“When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done.”

— John Maynard Keynes

Not a rant, but a critical observation:

It all started with MEME stocks during the pandemic, when furloughed workers metamorphosed into armchair speculators.

0DTE options followed.

Then leveraged ETFs.

Then prediction markets such as Kalshi and Polymarkets.

Rightfully, you would be inclined to ask where the regulator is in all this?

But not only is the SEC (Securities & Exchange Commission) in the US for example completely blindfolded to the gamification of financial markets, it actually is in full support of it!

Key Details of the Approval

• What it is: Binary “yes/no” options contracts that pay out based on whether a publicly traded company beats or misses specific performance metrics (such as Tesla deliveries, Apple iPhone sales, or Alphabet YouTube ad revenue).

• Initial Rollout: Covers 23 major U.S.-listed companies, with Robinhood acting as the primary retail brokerage platform.

• Fees: Cboe will waive exchange fees through the end of 2026, and Robinhood plans to offer the contracts with no platform fees through year-end.

We all know how this will end.

But if you don’t know, I will resolve your doubts at the end (aka the bottom) of this week’s Quotedian.

But before that, let’s have a cross-asset look at financial markets after what has been an agitated week.

It was a difficult week for equities:

Though actually, it was not THAT bad … mostly so for passive investors which allocate to the most expensive overweight stocks in the cap-weighted indices:

Or those riding the AI-trade to the full, where the past month has been an authentic sh.t show:

As a matter of fact, the GS US Broad AI basket, which according to its Bloomberg description, consists of US-listed companies that are pursuing the development of artificial intelligence across all categories: hyperscalers, data centre infrastructure, equipment suppliers, power, and commodities is down to a nearly identical drawdown during the July sell-off:

But before you dive and try to catch that falling knife, there have been larger pullbacks, like for example during Q1 of last year:

But then again, the setup in semiconductor stocks for example is tempting:

Worthwhile a dabble to the upside?

Probably!

Just don’t forget to set a stop loss!

Many indices may be poised for an at least short-term bounce here. For example the S&P 500:

Or the Nasdaq 100:

European stocks (SXXP) even look halfway constructive here,

and have been outperforming their US counterparts on a relative basis over the past two weeks:

If you don’t buy the Nikkei here, don’t buy it until much lower then:

And just to finish the equity section - now, THAT is what I call a candle on the iShares MSCI Brazil ETF (EWZ), after Lula’s surprise election turnaround:

The bond market, taking the iShares 20+ Year Treasury Bond ETF (TLT) has a proxy, is continuing its recovery after the now famed The Economist “Will Bonds Blow Out” magazine cover bottom. Next stop is the previous support (dashed line) now turned resistance, thereafter the 200-day moving average (thick black line):

There are four central banks (Fed, BoE, BoJ, BoC) setting their interest policy this week, but the big one is of course the FOMC (Fed) decision on Wednesday evening:

As we can read out of the table above, the market implied possibilities for a rate hike this week are only at 10%…

… but I say, what if … just assume, what if …

I would at least look to position myself for such an outlier chance with a tiny short on the stock market and or a long (in bonds) on the back end of the yield curve.

Even if Warsh indeed does not hike, his tone may be super-hawkish.

Meanwhile in France, the 10-year government bond yield traded briefly above its US counterpart last week - a first in 13 years:

Aren’t we lucky then, that at least Moody’s (a paid service, btw. … just saying…) is giving its full confidence vote in favour of France.

To me, and please look away now if you are faint at heart, the only question remaining is then:

Too big to fail?

OR

Too big to be saved?

Frexit, anyone?

Sorry, now you cannot unsee that …

This is the Gold chart nobody wants to see (but which we showed anyone in one of last week’s Daily Qs):

The following chart of Silver, with quarterly candles and on a log scale, suggesting a possible cup and handle pattern, would be much more agreeable to precious metal bulls then, as it would suggest a bottom around the $48-handle with substantially more upside thereafter:

At the end of the introduction I told you that we all know how this gamification of everything will end.

For those who, however, may still be in doubt, here’s how it will end:

In tears.

“It’s tough to find values when everybody is preferring gambling.”

— Warren Buffett, CNBC interview, 15 July 2026

But in the meantime, “May the Betting Odds be with you!”

André

The Important One:

• Everything in this document is for educational purposes only (FEPO)

• Nothing in this document should be considered investment advice

• Investing real money can be costly; don’t do stupid shit

• Leave politics at the door—markets don’t care.

• Past performance is hopefully no indication of future performance

• The views expressed in this document may differ from the views published by NPB Neue Privat Bank AG

The Legal One:

This publication is marketing material within the meaning of Article 68 of the Swiss Financial Services Act (FinSA). It is provided for information purposes only and is intended exclusively for persons to whom the financial instruments and financial services described herein may lawfully be made available.

This publication does not constitute an offer or solicitation to make an offer to purchase, sell, subscribe for or exchange financial instruments. Nor does it constitute personalised investment advice, a personal recommendation, or a solicitation to implement a specific investment strategy. Any investment decision should be made only after reviewing the complete documentation applicable to the relevant financial instrument and after taking into account the investor’s personal circumstances, investment objectives, risk capacity, and legal and tax situation.

Where a prospectus and/or key information document is available or required for a financial instrument referred to in this publication, such document(s) may be obtained free of charge from NPB. This publication must be read together with the relevant legal offering and product documentation. The information contained in this publication must be consistent with such documentation. In the event of any inconsistency, the relevant offering and product documentation shall prevail.

The availability of the financial instruments and financial services described herein may be subject to legal or regulatory restrictions depending on the recipient’s domicile, residence, nationality or other status. The financial instruments and financial services described herein are not offered in all countries and may not be offered, distributed or made available to persons for whom this would be unlawful under applicable law.

The information contained in this publication is based on sources which NPB considers reliable. However, no representation or warranty is made as to its accuracy, completeness or currency. Statements concerning future developments, returns or markets are non-binding assessments and do not constitute any assurance or guarantee. Past performance and simulations are not a reliable indicator of future results. Investments in financial instruments involve risks, including the possible loss of the invested capital.

The content, scope, conditions and fees of any service are governed exclusively by the contractual agreement in force between NPB and the client. NPB may amend services, products and terms at any time, subject to the applicable agreements and legal requirements.

Information about the processing of personal data is available in NPB’s current Privacy Policy at https://www.npb-bank.ch/uploads/downloads/Dataprotection.pdf

“A lot of investors have no clue what they’re investing in, but set very extreme expectations … almost like they are in a casino.”

— Hock Tan, CEO of Broadcom, October 2026 (paraphrased)

• Breadth is breaking: Beneath resilient headline indices, an increasing number of stocks are already in correction or bear market territory.

• Complacency reigns: Despite mounting warning signs, speculative positioning remains elevated and volatility surprisingly subdued.

• Debt is biting: From French sovereign bonds to AI infrastructure financing, credit markets are showing increasingly worrying cracks.

• 1966, not 1929? The next secular bear market may be a long, volatile sideways grind rather than a spectacular crash. A stock picker’s paradise?

It’s all over.*

The only question remaining is: Is it the end of the cyclical or the secular bull equity cycle?

I know - strong words for a Monday afternoon. But at least I got your attention now.

But, and on a more serious note, chances for a deeper equity market correction have increased over the past few weeks.

Why?

Too bad market breadth? Too much complacency? Too high bond yields? Too much midterm uncertainty? Too much government debt (US/EU)? Too much corporate debt (Coreweave et al.)? Too high earnings expectations? Too often social unrest?

Maybe some of the above, maybe all of the above.

Let’s have a look at some of them together.

BREADTH

In the S&P 1,500 Composite index, an index covering US large-, mid- and small-cap equities in the US, less than 50% of its constituents are above their 200-day moving average:

What is surprising is that the index is less than 2.5% from its all-time high away - something seems to be off here.

If we break down the three indices in the composite above, we of course immediately recognise that it is the mid- and small cap stocks which are in at or close to correction (-10%) territory:

But even large cap stocks, one we remove the Magnificent Seven and only look at the X7 Index (S&P 500 minus 7 Mags) the previously bullish picture changes to somewhat less bullish:

An equal-weight market carpet with three months performance shows a lot of red and a lot of double-digit red too:

In the S&P 500, on a year-to-date basis,

• 38% of stocks are negative

• 25% of stocks are in a correction (minus 10% or more)

• 12% of stocks are in bear market (minus 20% or more)

And all of this, before we even look at the more volatile corners of the market.

Such as the Nasdaq 100 for example:

Or the Philadelphia Semiconductor index, commonly known as the SOX, which starts to smell rather a lot like a bubble burst:

It was a difficult week for many popular themes:

But especially the AI trade:

Korea’s KOSPI index, heavily exposed to memory chip makers, has fully reversed its distancing from 200-day moving average (bottom clip) and an overshoot to the downside is now the danger:

And then, as usual when markets get a bit wobbly, someone throws in this comparison chart again:

COMPLACENCY

So, are investors scared stiff now?

