BentinPartner Weekly
Dear Reader,
Last week’s unwind affected most asset classes while the dollar continued to strengthen on short covering. The risk off mood started with additional weakness in bank shares after a new investigation by the International Consortium of Investigative Journalists saying that JPMorgan, Deutsche Bank and HSBC were among global banks who ‘kept profiting from powerful and dangerous players’ in the past two decades even after the U.S. imposed penalties on these financial institutions.” Fed Chair Powell pledged continued support for the economy, calling several times, along with several other Fed Governors, for more support from fiscal side.
Risk off also affected US credit markets amidst a global de-risking/deleveraging episode that hit precious metals equally hard.
Despite some wild gyration throughout the week, US equities managed a late recovery on Friday that reduced the losses to small numbers (while European and Chinese markets were closed).
Economist Stephen Roach reiterated his warning that next year will be brutal for the dollar. Not only does he see growing odds of a double-dip recession but ‘We’ve got data that’s confirmed both the saving and current account dynamic in a much more dramatic fashion than even I was looking for’, he said. ‘The current account deficit in the United States, which is the broadest measure of our international imbalance with the rest of the world, suffered a record deterioration in the second quarter… The so-called net-national savings rate, which is the sum of savings of individuals, businesses and the government sector, also recorded a record decline in the second quarter going back into negative territory for the first time since the global financial crisis.’, he added.
Those (like us) interrogating the turning point on the dollar will read with some amusement Reuters story below, suggesting that D. Trump also tries to leave his footprint on currencies through other means than tweets and public comments.
September 21 – Reuters (Jeff Mason): “U.S. President Donald Trump… said he was rebuffed when he asked officials to adjust the exchange rate of the dollar to counteract what he described as repeated currency manipulation by China of its yuan… ‘I go to my guys, ‘What about doing a little movement on the dollar?’ he said, but they countered that was not possible. ‘Sir, we can’t do that. It has to float naturally.’”
Last Week's Recap...
Over the past week, the S&P500 dropped -0,6% (2,1% YTD) despite a short covering rally on Friday and the Nasdaq100 finished the week with a gain of 1,8% (27,7% YTD). The US small cap index in contrast shed -4,5% (-11,6% YTD).
BofA’s weekly fund flow report showed that “Investors had (in the week ending September 23d) pulled $25.8bn out of US equity funds, the third biggest outflow from this asset class. The same report showed that investors pulled out from US HY debt as well.
CBOE Volatility Index climbed 2,1% (91,4% YTD) to 26,38.
The Eurostoxx50 sold off by -4,3% (-14,2%), underperforming the S&P500 by-3,7%.
Diversified EM equities (VWO) sold off by -4,5% (-5,2%), underperforming the S&P500 by-3,9%.
The Dollar DXY Index (UUP) measuring the USD performance vs. other G7 currencies gained 1,8% (-1,6%, Z-score 2,0) while the MSCI EM currency index (measuring the performance of EM currencies vs. the USD) dropped -1,3% (-2,2%). The Mexican peso lost 5.4%, the South African rand 4.7%, the Colombian peso 3.9%, the Polish zloty 3.6%, the Russian rubble 3.2% and the Brazilian real shed 3.1%
10Y US Treasuries rallied -4bps (-126bps) to 0,65%. 10Y Bunds dropped -4bps (-34bps) to -0,53%. 10Y Italian BTPs rallied -8bps (-53bps) to 0,89%, underperforming Bunds by 2bps. For what it worth, the (bipartisan) Congressional Budget Office said in its long-term budget outlook, that projected debt will reach 195% of gross domestic product in 2050, up from 98% this year and 79% in 2019. Doing the math, this scary forecast may have looked optimistic to some.
Despite US indices doing their best to close on a strong impression before the week end (in contrast with European and EM markets which both closed the week with larger losses without the artificial construct of two late squeezes), US High Yield (HY) Average Spread over Treasuries climbed 47bps (201bps, Z-score 2,2), to 5,37%. US Investment Grade Average OAS climbed 14bps (49bps, Z-score 3,1) to 1,50%.
In European credit markets, EUR 5Y Senior Financial Spread climbed 20bps (30bps, Z-score 2,1) to 0,82%.
Precious metals traded weaker across the board with Gold selling off -4,6% (22,7%, Z-score -2,1) while Silver shed -14,5% (28,2%, Z-score -2,1). Major Gold Mines (GDX) sold off by -7,1% (31,2%).
What was meaningful last week was the very high and unusual positive correlation with stocks from which gold is normally totally uncorrelated with. We wrote on this on Thursday.
Goldman Sachs Commodity Index sold off by -2,7% (-29,3%). WTI Crude sold off by -2,1% (-34,1%).
Have a nice week ahead and stay safe.
For a Timely receipt of this report and daily updates and to access our intra-day Alert system, join the BentinPartner Daily Free Trial List. You won't regret it.
Marc Bentin, BentinPartner GmbH
Founder, Chief Investment Officer
BentinPartner GmbH is a Swiss registered independent financial adviser.
We deliver transparent, professional, tailor-made, and competitive portfolio management services. We help our clients build and manage their wealth, resting on the three pillars of our business values; integrity, competence, and responsibility.
Our premium research blends macro economic, political, monetary and technical analyses to produce an actionable 360 degrees daily review of Global Financial Markets on a daily basis.
If you like our Weekly, you will love our Daily. Take a free trial to the BentinPartner Daily or visit our web site http://BentinPartners.ch
Bentinpartner GmbH is Advisor to the Phi Funds AIF, an umbrella Alternative Investment Fund registered and regulated in Lichtenstein, specialized in the management of Funds focused on physical precious metals.
Important Disclaimer
© Copyright by BentinPartner llc. This communication is provided for information purposes only and for the recipient's sole use. Please do not forward it without prior authorization. It is not intended as a recommendation, an offer or solicitation for the purchase or sale of any security or underlying asset referenced herein or investment advice. Investors should seek financial advice regarding the suitability of any investment strategy based on their objectives, financial situation, investment horizon and particular needs. This report does not include information tailored to any particular investor. It has been prepared without any regard to the specific investment objectives, financial situation or particular needs of any person who receives this report. Accordingly, the opinions discussed in this Report may not be suitable for all investors. You should not consider any of the content in this report as legal, tax or financial advice. The data and analysis contained herein are provided "as is" and without warranty of any kind. BentinPartner llc, its employees, or any third party shall not have any liability for any loss sustained by anyone who has relied on the information contained in any publication published by BentinPartner llc. The content and views expressed in this report represents the opinions of Marc Bentin and should not be construed as guarantee of performance with respect to any referenced sector. We remind you that past performance is not necessarily indicative of future results. Although BentinPartner llc believes the information and content included in this report have been obtained from sources considered reliable, no representation or warranty, express or implied, is provided in relation to the accuracy, completeness or reliability of such information. This Report is also not intended to be a complete statement or summary of the industries, markets or developments referred to in the Report.
Comments