,82%, outperforming Bunds by   -2bps.

US High Yield (HY) Average Spread over Treasuries dropped -13bps (2bps) to 3,25%. US Investment Grade Average OAS dropped -3bps (-7bps) to 0,98%.

In European credit markets, EUR 5Y Senior Financial Spread dropped -3bps (-1bps) to 0,67%.


Gold dropped -0,5% (-2,2%) while Silver gained 0,8% (-4,2%). Major Gold Mines (GDX) gained 1,4% (-9,5%).


Goldman Sachs Commodity Index rallied 3,1% (2,6%, Z-score 3,0). WTI Crude rallied 6,3% (8,9%, Z-score 2,4).



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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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