CNN’s Greed and Fear would suggest that yes, investors are somewhat weary:

We could even (try and) argue that investors are rational (ehem), and are switching out of volatile semiconductor stocks (SMH, grey) into defensive consumer staples (XLP, red) stocks:

But then the following chart of the three times leveraged SOX index ETF throws that tale of caution immediately and completely out of the window:

YOLO, FOMO and GERONIMO all at once!

And the chart of the positioning of members of the American Association of Individual Investors (AAII) also shows that the retail cohort is full in:

S&P 500 volatility, as measured by the VIX, also seems somewhat do laidback, especially also in comparison to Nasdaq (VXN) and Semiconductor (VXSMH) volatility:

UNREST

Things are not good in Europe and especially not good in France. When there´s acronyms, you know Europe´s having a debt crisis and somebody came up with what FROGS stands for:

French Oversized Government and Social Security

The stock market (CAC 40) has been in the know since this summer:

The decoupling of the French equity market (CAC 40 - red) from the rest of the European markets (SXXP - grey) has been very visible:

The bond market, of course, has been in the know also for a while now:

We are speaking here of levels on par with the panic moments during the 2011/2012 European sovereign debt crisis!!

Credit Default Swap rates have moved higher, but are not at those 2011/12 levels … yet:

DEBT (Government)

The problem in France are not only elevated Debt-to-GDP levels:

The problem in France is not only elevated government debt (which is in line with the US debt in % of GDP), but also very high private debt:

In the US bond market, The Economist once again came to the rescue with their famed … fabled … notorious Magazine Coverpage contra-indicator:

But to honest, it had some help also from Germany’s Handelsblatt, which came out with the following cover, only a day after The Economist’s:

So far, so good:

Looking at bond prices and taking the iShares 20+ Year Treasury Bond ETF (TLT) as a proxy, this looks as follows:

Debt (Corporate)

At least partially initiating the AI ‘panic’ last week was a sharp sell-off in CoreWeave with the central debate being whether the company can continue its data-center buildout without materially eroding shareholders return.

The company’s share price has dropped 30% in less than two weeks:

But probably more drama was seen on the company’s bonds, where its 9 5/8% 2032 issue for example briefly fell below 80,

yielding north of 15% p.a.,

as their CDS rates blew out to above 1,000 (normally considered the magic number of default…):

Other AI sinners spenders were also castigated. E.g., Oracle:

We have been warning (last time in our quarterly outlook - click here) that the widening in the lowest quality bucket of high yield (CCC - Gold line) should be closely monitored:

The blow-up sequence is lowest quality first (above), followed by the rest of the credit market (below),

then followed by equities:

Yes, equity investors always get the memo last. Or, better put, they get the memo but prefer not to read it…

Unfortunately, it has gotten late on this busy Monday, and I need to hit the send button on what feels like unfinished business.

But hey, c’est la vie (to stay topical).

But one more thing just before I leave … I nearly forgot to mention why it today’s title is “Party likes it’s …1966”.

My working assumption for the next secular bear market, whether it is just beginning or will only do so over the next one to two years, has always been that it will look something like the secular bear from 1966 to 1982:

16 years of nothingness, but with wild volatility and money to be made for the non-passive, active investor!

It may not be pretty, but better 1966 than 1929, no?

Markets rarely ring a bell at the top. But right now, quite a few bells are ringing simultaneously.

Deteriorating breadth, speculative excess, sovereign debt concerns and widening credit spreads are an increasingly uncomfortable combination. Particularly as equity investors seem determined to ignore what bond investors are telling them.

Does this mark the end of the secular bull market? Too early to tell. But the probability of a meaningful correction has increased substantially.

And remember, a secular bear market doesn’t necessarily mean a collapse. It might simply mean that buying and holding stops working for a very, very long time.

May the Trend be with You!

André

*Unless I am wrong, which is a high-probability scenario😜

The Important One:

• Everything in this document is for educational purposes only (FEPO)

• Nothing in this document should be considered investment advice

• Investing real money can be costly; don’t do stupid shit

• Leave politics at the door—markets don’t care.

• Past performance is hopefully no indication of future performance

• The views expressed in this document may differ from the views published by NPB Neue Privat Bank AG

The Legal One:

This publication is marketing material within the meaning of Article 68 of the Swiss Financial Services Act (FinSA). It is provided for information purposes only and is intended exclusively for persons to whom the financial instruments and financial services described herein may lawfully be made available.

This publication does not constitute an offer or solicitation to make an offer to purchase, sell, subscribe for or exchange financial instruments. Nor does it constitute personalised investment advice, a personal recommendation, or a solicitation to implement a specific investment strategy. Any investment decision should be made only after reviewing the complete documentation applicable to the relevant financial instrument and after taking into account the investor’s personal circumstances, investment objectives, risk capacity, and legal and tax situation.

Where a prospectus and/or key information document is available or required for a financial instrument referred to in this publication, such document(s) may be obtained free of charge from NPB. This publication must be read together with the relevant legal offering and product documentation. The information contained in this publication must be consistent with such documentation. In the event of any inconsistency, the relevant offering and product documentation shall prevail.

The availability of the financial instruments and financial services described herein may be subject to legal or regulatory restrictions depending on the recipient’s domicile, residence, nationality or other status. The financial instruments and financial services described herein are not offered in all countries and may not be offered, distributed or made available to persons for whom this would be unlawful under applicable law.

The information contained in this publication is based on sources which NPB considers reliable. However, no representation or warranty is made as to its accuracy, completeness or currency. Statements concerning future developments, returns or markets are non-binding assessments and do not constitute any assurance or guarantee. Past performance and simulations are not a reliable indicator of future results. Investments in financial instruments involve risks, including the possible loss of the invested capital.

The content, scope, conditions and fees of any service are governed exclusively by the contractual agreement in force between NPB and the client. NPB may amend services, products and terms at any time, subject to the applicable agreements and legal requirements.

Information about the processing of personal data is available in NPB’s current Privacy Policy at https://www.npb-bank.ch/uploads/downloads/Dataprotection.pdf

“It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of light, it was the season of darkness, it was the spring of hope, it was the winter of despair.”

— Charles Dickens, A Tale of Two Cities

As announced last week, this is our quarterly special edition of The Quotedian, where we review some of the decisions and most impactful charts of NPB’s investment outlook for the coming three months (and beyond).

But just before we start, here’s a housekeeping matter from the previous Quotedian, where I asked you whether the two editions (weekly and daily) should be merged into one. Here is how you have voted:

A close outcome, but given this is a true democracy: You have spoken!

Ok, with that out of the way, to some of the key elements of our outlook. And please forgive me for heavily copy/pasting from our outlook document, but after an intense 10-day of preparing, meeting & deliberating and then putting the material into presentable form, both, my fingertips and grey brain cells are in need of a break…

But I need to admit something first …

Back in April of 2020, during the first weeks of the COVID-related lockdown, I wrote a piece for my then stakeholders titled “A Tale of Two Cities” and started with “ It was the best of times, it was the worst of times …” you know the rest.

At the time, the human aspect of the pandemic was definitely close to the “worst of time”, whilst financial markets quickly recovered and then same in the “best of times”.

Today, as I am recycling this title, it feels a bit the opposite, where we are coming from some of the “best of times”, potentially moving into the “worst of times” (tbc of course).

Here’s the slide of our Executive Summary out of the deck:

Both decks, the Global Asset Allocation and the accompanying chartbook should be available soon on our home page (www.npb-bank.ch), but for those of you who cannot wait, feel free to ping me at ahuwiler@npb-bank.ch to receive either or both documents.

To follow some key slides out of the chartpack.

Our “Chart of the Quarter” is a true stunner:

Overall, we argue that growth is good and probably even better than expected,

especially in the US

However, this economic strength may provoke further rate hikes from central banks around the globe,

which in turn may lead to a tightening of financial conditions, which today are still pretty relaxed:

Underweighting bond duration has been one of our best calls this year, as global government bond yields have been shooting higher, with one notable exception…

Whilst rising inflation expectations, but especially also the aforementioned better-than-expected economic growth numbers, are largely responsible for the rise in yields, the culprits in Europe are rather political, fiscal and social turmoil:

For now, the bond ‘panic’ has not swapped over into equity markets:

Earnings have been supportive to the move higher in stock markets, however, the seem to be at the upper end of the typical cycle:

Expectations may need to cool down:

Will the passive avalanche ever end?

As natural born optimists, we see opportunities arising out of the obsession for passive in the market:

And finally, this chart explains why Trump let his pants down (sorry, this is the technical and above all correct term) last weekend, when agreeing on Diesel imports from Russia with Russia:

These are only about a dozen charts out of our 170-pages chartbook - again, feel free to ask for your company by dropping me a friendly email:

Ping André

And, of course, feel free to share The Quotedian with friends and family:

Share

That’s all for today - May the Trend be with You!

