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Hitting the Ground Running...

Writer's picture: Marc BentinMarc Bentin

Updated: 3 days ago

BentinPartner Weekly



Dear Reader,


Please find below our latest Weekly Trend Report.

Have a nice start of the week.

 

Marc Bentin,

Bentinpartner GmbH


 

D. Trump lost no time planting his footprint and hit the ground running, announcing a slew of executive orders an delivering a defiant visio conference to the Davos gathering last week as he laid out laid out the agenda voiced during his Presidential campaign.

Equity markets responded favorably so far…

Among the measures announced were boosting energy production (“Drill, baby, drill.”), curbing immigration, repeal climate change initiatives by terminating the US involvement in the Paris Agreement (and the decree on EVs), leave the World Health Organization, dismantle regulations across industries (especially cryptos), urging banks to ride the wave and finance whatever, in short order after first banning all government DEI programs.

D. Trump also announced that Canada and Mexico were likely facing 25% tariffs beginning Feb. 1st at the same time as he warned Europe to “Manufacture in the U.S. or we’ll tariff you” but remaining surprisingly reserved about tariffs targeted for China, which enabled Chinese stocks to rally and outperform in the latter part of the week.  ‘We have one very big power over China, and that’s tariffs, and they don’t want them,’ the US leader said ‘And I’d rather not have to use it. But it’s a tremendous power over China.’”

He also vowed to “Drill, baby, drill.”, including in an effort to bring down the price of oil (and try to contain inflation to justify forcing rates down).

He also yielded pressure on the Federal Reserve unreservedly, urging it to cut rates “a lot”, lambasting the Central Bank and J. Powell in particular. President D. Trump questioned Fed Chair J. Powell’s decision-making on interest rates and said he planned to speak to the central bank chief ‘at the right time.’ ‘I think I know interest rates much better than they do, and I think I know it certainly much better than the one who’s primarily in charge of making that decision,’ Trump said.

D. Trump may be ignoring that financial conditions are fairly loose already, at least judging from HY spreads to Treasuries trading within three bps of lows dating from June ’07.

He announced a joint venture to fund AI infrastructure worth USD500bn over 4 years, with the leaders of Softbank, OpenAI, and Oracle. He also immediately halted the implementation of key safety and transparency requirements for AI developers, leaving some tech leaders attending the World Economic Forum in Davos praising his approach while others warned against an AI world with fewer guardrails.

 

What does it mean for investors?

 

It can hardly be argued that this is an ambitious pro-growth agenda, for the US, likely justifying US markets to make a push back towards fresh all-time highs. But what about the rest of the world, and Europe in particular which needs to reinvent itself and is left ill “armed” to fight back at the American bully, as it remains marred in a bureaucratic quagmire, political stalemate and short of financial resources to deploy and reinvent itself (see overnight WSJ article “Germany’s Economic Model is broken, and No One Has a Plan B”)?

Global markets have not only been exuberant going into the election but they also celebrated the arrival of Trump 2.0 with renewed confidence that he will do what is good for America, including by poaching resources capital, human and resources from the rest of the world in a rather aggressive manner…

As the FT put it,

“Donald Trump insisted he was serious in his determination to take over Greenland in a fiery telephone call with Denmark’s prime minister… The US president spoke to Mette Frederiksen, the Danish premier, for 45 minutes last week… Frederiksen said she had emphasized that the vast Arctic island — an autonomous part of the kingdom of Denmark — was not for sale, while noting America’s ‘big interest’ in it. Five current and former senior European officials briefed on the call said the conversation had gone very badly… Trump had been aggressive and confrontational following the Danish prime minister’s comments that the island was not for sale, despite her offer of more co-operation on military bases and mineral exploitation. ‘It was horrendous,’ said one of the people. Another added: ‘He was very firm. It was a cold shower. Before, it was hard to take it seriously. But I do think it is serious, and potentially very dangerous.’ ‘The intent was very clear. They want it. The Danes are now in crisis mode’… Another said: ‘The Danes are utterly freaked out by this.’ A former Danish official added: ‘It was a very tough conversation. He threatened specific measures against Denmark such as targeted tariffs.’”

Besides this heroic act of resistance, the rest of the world so far, has been sitting in torpor and/or hurrying to kiss D. Trump’s ring, none better than NATO head Marc Rutte, a refugee from the Dutch political system, who hurried to embrace D. Trump suggestion that Europe should spend 5% of its budget on defense spending buying mostly American equipment.

Another very contentious development occurred in the crypto sphere, besides the pushing out of former SEC Chair, with the issuance on the date of the new President investiture, of $TRUMP and $MELANIA meme coins, two tokens with no economic purpose besides unduly (and possibly illegally) enriching President Trump and his family.

On this issue, the WSJ commented that;

“The market cap of the president’s coin soared to a high of $8.4 billion since Friday night’s launch, while the first lady’s token was worth about $800 million, according to CoinMarketCap. By selling coins known for their speculative nature and extreme volatility, the president has undermined the credibility that the industry has worked hard to build in recent years, some crypto executives and investors say. They also point to the brazen conflict of interest: Trump benefits directly from the sale of the tokens while setting the policy that affects how markets are valued and regulated.” President and First Lady introducing their own “coins” must signal peak speculative Bubble.”

