Hard to Scare...
- Marc Bentin
- Jul 14
- 7 min read
Updated: Jul 19
BentinPartner Weekly
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Please find below our latest Weekly Trend Report.
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Marc Bentin,
Bentinpartner GmbH
US stocks retreated slightly at the index level over the past week (after the SP500 marked a fresh all time high on Thursday) on global uncertainties related to D. Trump tariff policy which has become all the more emboldened with risk assets remaining extremely resilient.
On Tuesday, Japan and North Korea received letters last week notifying them of a 25% tariff rate applied to their exports. On that day, D. Trump announced a special 50% tariff on copper. Later on Wednesday, Philippines, Algeria, Brunei were told about the 30% tariff rate that would apply with the maximum pain applied to Brazil exports for reasons that had nothing to do with trade (the US runs a trade “surplus” with Brazil) and much with the trial of former President Jair Bolsonaro, one of his strongest ally in South America.
Besides a strong response from President Lula da Silva, the expected response came from leaders of the BRICS Summit of developing nations who lashed out against President Trump, vowing to intensify their efforts to move away from the USD.
Although “private” investors remained hard to scare and evidence of “financial exuberance” remaining plentiful (judging from the performance Nvidia and bitcoin for example), government bonds (+6bps) and credit markets (HY rose +15bps) did not play ball last week with yields climbing across the credit and maturity spectrum on both sides of the Atlantic.
This happened in a context of rising pressure on the Federal Reserve and its Chairman in particular, to lower (interest) rates, arguing that tariffs are not inflationary (we are about to find out…). Kevin Warsh (a former Fed Governor who served during the great financial crisis and is the leading candidate to succeed J. Powell) and Kudlow called on the Fed to reform, citing “personnel problems” as the main reasons as for why the Fed is not cutting rates, calling for changes at different levels of the Fed.
Warsh said the reason yields did not fall last September when the Fed started to cut rates has do with the lack of credibility of the Fed. This is most likely a flawed diagnostic…but one that will be music to D. Trump’s ears when it comes to appoint J. Powell’s successor. Pursuing the assault on the Fed independence will come at a steep price, in our view.
For what it is worth the ECB has cut rates 100bps so far this year, likely en route for more, and long-term yields also found it difficult to drop. Surging global bond issuance plays a role in preventing this policy lever (of lower short-term rates) to be effective at reducing the cost of long-term debt.
In my view, the runaway rally in risk assets is less a worrying sign of bubbling risk assets than the first inning of a running away from cash, be it into gold, commodities, stocks or indeed bitcoin as alternative stores of value. At the same time, there is little appetite left to accumulate more of the balloning US debt in a context of out of control government spending (“Big Beautiful Bill”) and (hard to justify) tax cuts, fast depreciating dollar (in value and perception abroad) and rogue international trade policies. I would be more cautious for European shares that have outperformed this year despite losing big on competitiveness but also lost steam in favor of US stocks over the past couple of months, with the caveat that potential for additional gains remains from additional rate cuts (likely going back to ZIRP) and the “Draghi” debt financed “war preparation trade”.
While remaining necessarily cautious (and naturally worried about) any short-term risk of a setback or correction in equities, US stocks are likely to remain supported by buy-backs (USD1 trn expected between August and the end of the year), tech FOMO, the fact that earnings expectations have been guided lower (usually preceding a positive surprise), renewed dollar “competitiveness”, the beginning of a Fed easing campaign…and last but not least, probably a bit of TACO (“Trump Always Chickens Out”).
The dollar recovered nearly 1% last week, supported by weakness in EM currencies that took a hit from D. Trump’s harsh tariffs tactics.
Gold, Silver, Copper (+10.2%) and Platinum posted further gains last week. Noticeably, China added to its “official” gold reserves for an eighth straight month in June, capitalizing on the small price decline, adding 70’000 oz. China added 34.2 tons to its official reserves since November last year. Bitcoins also rallied nearly 9% last week…ahead of “crypto week”.