André

The Important One:

• Everything in this document is for educational purposes only (FEPO)

• Nothing in this document should be considered investment advice

• Investing real money can be costly; don’t do stupid shit

• Leave politics at the door—markets don’t care.

• Past performance is hopefully no indication of future performance

• The views expressed in this document may differ from the views published by NPB Neue Privat Bank AG

The Legal One:

This publication is marketing material within the meaning of Article 68 of the Swiss Financial Services Act (FinSA). It is provided for information purposes only and is intended exclusively for persons to whom the financial instruments and financial services described herein may lawfully be made available.

This publication does not constitute an offer or solicitation to make an offer to purchase, sell, subscribe for or exchange financial instruments. Nor does it constitute personalised investment advice, a personal recommendation, or a solicitation to implement a specific investment strategy. Any investment decision should be made only after reviewing the complete documentation applicable to the relevant financial instrument and after taking into account the investor’s personal circumstances, investment objectives, risk capacity, and legal and tax situation.

Where a prospectus and/or key information document is available or required for a financial instrument referred to in this publication, such document(s) may be obtained free of charge from NPB. This publication must be read together with the relevant legal offering and product documentation. The information contained in this publication must be consistent with such documentation. In the event of any inconsistency, the relevant offering and product documentation shall prevail.

The availability of the financial instruments and financial services described herein may be subject to legal or regulatory restrictions depending on the recipient’s domicile, residence, nationality or other status. The financial instruments and financial services described herein are not offered in all countries and may not be offered, distributed or made available to persons for whom this would be unlawful under applicable law.

The information contained in this publication is based on sources which NPB considers reliable. However, no representation or warranty is made as to its accuracy, completeness or currency. Statements concerning future developments, returns or markets are non-binding assessments and do not constitute any assurance or guarantee. Past performance and simulations are not a reliable indicator of future results. Investments in financial instruments involve risks, including the possible loss of the invested capital.

The content, scope, conditions and fees of any service are governed exclusively by the contractual agreement in force between NPB and the client. NPB may amend services, products and terms at any time, subject to the applicable agreements and legal requirements.

Information about the processing of personal data is available in NPB’s current Privacy Policy at https://www.npb-bank.ch/uploads/downloads/Dataprotection.pdf

“There are three kinds of lies: lies, damned lies, and statistics.”

— Benjamin Disraeli

This week’s letter will be shorter than usual (no need to thank me 😏) as I am in full preparation mode for our Quarterly Investment Committee meeting in a few days, the outcome of which I hopefully will be able to share with you next week.

Hence, today’s letter will hold some statistical end-of-month (September) tables and a potpourri of charts I stumbled over and found interesting enough to share.

But just before, a truly important poll, to which I ask all of you for your kind participation.

Over the past two years or so, I have been splitting the Quotedian between its weekly version (www.thequotedian.com) and a ‘daily’ issue (www.quicq.ch). Please let me know if we should continue with this split, or if you prefer bringing it back to one publication again:

Ok, onwards…

Starting with equities, September should have been rocky, especially in mid-term election year:

But, hey, what happened here? The S&P was actually flat on the month:

And the Nasdaq-100 even advance more than three percent, closing the month at a new all-time high:

This of course reminds us immediately of the story of a man who was six feet tall drowned crossing a river that was, on average, only five feet deep.

The reality, most global investors ‘felt’, was quite different:

And more so, when checking in on the two previously highlighted indices in their equal-weight version, the picture suddenly changes.

The Nasdaq for example was not up 3%-plus, but rather small down:

And the S&P 500, instead of being flattish, gave back a full five percent and closed the month at the lows:

In other words, once again, it was only the largest cap stocks that pulled the market higher, and if you had a well-diversified portfolio, that probably did not pay off. Here’s the monthly chart of the Magnificent Seven:

The big mover of the month were of course interest rates, which we will discuss in a moment. But one direct victim of interest rates were small cap stocks (Russell 2000 below), which per se tend to have a higher level of debt and hence are more impacted by changes in rates:

Less than 500 stocks out of the 2,000 closed higher on the month, meaning more than three quarters of the index trended lower.

It is then interesting to observe that the short interest in the Russell 2000 is at its highest since the beginning of this decade, according to this chart created by JP Morgan:

Also very interesting, when we create an equal-weight index of interest rate-sensitive sectors in the US (Financials, Staples, Utilities, Real Estate), we note that it is at oversold levels, which in the past were good moments to enter at least for a short-term countertrend rally:

Worth a try? Probably.

As we are talking sectors anyway, here are the global sector performances for September, carrying little surprise in terms of the positive sectors:

This year, energy stocks (SPDR Energy Select ETF - XLE - red) have served well as a hedge to the sell-off in bond markets (iShares 20+ year Treasury Bond ETF - TLT - grey):

Which in other words mean that yields have moved in lock-step with energy stocks:

However, this correlation may have found its end now, when focusing on the last few weeks:

Which means that bond yields are not moving higher due to elevated energy prices now, but probably rather due to solid economic growth:

Having said that, last week’s economic data was a tad softer than expected, helping to bring down market expectation of future rate hikes at least a little bit:

This in turn has led to a re-steepening of the yield curve (10y-2y):

Staying on government bond yields for a moment, nous devons parler de la France…

Not good!

Zooming out on the same chart reveals the extent of the disaster:

2011 levels. Remember 2011? This was the story:

Hence, the falling EUR/USD cross rate is probably not purely to a strengthening US Dollar anymore:

The break below 1.1330 forces us (me) to review our (my) bullish outlook on the currency pair, as the danger to a deeper sell-off into the 1.07 range has increased massively:

Amazingly Annoyingly, that trendline on the US Dollar Index (DXY) has held up well:

Even more amazingly annoyingly, we just should have followed this chart, which compares the current, second Trump term of the US Dollar to his first one:

Sometimes, it’s just easy …

The Dollar strength is also pushing Gold, Silver and other precious metals lower. All of them show negative YTD performance now:

Gold seems poised to fall back to the $4,000 mark:

So perhaps September really could have been worse. The indices survived, after all. But breadth collapsed, small caps suffered, bonds were battered, sovereign risk resurfaced and the Dollar broke higher. As our unfortunate six-foot gentleman discovered, averages can be comforting right up until you step into the deep end.

That’s all for this week - as mentioned, keep an eye out for our quarterly investment outlook, due sometime later this week.

May the Trend be with You!

André

The Important One:

• Everything in this document is for educational purposes only (FEPO)

• Nothing in this document should be considered investment advice

• Investing real money can be costly; don’t do stupid shit

• Leave politics at the door—markets don’t care.

• Past performance is hopefully no indication of future performance

• The views expressed in this document may differ from the views published by NPB Neue Privat Bank AG

The Legal One:

This publication is marketing material within the meaning of Article 68 of the Swiss Financial Services Act (FinSA). It is provided for information purposes only and is intended exclusively for persons to whom the financial instruments and financial services described herein may lawfully be made available.

This publication does not constitute an offer or solicitation to make an offer to purchase, sell, subscribe for or exchange financial instruments. Nor does it constitute personalised investment advice, a personal recommendation, or a solicitation to implement a specific investment strategy. Any investment decision should be made only after reviewing the complete documentation applicable to the relevant financial instrument and after taking into account the investor’s personal circumstances, investment objectives, risk capacity, and legal and tax situation.

Where a prospectus and/or key information document is available or required for a financial instrument referred to in this publication, such document(s) may be obtained free of charge from NPB. This publication must be read together with the relevant legal offering and product documentation. The information contained in this publication must be consistent with such documentation. In the event of any inconsistency, the relevant offering and product documentation shall prevail.

The availability of the financial instruments and financial services described herein may be subject to legal or regulatory restrictions depending on the recipient’s domicile, residence, nationality or other status. The financial instruments and financial services described herein are not offered in all countries and may not be offered, distributed or made available to persons for whom this would be unlawful under applicable law.

The information contained in this publication is based on sources which NPB considers reliable. However, no representation or warranty is made as to its accuracy, completeness or currency. Statements concerning future developments, returns or markets are non-binding assessments and do not constitute any assurance or guarantee. Past performance and simulations are not a reliable indicator of future results. Investments in financial instruments involve risks, including the possible loss of the invested capital.

The content, scope, conditions and fees of any service are governed exclusively by the contractual agreement in force between NPB and the client. NPB may amend services, products and terms at any time, subject to the applicable agreements and legal requirements.

Information about the processing of personal data is available in NPB’s current Privacy Policy at https://www.npb-bank.ch/uploads/downloads/Dataprotection.pdf

"To know what you know and what you do not know, that is true knowledge."

— Confucius

Last Friday, the S&P 500 closed at 7,743.41, which is less than a percentage point from the August 13th all-time high at 7,798.99.

But somehow it does not feel like we are so close from a new ATH, no?

