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The Fear of Consensus?

BentinPartner Weekly

Dear Reader,

Last week may just have been one of these bumps on the road of an everlasting growth stocks outperformance. If it was not, value stocks may only outperform within the context of a bear market (which will complicate matters), given the dominating position of tech stocks in US indices. Dollar bulls got some reprieve, on “risk off” dollar reflex purchases (as ECB President C. Lagarde also took a page from M. Draghi’s script, talking down the Euro after the ECB Council last Thursday, promising more easing December).

The transition away from the dollar will remain a key concern that the digital CNY (severed from Swift) and similar other central banks digital initiatives may only exacerbate. A crisis often happens slowly, then all at once. The lesson of history is also that people most often ignore them.

Precious metals dropped for the week as well although bitcoin, silver and gold (in that order) shined again towards the end of the week.

Over the past week, the S&P500 sold off by -5,6% (1,5% YTD, Z-score -2,1) while the Nasdaq100 sold off by -5,4% (26,7% YTD, Z-score -2,1). The US small cap index sold off by -6,1% (-7,6% YTD, Z-score -2,1).

Most Gafas and new tech themes that raked in the biggest year to date gains so far, got crushed last week ...

Some fund managers grew more concerned by fears of a “consensus” developing in Washington to tighten regulations, and prospects that another large stimulus bill would bolster a rotation out of tech and into other sectors, including economically sensitive value stocks. Both Trump and Biden criticized large tech companies although they fell short of explicitly calling for them to be broken up. Trump has said “there is something going on in terms of monopoly” when asked about big tech firms...

Cboe Volatility Index rallied 38,0% (175,9% YTD) to 38,02.

The Eurostoxx50 sold off by -7,4% (-19,0%, Z-score -2,1), underperforming the S&P500 by -1,9%.

Diversified EM equities (VWO) sold off by -3,4% (-1,5%), outperforming the S&P500 by 2,1%.

The Dollar DXY Index (UUP) measuring the USD performance vs. other G7 currencies gained 1,3% (-2,3%) while the MSCI EM currency index (measuring the performance of EM currencies vs. the USD) dropped -0,5% (-0,6%). As the FT wrote “...the US dollar has found its footing, reflecting its haven status whenever equities and investor sentiment take a knock.

But that may prove fleeting given the longer-term forces stacking up against the world’s reserve currency.” We certainly share those concerns.

10Y US Treasuries dropped 3bps (-104bps, Z-score 2,2) to 0,87%. 10Y Bunds dropped -5bps (-44bps) to -0,63%. 10Y Italian BTPs climbed 0bps (-65bps) to 0,76%, underperforming Bunds by 6bps.

US High Yield (HY) Average Spread over Treasuries climbed 41bps (173bps) to 5,09%. US Investment Grade Average OAS climbed 4bps (34bps) to 1,35%.

In European credit markets, EUR 5Y Senior Financial Spread climbed 12bps (33bps, Z-score 2,3) to 0,84%.

Gold dropped -1,2% (23,8%) while Silver sold off by -3,9% (32,5%). Major Gold Mines (GDX) sold off by -3,4% (28,0%).

Goldman Sachs Commodity Index sold off by -5,0% (-31,6%, Z-score -2,4). WTI Crude sold off by -10,2% (-41,4%, Z-score -2,5).

Over the week end…

Ø Stock futures started weak overnight as oil declined 4.4% amidst fears of a slowing global economy (as the US reported 99,321 new Covid-19 cases on Friday, beating its previous record from a day prior) and as Libya continued to ramp up crude production after a truce in its civil war. Choppy trading will likely continue as traders brace for Tuesday’s US presidential election. This morning’s equity session was saved by better than expected Chinese growth data.

Ø EU and British Brexit negotiators will continue talks on Monday until mid-week to avoid a damaging breakdown in trade in less than nine weeks.

Ø French President E. Macron said that France’s wish was that things “calm down” but for this to happen, it was essential that the “Turkish president respects France, respects the European Union, respects its values, does not tell lies and does not utter insults”.

Ø Morgan Stanley estimated that we will simply have to watch Florida and South Carolina to determine who won the elections on Tuesday night as the difference will come from the mailed-in votes and both states have already processed the majority of those while other states have been slower processing.

Have a nice week ahead and stay safe.


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Marc Bentin, BentinPartner GmbH

Founder, Chief Investment Officer

BentinPartner GmbH is a Swiss registered independent financial adviser.

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