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Pandas to Return to San Francisco...

BentinPartner Weekly

Last week delivered another string of cross asset positive return, jolted by US CPI and PPI, which both dropped slightly more than expected, and on encouraging signs that the US and China resumed talking to each other, in a more constructive way, with hopes conveyed that “planet earth is big enough for the two countries to succeed.”

Last week, Ray Dalio recalled what he identified as being the five critical challenges likely to remould the world order as we know it, citing the sheer size of existing (and unsustainably high) debt levels, the emergence of all round internal political conflicts (leading to the increased polarization of society due to rising inequalities), international geopolitical tensions (with conflicts in Ukraine, war in the Middle East, a potentially brewing one in Taiwan), climate change and the changes brought by Artificial Intelligence.

Whatever antagonism has been put forward, purposely or inadvertently shortly thereafter, in a week end post, R. Dalio gave kudos to the US/China meeting for restoring…. communication channels at the military level, for enhanced collaboration on Fentanyl and for exchanging students (and pandas) as envoys of friendship. R. Dalio opined that it helped restoring empathy between the two sides as he related to the good atmosphere that prevailed during the official dinner which he attended between people who happened to have known each other quite well and for a fairly long time.

While equity, bond and credit markets rallied solidly last week (including it seemed, with some “dash for thrash”), the USD was mostly taken on the back foot as the focus turned to Fed easing.

That said, observers including Fed official M. Daly warned last week that the US Federal Reserve would put its credibility at risk if it prematurely declared victory in its fight against inflation and then had to raise rates again. History may not repeat itself but the roller coaster seen in inflation between 1968 and 1980 when it rose and fell sharply several times (as did Fed policy rates) before peaking at 14.7% in April 1980 could serve as a warning sign against “stop-start” policy tightening, even if the charge of the massive debt that was built ever since, is likely to instil a rapid temptation to ease which will be difficult to contain.

Focus will be this coming week on European PMI’s still likely to show, that Europe is on the cusp of a mild recession.

Investors will also be closely watching the sanity check of how the 20-year notes auction goes today.


Over the past week, the S&P500 rallied 2,3% (17,9% YTD) while the Nasdaq100 rallied 2,0% (45,0% YTD). The US small cap index rallied 5,4% (2,3% YTD). AAPL gained 1,8% (46,0%).

The Equally Weighed SP500 rallied 3,4% (3,0% YTD), outperforming the S&P500 by 1,0%.

The median SP500 YTD return closed the week at 1,3%.

Cboe Volatility Index sold off by -2,6% (-36,3% YTD) to 13,8.

The Eurostoxx50 rallied 3,5% (18,0%), outperforming the S&P500 by 1,2%.

Diversified EM equities (VWO) rallied 2,6% (3,6%), outperforming the S&P500 by 0,3%.

The Dollar DXY Index (UUP) measuring the USD performance vs. other G7 currencies dropped -1,8% (5,4%, Z-score -2,4) while the MSCI EM currency index (measuring the performance of EM currencies vs. the USD) gained 1,1% (2,6%).

10Y US Treasuries rallied -22bps (56bps) to 4,44%. 10Y Bunds dropped -13bps (2bps) to 2,59%. 10Y Italian BTPs rallied -22bps (-36bps) to 4,36%, outperforming Bunds by -9bps.

US High Yield (HY) Average Spread over Treasuries dropped -3bps (-80bps) to 3,89%. US Investment Grade Average OAS dropped -9bps (-23bps, Z-score -2,2) to 1,20%.

In European credit markets, EUR 5Y Senior Financial Spread dropped -6bps (-18bps) to 0,81%.

Gold rallied 2,1% (8,6%) while Silver rallied 6,5% (-1,0%). Major Gold Mines (GDX) rallied 4,3% (-0,8%).

Goldman Sachs Commodity Index dropped -0,4% (-2,8%). WTI Crude dropped -1,7% (-5,4%).


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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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