Also, as per last Friday, the same index is up over 13% year-to-date, which is solid midfield in a Globalperformance comparison:

But somehow it does not feel like we are up so much this year, no?

There are many reasons for that “I am not having quite that much fun as the market stats would suggest”-feeling. Here are some:

For one, the S&P 500 equal-weight index is lagging 300 basis points behind its ‘normal’ cap-weight version on a YTD comparison:

But, worse, since the market top a bit over a month ago that performance difference is close to 500 basis points:

Also, since the August market top, only about 20% of the index have made price gains. The rest is printing red since then.

No wonder then, that the number of shares above their 50- and 200-day moving average (MA) has dropped to 27% and 49% respectively:

Which in turn means the cumulative advance-decline ratio of the index must look horrendous:

Indeed.

This must of course mean that a few stocks are doing all the heavy-lifting. Let’s check in on the usual suspects … the Magnificent 7!

Bingo! New ATHs for the Mag 7 cohort!

So, what’s gonna happen from here then?

Either, the largest stocks are “infected” by the current virus affecting most of the market and are pulled down.

Or, the rest of the market starts playing catch-up with the advancing generals, the Mag Sevens.

I guess it is going to be the latter.

For one, seasonality is turning wildly bullish for stocks, be it midterm election year or not:

Further, the high beta factor continues to largely outperform low volatility:

And consumer discretionary stocks are not underperforming consumer staples stocks:

Both mean that the market is NOT positioning itself more defensive (yet).

However, what could be a stick in the (equity) wheel are interest rates:

The shift across the US Treasury yield curve has been massive this year (green is current, brown 31.12.2025).

Obviously the change at the short-end has been bigger, leading to a flattening curve:

It was Rudi Dornbusch who said:

“None of the post-war expansions died of old age. They were all murdered by the Fed.”

So, will the Fed “kill” this expansion too?

Well, first of all, the expansion seems real, with the S&P Global United States Composite PMI reading at 58.4 reported last Wednesday, pushing the 10-year to new cycle highs:

This week, starting Wednesday, we will get some very important, additional information on the state of the US economy:

But in the meantime, with the 30-year Treasury yield north of 5.5%,

pushing the 30-year mortgage rate above 7%,

the housing market will remain under siege.

But, of course, the US is not the only country facing higher yields. Long gone are the days of negative 10-year yields in Europe (Germany as proxy),

and Japan:

So, let me ask again: Will the Fed “kill” this expansion too?

The market, pricing in close to four hikes, i.e. Fed Fund Target rate at 5% by this time next year, thinks it is a possibility:

Given that the strongest pick-up in yields has been seen in the US over the past few days, interest rate differentials have largely worked in favour of the US Dollar:

With the exception of the JPY, which has been able to show strength. However, the USD/JPY basically screams “market manipulation” (aka currency intervention) at any observer:

The EUR/USD is close to key support and a decisive break below 1.1340 will make it difficult for us to maintain the USD-bearish view, at least on a short- to medium-term basis:

Bitcoin however, has largely been able to hold its ground versus a strengthening USD:

The next move higher could be imminent.

Gold however, has not shown that same resilience and the price has broken the neckline-support of our mini shoulder-head-shoulder formation:

A pull-back to $4,000 is now the most likely outcome.

Equity markets are frothier under the hood than what can be observed from the outside. However, there is a fair chance that the generals (Mag 7) will soon be joined by the soldiers (rest of the market). Only further strongly advancing interest rates could spoil the party.

So, is the bear observing a mean, dark grizzly or just your friendly neighbourhood Winnie the Pooh checking in on you?

May the Trend be with You!

André

• Everything in this document is for educational purposes only (FEPO)

• Nothing in this document should be considered investment advice

• Investing real money can be costly; don’t do stupid shit

• Leave politics at the door—markets don’t care.

• Past performance is hopefully no indication of future performance

• The views expressed in this document may differ from the views published by NPB Neue Privat Bank AG

“Price is what you pay. Value is what you get.”

— Warren Buffett

• Real rates (nominal minus inflation) are at their highest since the GFC

• TIPS offer an interesting “guaranteed” real return of 2.7% now

• Equity charts start looking more compelling again and could be setting up for a rally to new cycle highs

• The JPY rally may be in for an extended pause

• Keep/increase your crypto exposure

• Something big may happen in Gold soon

• Stay long copper and copper miners

If you have been paying attention, you’ll know that I have been oracling* higher bond yields for months on end - and we are getting them!

Not only in the US:

But also globally:

So, is 5% on US 10 Years then the magical number where equities bode and start selling off? Probably not.

BUT …

What is more important, is that Real Yields* are hitting multi-decade highs.

Not only in the US:

But also globally:

So what, you will ask.

Well, at a minimum, it means that long-term asset allocators, such as pension funds, endowment plans, family offices and similar, have the opportunity to ditch their old girlfriend TINA (There Is No Alternative) for the rejuvenated (Botox et al.) TIARA (There Is A Real Alternative).

I know, the younger investors amongst you (which is probably 97% of our readership) will say: “Hey, what do I care for a 2.68% real return, if the S&P 500 has given me 15%-plus since the GFC”.

Well, good point, but do you think Mr. and Mrs. Smith, or Herr und Frau Schmid or even Watanabe-San would like to see this kind of draw-down in their pension plans?

You may say: “Hey, over the long run, that went really well”. To which I would answer twofold. First, the classic “over the long run, we are all dead”.

Second, and much more serious, but super-difficult to quantify: “When looking into the abyss of a 40% loss or more (say your fortune was one million, now 600k), it is very difficult to not lose your cool and sell to save what is left.”

Trust me, no pensioner will want to see that on this statement.

Hence, when you get paid close to 3% above inflation, that’s not bad at all, dude.

Therefore, without becoming outright bond bulls at these levels, though a snap-back rally also seems attractive here, buying some TIPS* (Treasury Inflation-Protected Securities) could make a lot of sense here.

For an absolute return focused investor (and many others), this makes a whole lot of sense.

US TIPS are plentiful and liquid:

If you do not have a Bloomberg terminal, you can easily find a lot of resources online, one of them being here.

Or, to keep it nice and easy, you can buy a TIPS focused ETF, such as the London-listed State Street SPDR Bloomberg US TIPS UCITS ETF (TIPS LN), or the US-based Schwab U.S. TIPS ETF (SCHP US) and the iShares TIPS ETF (TIP US). The latter is the largest in terms of AuMs, but also the most expensive. SCHP and TIPS have a TER of 0.03% and 0.04% respectively.

Also, TIPS aren't uniquely American. Across the Atlantic, France's OAT€i, Italy's BTP€i, Germany's remaining Bund/€i and Britain's index-linked gilts offer variations on the same proposition: lend money to a government at a known real yield and let inflation determine the nominal return.

But that’s enough on inflation-linked bonds for today. Let’s see BRIEFLY if we find some more hints & TIPS across other asset classes.

Starting with equities, investors have been very respectful on the S&P 500' of the key 7,600 pivot zone and the 50-day moving average:

If today can indeed eke out a gain, as futures prices currently indicate, then that chart looks suddenly much more constructive again.

And maybe even more interesting, the tech-heavy Nasdaq seems to have found new tailwind:

As a matter of fact, we could argue that the Nasdaq is about to abandon its pattern of lower lows and lower highs (something futures prices have already done this morning) and that we may be breaking out of a huge consolidation flag:

Such a breakout could lead to substantial more upside, just at a time when retail investors (AAII) have expressed their most bearishness in over 18-months:

This is mainly due to the bears having increased meaningfully, to their highest since the breakout of the Iran conflict:

Maybe this bearishness came after the warnings from these three blokes a week ago:

But, remember, when the USSR agreed to slow the arms race in 1987, it was not because it suddenly cared about safety. It was because it was running out of money and would soon collapse.

Just saying…

Keeping it very short this week, we already hope over to interest rates (again, I know), via the following cross-asset chart, which also bodes a positive message for equities:

Emerging market bonds, as measured via the iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB) are breaking out relatively to US Treasury bonds, here proxied with the iShares 7-10 Year Treasury Bond ETF. As both have a very comparable duration (6.5-7), this is not about interest rate risk, but about increasing risk appetite from bond investors, which could be an early sign for increasing risk appetite on the behalf of equity investors too.

Of course, we had the hawkish hike from the FOMC last week, which seems to have a put, at least for now, a stop to the raise in the yields at the long-end of the curve:

As could be expected, the yield curve flattened further:

The trouble is, if 2-year yields are right, and the Fed will hike another 75 basis points, the yield curve on the previous chart will likely invert, which in turn means an increased possibility for a recession:

As discussed above, for now, equities are ignoring this … stay tuned however…

The Bank of Japan was the other major central bank hiking last week (with the ECB having moved the preceding week). The policy rate is as high as it not has been in over 30-years:

However, contrary to the FOMC statement two days before, the BoJ hit a more cautious, nearly dovish rhetoric.

