In Memoriam...
- Marc Bentin
- 6 days ago
- 9 min read
Updated: 14 hours ago
BentinPartner Weekly
Dear Reader,
Please find below our latest Weekly Trend Report.
Have a nice start of the week.
Marc Bentin,
Bentinpartner GmbH
The week started with the bang of the post Moody’s US downgrade decision which was deemed problematic by some, causing a selloff that was immediately and aggressively bought by retail investors who according to JPM bought a record amount of USD4.1bn in the first three hours of trading on Monday.
The major source of concern throughout the week was the pressure on the long end of the bond curve (which was not specific to the US and actually started in Japan and spread to the UK as well) which on Thursday saw 30y Treasuries reach 5.15%, its highest level since 2007 while, at the same time, the dollar index dropped by 2% to 99, approaching the lowest level from April’s turmoil (98.30), which we believe will be pierced as investors seek further diversification and observe the growing decorrelation between higher yields and a higher dollar.
To alleviate fiscal concerns, S. Bessent took some of the sting of D. Trump’s BBB (“Big Beautiful Bill”), saying that “he was expecting the US budget deficit to be something with a 3% in front of it by 2028” with revenues of the tariffs to be used to reduce the deficit and an incrementally higher GDP growth supported by reindustrialization, deregulation and AI productivity. Prior to that, the CBO (which does not consider the positive effects on growth of the proposed policy mix) said that it was expecting the new bill adopted last week by Congress with a slim majority, to add USD2.3trn to deficits over the next decade.
President Trump also said he would take a decision in the near term about taking mortgage finance firms Fannie Mae and Freddie Mac public. This would require a heavy equity refinancing and raise questions marks on future QE programs from the Fed (which may possibly have contributed to upside pressure on bond yields last week).
Two Federal Reserve officials also underscored the US central bank needs to be patient and assess incoming data before adjusting policy rates.
J. Dimon from JPMorgan and R. Dalio from Bridgewater threw cold water on market enthusiasts, saying that credit agencies were understating credit risks because they only rate the governments risks not to pay their debt, and not to pay it back in devalued currencies, saying one “you should be afraid of the bond market…because we are in that type of a critical, critical situation” with deficits likely to hit 6.5%.
As regards, US stocks, he said “the market came down 10%. It is back up 10%. I think that is an extraordinary level of complacency …and I think there is a chance of inflation going up and stagflation a little bit higher than what others think. They are too many things out there. I am not going to talk about geopolitical risks. I think there is an operating assumption inside the room that it is not a big deal that it is not going to cause a problem…. I think the geopolitical risk is very very very high.”, Dimon said. For credit, he said “…I think there have been 15 years of pretty happy-go-lucky credit - a lot of new credit players, different covenants, different leverage ratios, there’s leverage on top of leverage in some of these things. I would expect that credit would be worse than people think when you have a recession…”
J. Dimon obviously belongs to the “smart money camp”. He is right in every word but timing is everything and we still need a catalyst…
With the exception of last Friday when European stocks underperformed (the DAX closed -1.5% lower) the general inclination remained for investors to seek further diversification with the recent appreciating trend of Asian currencies only reinforcing itself (CNY rallied strongly as well).
Short of a further US bond market sell-off, holding too much cash may raise the opportunity cost, considering how short hedge funds are (the so-called smart money) who have essentially sold their exposure to retail (the so called stupid money) and the powerful impact that share buyback is expected to have until mid-June (when they will fade ahead of the Q2 earnings season) and considering the effective verbal intervention of the White House (which remains determined to prevent a bear market as this would be the single most important factor for Republicans to lose political support from both main and Wall Street).
In other words, while the Trump “put” seems pretty much alive, perhaps the Trump “call” will have an even louder voice in the next few week before valuation or economic concerns start to weigh in.
Chances are that institutional investors might be squeezed out of their large short positions (which according to the last 3 COT reports increased by USD25bn or the largest amount in 10 years) before retail runs out of ammunition.
D. Trump threw a last curve ball on Friday threatening to impose 50% tariffs on European exports on June 1st as he reiterated his complaints of the EU being slow walking in the negotiations and unfairly targeting US companies with lawsuits and regulations.
He also said a potential 25% tax would apply on all foreign made smart phones as he clearly charged AAPL for trying to substitute China for India as its main manufacturing hub for Iphones (instead of the US).
Perhaps the most likely scenario is for more stocks (and bonds) recovery over the near-term, while the USD continues to weaken in line with investors and the White House preferences.
Gold could in that case remain the anti-fragile part of investors’ portfolio for those reluctant to the idea preferring cash until the situation clears out (which it is unlikely to do anytime soon), especially considering the very heavy outflows recently observed in Gold ETF’s and the unwavering central banks appetite for the precious metal.
On this day of remembrance, when poppies will flourish many suits, D. Kotok offered a piece of history worth remembering on the origins of the poppy.
“ The poppy was introduced as a remembrance after WW1 and because of a poem composed in memory of fallen soldiers buried hastily after a deadly battle in a Flanders, Belgium, field, where poppies bloomed between newly dug graves. Inspired by the poem, Moina Michael, an American professor and humanitarian, vowed in 1918 to always wear a red poppy in remembrance of those who died in war.