 

While bonds remained mostly stable ending the week 1bp lower, currencies reacted with a burst of volatility, sending the dollar -1.7% lower, the steepest weekly decline in 16 months. EM currencies ended the week mostly stronger.

Because the euro can hardly act as an offset to the dollar for too long and certainly not too fast, the rally of XAUUSD towards all-time highs was a logical response to likely upcoming monetary and FX disorders, in our view.

In this context, unless and until the Fed restarts QE, it will be equally difficult to be bullish on anything else than T-bills among government bonds, even and perhaps especially, in light of the pressure D. Trump is exerting on the Fed to slash interest rates in a context of still pressing inflationary pressures.

Bond “vigilantes” are not drinking the pro-growth Kool-Aid. They’re instead staring anxiously at an overheating economy, massive debt issuance, and a highly levered environment.

The fact that BoA also kissed D. Trump ‘s ring, pressuring the Fed won’t change much to the equation. “The Federal Reserve now needs to be on Trump watch if it wants to engineer the proper dose of monetary policy, BoA chief Brian Moynihan said- ‘They’ve got a new administration with a new set of fiscal policies, and the monetary policy has to respond to that,’ the BofA chair and CEO said, adding ‘We are not a central bank-led economy. We’re actually a private sector-led economy, of which the government supports, of which the central bank responds to, and they have to think of what stimulus they’re going to respond to.’”

Oil dropped after D. Trump demanded OPEC lower oil prices. ‘I'm also going to ask Saudi Arabia and OPEC to bring down the cost of oil.’ He also said he would not visit Saudi Arabia unless the country would commit to invest USD1trn in the US (USD600bn are already committed).

On Russia, D. Trump would add new tariffs to his sanctions threat against Russia if the country does not make a deal to end its war in Ukraine, and added that these could also be applied to ‘other participating countries. Over the week end, V. Putin said, reminding his lawyer’s education, that a deal with President Zelinsky would have no legal lasting basis as long the decree forbidding Ukraine to negotiate with Russia remained in place.

 

Elsewhere in Europe, as reported by the FT;

“European Commission president Ursula von der Leyen has warned that the world economy has ‘started fracturing along new lines’ after Donald Trump threatened sweeping tariffs on the bloc… Von der Leyen said it was in ‘no one’s interest to break the bonds in the global economy’… cautioning against a ‘race to the bottom’ on global trade… Germany’s Green vice-chancellor Robert Habeck also warned that tariffs would push up inflation and promote geopolitical divisions, saying he woke up on Tuesday with a ‘queasy feeling in the pit of my stomach’… He urged Europe not to ‘let ourselves be pushed around’ by the US."


 

 

Over the past week, the S&P500 rallied 2,8% (3,7% YTD) while the Nasdaq100 rallied 3,2% (3,6% YTD). The US small cap index gained 1,9% (3,5% YTD). AAPL sold off by -2,4% (-11,0%).

The Equally Weighed SP500 gained 1,7% (4,0% YTD), underperforming the S&P500 by-1,1%. The median SP500 YTD return closed the week at 3,2%.

Cboe Volatility Index sold off by -10,5% (-14,4% YTD) to 14,85.

The Eurostoxx50 gained 1,4% (6,6%), underperforming the S&P500 by -1,3%.

Diversified EM equities (VWO) rallied 2,6% (1,2%), outperforming the S&P500 by -0,1%.

 

The Dollar DXY Index (UUP) measuring the USD performance vs. other G7 currencies dropped -1,4% (-0,7%) while the MSCI EM currency index (measuring the performance of EM currencies vs. the USD) gained 1,2% (1,2%).

 

10Y US Treasuries rallied -1bps (5bps) to 4,62%. 10Y Bunds climbed 3bps (20bps) to 2,57%. 10Y Italian BTPs climbed 1bps (13bps) to 3,66%, outperforming Bunds by   -2bps.

US High Yield (HY) Average Spread over Treasuries dropped -6bps (-31bps) to 2,56%. US Investment Grade Average OAS dropped -2bps (-2bps) to 0,85%.

In European credit markets, EUR 5Y Senior Financial Spread dropped -1bps (-4bps) to 0,59%.

 

Gold rallied 2,5% (5,6%) while Silver gained 0,7% (5,8%). Major Gold Mines (GDX) rallied 3,6% (11,9%).

 

Goldman Sachs Commodity Index dropped -1,3% (4,2%). WTI Crude sold off by -5,1% (4,1%).


Overnight in Asia…

 

  • S&P future -74 points; Hong Kong +0.7%; Nikkei -0.6%; China -0.1%

  • Asian shares rose partly on optimism about artificial intelligence in China.

  • US futures were spooked overnight with the Nasdaq dropping 2.2% in a delayed response to Chinese AI startup DeepSeek's new model which is cost-effective and runs on reduced-capability chips (without access to the expensive top performing chips), potentially challenging US tech dominance. “DeepSeek shows that it is possible to develop powerful AI models that cost less,” said Vey-Sern Ling, managing director at Union Bancaire Privee. “It can potentially derail the investment case for the entire AI supply chain, which is driven by high spending from a small handful of hyperscalers.”

  • A broad “risk off” session ensued in other asset classes including bitcoin and to a lesser extent precious metals while the dollar also rebounded.

 
Daily Score Card (20-Jan.-2025)
Daily Score Card (20-Jan.-2025)
DynaMo Trend-Following Model
DynaMo Trend-Following Model
 

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