The inflation data explain the caution. Headline CPI was 1.9% y/y in August, with the core rate at 2.0%, while the PPI was 7.6% (chart). The BOJ is tightening in response to a cost shock, not a demand boom:

Amid the hawkish Fed and the more dovish BoJ, the JPY has stopped rising (falling USD/JPY) versus the Greenback:

Also not helping the JPY, is that speculators (bottom clip, red line) are suddenly very long the currency of the land of the rising sun, which should be interpreted as a contrarian negative sign:

The EUR/USD is recovering from a steep sell-off over the past two weeks:

In cryptocurrency wonderland, the breakout after a consolidation period is happening:

I would stay long here:

A quick revisit of our “highest real rates in decades”-theme from further up. Gold, which has no cash flow (coupon, dividend, etc) attached to it has for obvious reasons suffered under higher real rates (inverted below):

However, given that real rates are as high as they are, gold has fought a further price decline bravely, and may be setting up for a break higher as the former are likely to plateau out and eventually reverse lower:

I continue to be very bullish on Copper, where the long-term chart suggests more upside:

A bullish constellation that is also confirmed when zooming in on the daily chart:

To me, there’s a clear supply shock in copper, if inventories (lower clip) at the LME are a proxy for global ‘reserves’:

Also, there is a massive mismatch between the needs for copper by AI now and the roll-out of new copper mines not happening for years.

Let’s get one thing out of the way: 5% on a Treasury does not make equities uninvestable. And no, bonds haven’t turned risk-free either. Anyone who held duration over the past few years still has the bruises to prove it.

What has changed is the hurdle rate. For the first time in a long while, you can lock in a proper return after inflation without praying for higher multiples or another rescue from the central bank. TINA, meet the competition.

That shifts the allocation maths. Equities can keep climbing, and so far they seem strangely relaxed about higher real yields. But from here on they have to earn their seat at the table. So does everything else. By the textbook, gold should be struggling with real yields this high. It isn’t. Copper doesn’t care about the textbook at all, because its problem is that the world wants the metal faster than anyone can dig it out. Both have a case. The difference is that every case now gets measured against roughly 3% real, paid to you for taking very little risk.

Which makes the dull corner of the portfolio rather less dull.

TIARA (There Is A Real Alternative) has entered the building.

May the Trend be with You!

André

• Everything in this document is for educational purposes only (FEPO)

• Nothing in this document should be considered investment advice

• Investing real money can be costly; don’t do stupid shit

• Leave politics at the door—markets don’t care.

• Past performance is hopefully no indication of future performance

• The views expressed in this document may differ from the views published by NPB Neue Privat Bank AG

“Interest rates are to asset prices, sort of like gravity is to the apple.”

— Warren Buffett

• Stop complaining - Interest rates are just about getting back to their old normal

• Equities seem to be in short-term topping process and suggest lower before higher, which fits well the usual mid-term election pattern

• Energy stocks continue to crush it, whilst utilities suffer together with bonds

• Bonds investors are getting hurt and we may not be at the end yet

• Be mindful of the happenings in France

• Commodities should continue to thrive in a multipolar world.

4.992%!!

That was the print high of the 10-year US Treasury yield last Friday.

That’s the highest intraday reading since October 2023, when the UST briefly traded above 5% (but closed much lower on the day):

However, on a weekly closing basis, we just witnessed the highest close since … drumroll … 2007!

That was when many of you, dear readers, were still _____________ (fill in your activity at the time).

It was also at the onset of the GFC, which in turn, led to a period of extreme (easy) central bank policies, pushing US the 10-year Yield to 0.50% (!) during crisis (e.g. European Sovereign Debt Crisis) after Crisis (e.g. COVID-Crisis).

So, with yields at 5% again, are we then in for a new GFC?

No.

Or, probably not.

Are we in for a short-term (equity) market correction?

Probably yes.

But the point of all this is that we are actually returning to the “new normal”. Point in case: If we consider the post-WW2 area as ‘modern time’,

then the average yield over the past 80 years was … another drumroll … 5.19%!!

But, wait! There’s more!

In early 2020, now Boston College finance professor Schmelzing issued a seminal Bank of England white paper (click here). Schmelzing went through seven centuries of archives — city-state ledgers, Dutch and British debt records, everything up to modern bond data — and built an annual series of what the safest government of the day paid to borrow, from 1311 to 2018.

The average yield over those 700 years?

Just north of 6%.

In other words, we are now getting back to what is normal.

BACK TO THE FUTURE.

Welcome to the Old Normal.

Starting our weekly “Tour de Force” of financial markets, first things first:

Just because bond yields are hitting a seemingly magical 5% number (US 10-year Treasury), it does not mean that markets will drop like a stone.

Quite “au contraire”, equity markets have been surprisingly resilient. The MSCI World index is less than two percent from a new all-time high:

HOWEVER …

Several factors argue for a move lower before higher …

For example, breadth continues to deteriorate. Not only on the S&P 500:

But also on the broader US market:

Only 3 out of the 11 economic sectors continue to trade above their 50-day moving average:

We could argue that the S&P 500 has successfully tested support and is recovering:

However, a broader view reveals a pretty different story.

E.g., the same index, but equal-weight:

Ouch!

No wonder then to see that the number of new 52-week lows has been expanding, whilst that of new 52-week highs, contracting:

Or that more and more stocks are trading below their key moving averages:

Dow Theory is setting up for a sell signal (needs confirmation), with the two indices disagreeing with each other:

Small-cap stocks (Russell 2000) are not liking the prospect of a Fed tightening cycle:

And the previous cycle leaders, semiconductor stocks, never found their way above the 50-day moving average again:

In Europe, stocks have fallen out of the consolidation triangle (dashed lines) on the ‘wrong’ side and are approaching key pivot point (dashed line) at 634:

A break of that pivot(dashed line) could take the index down another extra 5% to below its 200-day MA:

France’s CAC-40 is “ahead” of other European indices in that conxtext:

The SMI in Switzerland has been dragged down by bad news from index heavy-weight component (15%) Novartis:

On the other side, the Footsie 100 has turned into a relative outperformer, mostly thanks to its above-average exposure to oil and mining stocks:

In Asia, Japan’s Nikkei 225 index is at danger of completing a shoulder-head-shoulder trend reversal pattern, which could take the index down to 50k should the neckline (dashed) be broken:

All hopes on the broader Topix then, which continues to look more constructive then the N225:

However, this index too is currently trading below its 50-day MA…

The Indian stock market continues to disappoint, as the country is facing kind of a double-whammy from higher oil prices and the AI-shock to its service oriented economic:

However, there is a ray of light from Indian small caps, which are performing pretty decently in comparison to their large-cap bros:

Dubai’s DFMGI is surprisingly resilient, considering the economic impact the argument between Iran and the US must have on the wider region:

But it has definitely not been an easy year for UAE real estate stocks:

So, as we turned sector-specific anyway with our last observation, let’s continue sector specific.

On our proprietary aReS™ sector model, energy has taken the clear lead again, followed by tech stocks:

However, in comparison to energy stocks, which just marked new highs this year, tech stocks are showing up with a divergence:

The 36% YTD performance from the energy is very juicy in itself, and has proven a much better hedge than bonds to shifts in geopolitical tensions. The more astute investor, was able to squeeze that performance-lemon even more though:

And just to rub it in, we have been recommending the VanEck Oil Refiners ETF (CRAK) for months on end this year in this very publication 😉:

Let’s use the weakest sector on our aReS™ model, Utilities, as a segue into the bond section.

Utility stocks (XLU - grey line), tend be higher dividend payers, and hence, the threat of higher bond yields puts that cohort under a similar pressure as bonds (TLT - red line) themselves:

Strong employment numbers, firm inflation (CPI&PPI) figures, a big-mouthed US Treasury secretary and a Fed Chairman that has painted himself into a corner are all exerting simultaneously upside pressure on bond yields:

Post the strong economic numbers and firm inflation readings, the odds for a rate hike have climbed now to nearly 90%:

I previously thought that Fed Chairman Warsh will not hike until after the mid-term elections in early November in order not to upset Uncle Donald. But given his firm “I am an inflation-fighter” speech at the Jackson Hole symposium only a few weeks ago, he now has twisted his own arm behind his back for such a hike to occur this week.

In any case, the bond vigilantes have hiked already:

The 30-year Treasury bond yield is now also already way above the “You Shall Not Pass” level ‘set’ a few weeks ago by Bessent-In-Da-House:

Looking at a rising bond yield chart may “harmlessify” the cruel reality that bond investors, especially at the long-end are suffering.

The iShares 20+ Treasury Bond ETF, with an approximate duration of >15, is down over 50% over the past six years:

That’s an annualized Total Return, with dividends reinvested and all, of negative nearly nine percent!!