So far this decade, Gold has delivered the best performance and US treasuries the worst…, BoA strategist noted this week end.
Geopolitically, D. Trump who is witnessing with anger Russia’s seizing of more mining space by Russia, opted for a 180 degrees turnaround, reverting back to supporting Ukraine militarily, to fight the intensifying campaign and military progress achieved by Russia in Ukraine.
Over the past week, the S&P500 dropped -0,3% (6,4% YTD) while the Nasdaq100 dropped -0,4% (8,4% YTD). The US small cap index dropped -0,6% (0,3% YTD). AAPL dropped -1,1% (-15,7%).
The Equally Weighed SP500 dropped -0,4% (5,2% YTD), underperforming the S&P500 by-0,1%. The median SP500 YTD return closed the week at 5,0%.
Cboe Volatility Index gained 0,1% (-5,5% YTD) to 16,4.
The Eurostoxx50 gained 1,8% (12,3%), outperforming the S&P500 by 2,1%.
Diversified EM equities (VWO) dropped -0,9% (12,6%), underperforming the S&P500 by-0,6%.
The Dollar DXY Index (UUP) measuring the USD performance vs. other G7 currencies gained 0,9% (-7,5%) while the MSCI EM currency index (measuring the performance of EM currencies vs. the USD) dropped -0,6% (6,9%).
10Y US Treasuries underperformed with yields rising 6bps (-16bps) to 4,41%. 10Y Bunds climbed 12bps (36bps) to 2,73%. 10Y Italian BTPs underperformed rising 13bps (5bps, Z-score 2,2) to 3,57%, underperforming Bunds by 1bps.
US High Yield (HY) Average Spread over Treasuries climbed 15bps (-4bps) to 2,83%. US Investment Grade Average OAS climbed 4bps (0bps) to 0,87%.
In European credit markets, EUR 5Y Senior Financial Spread dropped -1bps (-6bps) to 0,58%.
Gold gained 0,6% (27,9%) while Silver rallied 4,0% (32,9%, Z-score 3,3). Major Gold Mines (GDX) dropped -0,9% (54,6%).
Goldman Sachs Commodity Index gained 1,0% (5,3%). WTI Crude rallied 2,2% (-4,6%).
Overnight in Asia…
S&P future -29 points; Hong Kong +0.1%; Nikkei -0.2%; China +0.4%
US and EU equity-index futures dropped after President Donald Trump announced a 30% tariff on goods from the European Union and Mexico.
Chinese stocks were in contrast supported by today’s better than expected June exports (+5.8% ytd vs. 5% expected and 4.8% last) and higher imports (yoy +1.1% (vs. 0.35 expected and -3.4% last).
China stocks could receive additional support, should June data (including tomorrow 2Q GDP due out in excess of 5%) prove that the economy remains resilient, adding to recent momentum fueled by steady US-China relations and speculation of fresh property support, Bloomberg reported.
President Donald Trump said Jerome Powell should "resign immediately" if allegations that the Federal Reserve chair misled lawmakers prove true. Trump called Powell "terrible" and told reporters that if the allegations about deceiving Congress over renovations to the Federal Reserve's headquarters are true, it would be grounds for a swift exit.
Trump called the Epstein List a democrat psyop and told Maga not to lose time and energy on J. Epstein, “somebody that nobody cares about”. Long gone the time when D. Trump vowed to release the Epstein files…Trump’s defense is weak and there won’t be many to believe it…It will come back to haunt him.
Over the week end, BoFa investment strategist who had been bullish on bonds over H1 has turned increasingly downbeat on (long duration) fixed income investments after dissecting the BBB, suggesting total US debt will push USD50trn by 2032 if not earlier… arguing the only way he can pay for the BBB is with a “Big Beautiful Bubble”…
US June CPI is due out today expected at 0.3% MoM (from 0.1% last month) and 2.6% YoY (from 2.4%). Empire Manufacturing is also due out today at -9.6 (from -16 last month).
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