The poem "In Flanders Fields" was written by Lieutenant Colonel John McCrae, a Canadian physician and soldier:
In Flanders fields the poppies blow
Between the crosses, row on row,
That mark our place; and in the sky
The larks, still bravely singing, fly
Scarce heard amid the guns below.
We are the Dead. Short days ago
We lived, felt dawn, saw sunset glow,
Loved and were loved, and now we lie,
In Flanders fields.
Take up our quarrel with the foe:
To you from failing hands we throw
The torch; be yours to hold it high.
If ye break faith with us who die
We shall not sleep, though poppies grow
In Flanders fields.
For more on the poet and the occasion for the poem, see
“John McCrae,”
There were, in fact, five major battles fought in Flanders during WWI. (McCrae wrote “In Flanders Fields” after the Second Battle of Ypres claimed many lives, including the life of McCrae’s good friend Alexis Helmer.) The five battles are succinctly outlined below by Bing AI (and fact checked). We found that casualty estimates for some battles vary considerably among sources.
First Battle of Ypres (October–November 1914)
· Marked the end of the "Race to the Sea."
· Allied forces halted the German advance.
· High casualties on both sides; estimated total 250,000 killed, wounded, missing, and captured.
Second Battle of Ypres (April–May 1915)
· Notable for the first large-scale use of poison gas (chlorine) by the Germans.
· Canadian forces played a key role in holding the line.
· Estimated casualties 100,000.
Third Battle of Ypres (also known as the Battle of Passchendaele, July–November 1917)
· One of the bloodiest battles of the war.
· Fought in horrific muddy conditions.
· British and Commonwealth forces eventually captured Passchendaele Ridge.
· Famous for the detonation of massive mines under German lines.
· Considered a tactical success for the Allies.
· Estimated casualties on all sides exceeded 500,000.
Fourth Battle of Ypres (April 1918, part of the German Spring Offensive)
· Also known as the Battle of the Lys.
· German forces attempted to break through Allied lines in Flanders.
· Estimated casualties 500,000, notable for the battle fought in mud.
Fifth Battle of Ypres (September–October 1918)
· Part of the final Allied offensives leading to the end of the war.
· Allied forces pushed German troops out of Flanders. Estimated casualties 200,000.
Estimated casualties (killed, wounded, missing, and captured) for the five WWI battles fought in Flanders totaled 1.2 to 1.3 million. These figures include soldiers from Britain, France, Belgium, Germany, Canada, Australia, and other nations involved in the Western Front.
Did Americans fight in Flanders fields? Yes, they did, 40,000 of them (“Americans in Flanders during World War I,” https://flandersintheusa.org/americans-flanders-during-world-war-i). But they didn’t arrive until June and July 1918, so they did not fight alongside McCrae, who died of pneumonia in January 1918.
Tomorrow, we might wear a red poppy to remember those who died fighting to preserve our freedoms and our way of life here in the US. At 3:00 PM tomorrow afternoon, during the National Moment of Remembrance, we are encouraged to pause to honor in silence those who served and made the highest sacrifice.”
Overnight in Asia…
Over the past week, the S&P500 dropped -0,4% (-3,7% YTD) while the Nasdaq100 dropped -0,2% (-4,5% YTD). The US small cap index gained 0,2% (-9,1% YTD). AAPL sold off by -3,3% (-20,7%).
The Equally Weighed SP500 gained 0,4% (-1,5% YTD), outperforming the S&P500 by 0,8%. The median SP500 YTD return closed the week at -0,8%.
Cboe Volatility Index sold off by -3,4% (26,2% YTD) to 21,9.
The Eurostoxx50 gained 1,0% (9,9%), outperforming the S&P500 by 1,4%.
Diversified EM equities (VWO) dropped -0,4% (5,0%), matching the S&P500.
The Dollar DXY Index (UUP) measuring the USD performance vs. other G7 currencies gained 0,5% (-6,0%) while the MSCI EM currency index (measuring the performance of EM currencies vs. the USD) gained 0,4% (4,7%).
10Y US Treasuries underperformed with yields rising 7bps (-19bps) to 4,38%. 10Y Bunds climbed 3bps (20bps) to 2,56%. 10Y Italian BTPs dropped -3bps (9bps) to 3,61%, outperforming Bunds by -6bps.
US High Yield (HY) Average Spread over Treasuries dropped -9bps (56bps) to 3,43%. US Investment Grade Average OAS dropped -4bps (19bps) to 1,06%.
In European credit markets, EUR 5Y Senior Financial Spread dropped -3bps (2bp) to 0,66%.
Gold rallied 2,6% (26,7%) while Silver rallied 2,2% (13,2%). Major Gold Mines (GDX) rallied 7,0% (48,5%).
Goldman Sachs Commodity Index gained 1,7% (-1,2%). WTI Crude rallied 4,7% (-14,9%).
Overnight in Asia…
S&P future +56 points; Hong Kong -1.1%; Nikkei+0.5%; China -0.7%
Shortly after the US futures opened, the President the European Commission said late on Sunday that she held a good call with the US President, that Europe was ready to advance talks “swiftly and decisively”, adding that to reach a deal, she would need time until July 9th, asking for a delay to which the US President agreed.
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