And if the following chart is of any guidance, the worst may still lay ahead:

But of course, rising yields are not only a US phenomenon:

The past month has been brutal for bond investors:

The German 10-Year Bund level is at its highest since 2009 (when it was falling=:

And staying on European yields for a moment, something seems rotten in the state of … France!

Whilst we know and have written about the upcoming French election (Spring 2027) and the perils associated by either the extreme right or the extreme left winning, last Friday’s news provided the “blow-out”:

Hence we are at levels again not see since the European Sovereign Debt Crisis:

Or, in other words, with French yields 4.45%, they are the highest in the euro area and 9bp above Italy. The only EU sovereigns paying more are the four non-euro CEE issuers, where the gap reflects local policy rates rather than credit.

Nearly enough on government bond yields now - just one or two more - because we cannot go without mentioning that even a Swiss 10-year bond yields pays ‘something’ again:

Nearly completely gone is the negative interest rate paradigm:

Credit spreads continue tight, despite a tiny widening observed over the past few weeks:

We continue to keep an eye on the widening amongst the CCC- rated bonds, which continues to fail to contaminate the other rating buckets:

Turning briefly to currencies, the US Dollar Index (DXY) continues to be range stuck between two opposing forces:

Until recently, it was the weak JPY that kept the Dollar index from dropping meaningfully. That is clearly not the case anymore, with the Japanese Yen having rallied more than five percent over the past month:

However, now suddenly a weak Euro, probably on the back of the French news, is now hindering the DXY to fall:

Frustratingly, the table has turned and the FX game continues to be one of the search for the least dirty shirt in the laundry basket.

At least our last week’s recommendation (click here) for a short CHF/JPY position is paying off handsomely:

What is working a bit less well is our call for a higher Gold price. Real yields (grey line) are pulling Gold lower:

On the Gold chart, there’s a small danger of a short-term shoulder-head-shoulder top, which could take the Gold price back down to the July lows:

Agent Orange (aka Tariff Man, aka DJT, aka The Disruptor-in-Chief, aka … ah, never mind) got himself, and everybody, into quite the mess with that Iran-thingy. Here’s the price of oil creeping towards its cycle highs:

But, of course, it is not only oil that suffers (or profits) from the conflict in the Strait of Hormuz:

Let’s look at that last item for a moment … TTF, or European natural gas:

Ouch, that hurt’s!

Though we could argue that we are well below the panic levels post the Russia invasion of Ukraine:

However, we have to be aware that EU gas storage is at its lowest of the past years running into winter:

And, as a proxy for the drought we have lived through in Europe this summer, we also note that water reserves for electricity production via hydro in Norway had its lowest cycle peak of the past years:

So, where does all of this leave us?

At the risk of repeating ourselves: 5% is not the problem. Getting to 5% is.

The Old Normal may ultimately be perfectly survivable, but markets, companies and governments have spent the better part of two decades adapting to anything but normal. The adjustment back comes with casualties — and deteriorating equity breadth, battered long-duration assets and suddenly-wobbly French bonds are warning shots.

For now, that argues for some caution on equities and continued avoidance of duration. But it does not argue for hiding under the bed. Energy and commodities are telling a very different story and remain our preferred hedge against a world of higher nominal growth, fiscal excess and geopolitical friction.

Higher before lower for yields. Lower before higher for equities. And higher for real assets for longer.

Welcome to the Old Normal and May the Trend be with You!

André

• Everything in this document is for educational purposes only (FEPO)

• Nothing in this document should be considered investment advice

• Investing real money can be costly; don’t do stupid shit

• Leave politics at the door—markets don’t care.

• Past performance is hopefully no indication of future performance

• The views expressed in this document may differ from the views published by NPB Neue Privat Bank AG

“Hope springs eternal in the human breast.”

— Alexander Pope, An Essay on Man

• The CHF could become the main (only) target as funding currency for the global carry trade.

• Equity markets continue their summer recess - is volatility to come back with a vengeance ahead of the US midterm elections?

• Bond vigilantes will have their eyes on the CPI this week and the Fed next week.

• The long commodity trade is alive and kicking. Stay committed.

From Wikipedia:

What does this have to do with anything relevant to financial markets?

Not a lot.

But still, what a good way to start talking about the Swiss Franc, which now seems to be, de facto, the last funding currency standing in G10-land.

This, mainly since the Treasury has decided, supported by the Bank of Japan (BoJ) / Ministry of Finance (MoF), that the Japanese Yen (JPY) had weakened enough now. And yes, my tongue is firmly out of my cheek here when writing WHO decided.

With this first Yen-related “You Shall Not Pass” on July 31st, soon followed by a second one for Treasury yields on August 19th, markets may reasonably assume that further material JPY weakness will be resisted, “whatever it takes”. And that rather spoils the economics of that oh-so-wonderful carry trade, which as a reminder, borrows in a low-yielding currency, sells it and invests the proceeds in a higher-yielding one. The Japanese Yen - Mexican Peso is (was?) a classical example of that carry trade:

That’s a nearly 3-fold increase in just a bit more than six years!

Hell! It even beats the S&P 500 buy-and-hold return by very wide margin over the past five years:

One feature of the carry trade is, of course, that the “borrowing currency” loses in value (helped by the sales out of the carry trade), or, at a minimum does not appreciate, which would curtail total return.

And hence, since the Treasury yelled their “Yen shall not pass”, this near-mechanic JPY depreciation has been put at risk. After all, we know that central banks can really get their way if they insist enough:

So, with the BoJ finally signalling a higher policy rate on accelerating inflation,

and Switzerland now ‘providing’ by far the cheapest money, courtesy super-easy monetary policy,

the CHF could indeed be the last funding currency standing.

Even better, the CHF is sooooo hopelessly overvalued, which surely will be useful too:

And the Swiss National Bank (SNB) is not expected to hike until mid next year (earliest!), despite some recent upside inflation surprises:

But never forget, hope does indeed spring eternal. Especially, it seems, among those betting against the Swiss Franc. Shorting the CHF has been something of a widowmaker trade over the years

— repeatedly declared overvalued, repeatedly expected to weaken, and repeatedly finding new and imaginative ways of making its detractors look rather silly.

So do we fund in CHF or don’t we?

The CHF has perhaps never looked more attractive as a funding currency — precisely when history tells you that treating CHF weakness as a structural inevitability is extraordinarily dangerous.

Let’s have a look at some other markets now …

Starting with stock markets, we wrote in a The Daily Q edition (02.09.2026 - click here) last week that (equity) markets seemed to be on the brink of breaking down. Here’s the chart of the S&P 500 mini-futures contract:

Well … saved by the bell, so to say! Or Back from the Brink, to follow last week’s thought train.

The index held, for now at least, exactly where it had to, using resistance-turned-support (dashed line) and the 50-day moving average (blueish line) for a bounce.

But follow-through via a new all-time high (ATH), less than one and a half percent away, is needed to keep the bullish argument alive.

Plus an improvement in market breadth, for example via a reacceleration of the advance-decline ratio (red line) on the NYSE would be very helpful too:

The Nasdaq-100 has been a bit of a laggard, but recent support held and the 50-day moving average has been reclaimed:

Though before we get too excited, let’s remember that we are in a US midterm election year and volatility should be picking up right about now:

But it is also fair to say that increased volatility is not necessarily equal to lower equity prices:

In any case it seems that Q4 could be positive for equity returns and in the best case, we may get an opportunity over the next month and a half to pick up those equities at a lower price…

European equities (SXXP) are tagging along the (upward-sloping) 50-day moving average:

In Asia, the Nikkei 225 continues to consolidate within a wide triangle, and may need some more time before establishing a new trend:

Though admittedly, the broader TOPIX index in the same country could be on the verge of a retest to the upside:

Your overweight India trade is not working for now. Neither on an absolute,

nor really from a relative basis:

Nevertheless, it continues to be our working assumption that we are just in a huge, massive digestion period post the massive rally starting in 2020. If true, a resumption of the uptrend should happen in the first half of next year latest:

One emerging market that has suddenly started working well again is Brazil, with the iShares MSCI Brazil ETF (red line) up 15% as the odds for a Bolsonaro win have been increasing:

Turning to fixed income markets, last week’s strong non-farm payroll number did not have an impact of relevance on the US 10-year Treasury yield:

Not even rate hike odds deducted from futures market reacted in a meaningful manner:

So, all the pressure now turns on Warsh the CPI number due later this week:

But, I do not think anybody seriously expects the FOMC to hike this month (or at all before the mid-term election, a period that also includes the 28/10 FOMC meeting).

It is therefore well possible that the bond vigilantes will respond to a no-hike with further upside pressure on yields …

Which in turn could mean the US Dollar may continue to weaken again. Here’s the US Dollar index, suffering under selling pressure over the past few sessions:

But for once, the $ weakness in the DXY is not stemming mostly from the Euro, but rather the Japanese Yen:

As mentioned in the intro to this week’s letter, something possibly has changed in the collective perception towards the JPY of global FX-investors.

Hence, the formula of: Positive view on JPY + CHF only funding currency = Sell CHF/JPY:

A move in excess of six percent in only a few months is massive for currencies, so definitely something seems to be going on.

HOWEVER, before you all rush into selling the Swissy and buying the Ninja, remember that this trade was the widowmaker for decades!

Finally, turning into the commodity complex for a moment, we think it is worth putting a toe or two back into Gold:

Also continue to hold on to your Copper,

or Copper Miner (COPX) position:

We are only at the beginning of this trend …

Also, it seems the US has gone into a “who blinks first” contest with Iran by applying now more of an economic strangle on the country, rather than outright throwing rockets at them (of which they may have few left anyway…). This is of course a contest where the US will have the longer breath, but it will not come without a cost. Hence, the price of crude will likely remain “higher for longer”:

We are living through extremely interesting macro times, where equities have moved to becoming somewhat of a sideshow - at least for the time being. However, if further strong advances fail to come through, I wonder what is going to happen to the wealth effect - especially in the US.

But that is a theme for another week. For now, let’s focus on where the action is happening and that seems to be mainly interest rates and currency markets.

Stay tuned and may the trend be with you!

André

• Everything in this document is for educational purposes only (FEPO)

• Nothing in this document should be considered investment advice

• Investing real money can be costly; don’t do stupid shit

• Leave politics at the door—markets don’t care.

• Past performance is hopefully no indication of future performance

• The views expressed in this document may differ from the views published by NPB Neue Privat Bank AG

“Debt management that even appears to follow the political calendar spends the one asset that took two centuries to accumulate: the credibility of the Treasury market. That asset doesn’t regain its value so easily.”

— Stan Druckenmiller, WSJ open-ed August 2026

• After Treasury Secretary Bessent threatened to impose yield curve control to lower the long end of the US interest rate curve, Fed Boss Warsh has now chimed in, threatening to increase the short end. Opposing forces?

• Interest rates are hence currently the clear focus of market participants with confusion abounds.

• Odds of rate hike in September have increased - observing economic data (NFP, CPI) over the next two weeks will be crucial

• Stocks are a bit of a sideshow for the time being and with earnings season largely over, an immediate catalyst for a defining move may not be on the horizon.

• Gold may already be ready for the next upleg and, accordingly, the US Dollar for the next move lower

For all the LEGO theatrics above, the battle is real.

Last week’s You Shall Not Pass!! (click) was about Scott Bessent drawing a line in the sand at the long end of the Treasury curve. Doubling long-dated buybacks — and making rather sure everybody understood he could do more — was not quite Draghi’s whatever it takes, but it certainly rhymed with it.

There is, however, one small complication.

The US Treasury does not set interest rates.

Kevin Warsh does.

And therein lies the potential for what Frankie Goes to Hollywood so helpfully described forty-two (XLII 😉) years ago: when two tribes go to war.

Bessent needs to keep the cost of financing America’s rather impressive debt mountain under control. Warsh needs to preserve monetary credibility and keep inflation expectations anchored. In a perfect world, those objectives coexist happily.

This may not be a perfect world.

And the choreography has already become interesting. Treasury has helped Japan support the yen, reducing the risk that Tokyo might eventually be forced to sell Treasuries in defence of its currency. It has doubled buybacks of 10- to 30-year debt to USD 4 billion per operation. And the next step could involve using some of the Treasury’s vast General Account to finance further purchases.

Draw down the TGA, however, and eventually it needs refilling — most likely through more T-bill issuance.

Conveniently, America is simultaneously creating a potentially enormous new structural buyer of those bills: stablecoins.

So, stripped of the plumbing, the emerging machine looks something like this:

Buy long bonds. Issue short bills. Let stablecoins absorb the bills.

And should all that bill issuance start putting pressure on money-market liquidity, the Fed may eventually find itself involved as well.

Which leaves us with the rather delicious irony at the heart of today’s Quotedian:

Bessent may need Warsh to make Bessent’s policy work.

So much for two independent tribes.

The real question is therefore no longer whether Treasury can knock a few basis points off the 30-year yield.

It is something considerably bigger:

Who actually controls the price of money?

But let’s see what markets are saying about all this - (un)fortunately however, we need to start our weekly tour across the asset class once again with bonds, as that is where all the action is - equities continue to be a sideshow for now.

As a matter of fact, I just had an epiphany when I was thinking about describing Fed Chairman Warsh’ hawkish tone:

Harsh Warsh!

That’s so damn good I was about to change the whole title and intro of the Quotedian - but I am too far passed my deadline already to start from scratch. But, I think it at least deserves a trademark:

HARSH WARSH™

It also deserves a meme!

But I digress.

Yields at the freely traded shortest end of the curve (2y) shot higher on Harsh Warsh™:

The yield curve (10y - 2y) flattened as yields at the short-end rallied more than those at the long-end:

HOWEVER, the long-end still also rallied, pushing the yield on the Tens (10y) right above Bessent’s “you shall not pass” intent of the week before last and to its highest level this cycle:

Global bond yields have been rising this year, with an acceleration visible over the past few months:

No wonder, as fiscal discipline is a thing of the past. Here’s just the US example:

But back to HARSH WARSH™ and his crusade to fight inflation. We have two more important data points before the next Fed meeting on September 16th - this Friday’s non-farm payroll and next week’s CPI (Consumer Price Inflation) reports. Both need to be on the weaker side for the Fed not to hike rates as the market has close to double its odd for a rate hike since Jackson Hole last Friday:

Pre Jackson Hole:

Post Jackson Hole:

For year-end, market-implied possibilities for rate hikes is now back at one and a half:

But, of course, would the Fed no be a first mover. Many other central banks have gone into tightening mode:

Let’s turn to equity markets now, where the S&P 500 after finally breaking out of its multi-week summer trading range, is struggling to make significant progress:

The increased odds for rate hikes this year since Friday’s HARSH WARSH™ speech have exerted some additional pressure on stocks, and odds have increased that the Gap at 7,600 (pointed hand) may get filled over the coming sessions.

The technology-heavy Nasdaq 100 never made it to new all-time highs:

A decisive move above 30k would be helpful to break that pattern of lower highs (red arrow).

Considering the equity market for a moment from a Treasury induced “you shall not pass” yield-curve-control (YCC) moment, suppression of yields is liquidity-boosting and hence bullish for equities.

Let’s take Japanese equities as a case study. The Topix gained 210% or roughly 12% per annum:

Not bad.

BUT, and here’s the BUT, that performance is in Yen terms. If we take a ‘neutral’ currency, such as gold for example, the price return drops to -40% or close to minus five percent per annum:

As we discussed last week, the likely pressure valve for YCC by the treasury is the US Dollar.

European equity markets have also been treading water, but generally have a tad more a bullish “feel” to them then their US cousins:

Unless you focus on France, that is:

We skip Asian markets this week as nothing specific has caught my attention over there.

Let’s move to some sector observation instead and allow me to take a small victory lap:

Over the past two weeks, I have been highlighting the cybersecurity software sector as a potential outperformer. The First Trust Cybersecurity ETF as a proxy for the sector is working well:

But, I am especially happy for one of its main constituents, Crowdstrike (CRWD), which even offered as an excellent entry opportunity a few day before ripping higher:

Admittedly, the recovery of the entire Software sector (proxy; IGV) has been close to miraculous:

Whatever happened to the SaaSapocalypse??

An interesting development then is, and I believe this was absolutely NOT the narrative only a few weeks ago, that software stocks (the AI losers) are showing important trend changes versus the semiconductors (the AI winners):

Two more sectors I have highlighted in the past few editions and which I want to reaffirm my bullishness on:

Energy stocks - it is always amazing how a trend starts creating narrative once it gets rolling. Suddenly, every headline seems fossil fuel positive (I know I just create a tonne of green haters). The refiners continue to work exceptionally well:

65% since the beginning of the year and 37% since the war “ended” (wink, wink).

And the other commodity-related equity segment that is working exceptionally well is of course Gold/Silver mining stocks.

The VanEck Gold Miners ETF is one obvious choice to play the upside if you continue to be as bullish as we are on the sector:

And if you want even more bang for your buck, become a client at NPB and enjoy being invested in our Mystery Gold Miners fund (red line):

Gold itself had a small correction over the past 2-3 sessions, post the HARSH WARSH™ hawkish tone last Friday. From a voodoo technical analysis point-of-view, the shiny metal quite precisely retraced 38.2% of its August up move and could be ready to move higher again from here:

With Gold having corrected post the hawkish Jackson Hole speech it is probably safe to assume that the Dollar has performed relatively well:

Indeed! However, here too we may assume that the Dollar corrected a part of its downtrend, which could soon resume.

Finally, let’s finish with a weekly chart on Bitcoin, which when adding a simple 42-week moving average, may just have produced a longer-term buy signal:

The two major actors in the US Treasury market are trying to influence opposite ends of the yield curve — and arguably have opposing objectives. Benign payrolls this week and CPI next week would reduce the pressure on Warsh to hike just yet.

We have strong views across asset classes. This is probably not the moment to write large tickets on them.

Stay adaptive and …. May the Trend be with You!

André

• Everything in this document is for educational purposes only (FEPO)

• Nothing in this document should be considered investment advice

• Investing real money can be costly; don’t do stupid shit

• Leave politics at the door—markets don’t care.

• Past performance is hopefully no indication of future performance

• The views expressed in this document may differ from the views published by NPB Neue Privat Bank AG

“Paper money eventually returns to its intrinsic value — zero.”

— Voltaire

“The dollar is our currency, but it’s your problem.”

— John Connally

• Mark last week in your calendar. You are living financial history

• The long end has failed (for now) to meaningfully react to the US Treasuries plan to shorten their duration profile

• However, the US Dollar, Gold and Bitcoin DID NOT fail to react

• Stocks are currently the sideshow, but sector performance deviation shows opportunity abound

• Commodities are on the move again, with Ags now joining the party

First things first …. congratulations to the current and all previous U.S. governments for cracking the $40-mark.

$40 TRILLION that is!

Is it then sheer coincidence that last week, at least in my mind, was one of those weeks we (we as in financial market observers) will look back on as a defining moment in financial history.

Whilst many are downplaying Treasury Bessent’s decision to at least double Treasury buybacks at the long-end (10 to 30 year bonds) on Wednesday (read about it here: click), which he then followed up with a verbal tantrum (read about it here: click) the next day.

Should we call it Yield Curve Control (YCC)? Or Fiscal Dominance (FD)? Or even Financial Repression (FR)?

Maybe Probably all of the above.

But for now, let’s call this: Operation Twist and Shout 🤣.

In any case, for those living under a rock too busy to follow financial market happenings, US Treasury secretary Bessent panicked last week, as bond yields at the long-end of the curve, hit their highest levels in decades. Here’s the 30-year Treasury bond yield for example:

Again, maybe I am over-judging the importance of the interaction by Scottie …

… but…

probably not. This was a panic and “you shall not pass”, or even better, “whatever it takes” moment.

It is well above my pay-grade to analyse, let alone understand, what the meaning of all this is.

Was it to allow Fed Chair Kevin Warsh to be more dovish at this week’s Jackson Hole meeting of central bankers?

Perhaps.

Was it to please the Commander-in-Chief, especially ahead of US mid-term elections as 30-mortgage rates are pushing towards new cycle highs?

Also, perhaps.

In any case, what we as good Quotedians do exceptionally well is to listen to the markets, when they speak.

Currently, they are not speaking.

They are YELLING!!!!!!!!

So, let’s start our tour of weekly listening.

Exhibit 1 - the idea to put a top on longer-term yields is failing so far, at least on the 10-year yield, where it took only one day to unwind the yield drop (and then some):

Maybe, just maybe, Scottie’s magic worked on the 30-year??

Meh.

But, what is endlessly more interesting, and telling, is the reaction of other asset classes.

IMHO, and being this week’s subtitle to the Quotedian, i.e. “In Search of the Cleanest Dirty Shirt”, the US Dollar was taken out in the backyard court and shot in the head last Wednesday. Or a bit less dramatic, the debasement trade is fully back on.

So, what could replace the Dollar dominance?

The Renminbi? - Probably not.

The Euro - ya’ kidding?

The Swiss Franc? - Cool, but too small a market

Gold - Ah!

Exhibit 2 - Gold

Or maybe even a cryptocurrency, such as Bitcoin?

Exhibit 3 - Bitcoin

Oh, wow! 20% in three sessions. Definitely something going on there.

And then of course, there is the US Dollar itself.

Exhibit 4 - Dollar Index (DXY)

That Dollar weakness, aka debasement, has been across the entire major currencies board:

I found the following summary from Rabobank to be useful:

If Bessent’s intention was to flatten the yield curve,

and/or take pressure of the Fed to hike rates,

the move was pretty much useless unfruitful.

So, all in all, we have yields that are back to where they were before Bessent’s signalling, but Gold and Bitcoin which are 8% and 20% higher respectively, and the Greenback that trades a percent lower.

In German there’s a saying for such a situation: “Operation gelungen, Patient tot”, which literally translates to “The operation was a success. The patient died.”

We are already way half into this week’s Quotedian and have not spoken about equities yet … shame on me! Or maybe equities were really only the sideshow last week?

Indeed!

Overall, markets were a bi softer last week, but most of that weakness came pre-Bessent:

Whilst the S&P 500 gave back about one and a half percentage point over the past week, sector performance over the same time frame reveals that opportunity to make money on the long-side was at hand:

That’s a >7% delta between best and worst in just one week.

Our rotation theme from tech stocks to everything else, highlighted in our quarterly outlook (click) and again last week (click), continues to work well.

However, we did also highlight last week that we do like the cybersecurity stocks within the tech sector, which hasn’t worked for past five days:

Put differently, and as mentioned in Friday’s QuiCQ (click), Mr. Market has given us another chance to load up on such wonderful stocks as Crowdstrike (CRWD):

What worked well was our call for higher energy stocks, where the SPDR Energy Select ETF hit a new all-time high £(ATH) early last week:

Especially refiners continue to fly:

Are we too late to buy CRAK then? I think as long as the Diesel Crack Spread (grey line) continues to widen, it is not too late:

Is the crack spread about to tighten then and we are too late to buy CRAK?

I do not think so either:

• Refining capacity has been knocked out/disrupted. Ukrainian attacks have hit Russian refineries, Russia has suspended diesel/gasoline exports, and the Iran/Hormuz conflict has reduced Middle Eastern refinery output and product exports.

• Diesel inventories are extremely low. U.S. distillate stocks are around their lowest seasonal level in roughly 30 years, while Europe and Asia are competing for increasingly scarce barrels.

• Demand isn’t disappearing. Diesel demand from trucking, agriculture, industry and construction is relatively inelastic. So even though crude has eased, diesel prices haven’t.

• The remaining refineries are already running flat-out. U.S. refineries have been above 95% utilization for 11+ weeks, the longest such stretch in more than 25 years. There simply isn’t much spare refining capacity available to arbitrage the spread away.

As we are nearly talking commodities anyway now, let’s steer into that asset class, but not before highlighting the healthcare sector first.

The sector was on the (up) move already pre-last week’s mega-announcement by Moderna (MRNA - see chart below) and Merck, regarding a skin cancer vaccine:

The SPDR Healthcare (see chart below) and the iShares Global Healthcare ETFs were both already clogging in new ATHs and have since the announcement accelerated further to the upside:

For those who want to “play” the health care rally with a high octane bet, I continue to like the ARKG:

Yes, I know it has doubled since April, but zooming out on the chart provides context:

So, moving into the commodity section, we note that the Bloomberg Commodity index (BCOM) is pushing towards new cycle highs again:

Whilst oil is of course a big part of the index, I find it interesting the agricultural commodities have after long absence now joined the (bull) party too:

These are the commodities in the ‘Ags’ subindex:

Whilst it is possible to invest into these individually via Futures and/or nearly all of them also via individual commodity ETFs, there is one ETF, the Invesco DB Agriculture ETF, which imperfectly tracks the sub-index:

But, I actually prefer to go via an agriculture business equity ETF, not least, because of its fantastic ticker (MOO):

These are the top positions and their weighting in the fund:

Finally, also commodity-related, our Mystery Fund pick (red line) for the rare earth segment, first presented a few months ago, continues to work very well:

Want to know which fund it is? Easy. Become a client of ours 😉

So, are witnessing a form of yield curve control in the US? Is fiscal dominance taking over? Will it lead eventually to financial repression?

I think the answer to all three questions is a big, fat yes. Or three of them.

For now, however, to remain politically correct polite, let’s call it Operation Twist and Shout, not least as the shouting continues this beautiful Monday:

May the Trend be with You!

André

• Everything in this document is for educational purposes only (FEPO)

• Nothing in this document should be considered investment advice

• Investing real money can be costly; don’t do stupid shit

• Leave politics at the door—markets don’t care.

• Past performance is hopefully no indication of future performance

• The views expressed in this document may differ from the views published by NPB Neue Privat Bank AG

“Never short a dull market.”

— Wall Street Adage

Chrüsimüsi is one of those wonderfully useful Swiss-German words that does not translate particularly elegantly. It describes a mishmash, jumble, muddle — a collection of things thrown together without any obvious order or common thread.

Which, conveniently, is also a pretty accurate description of this week’s Quotedian. No overarching thesis. Just a handful of charts that caught my eye — some important, some curious, some possibly contradictory. In other words: a proper market Chrüsimüsi.

Hence, without further ado, let’s start our CHRÜSIMÜSI — The Swiss art of making sense of a mess.

• Given the absence of any exogenous shock (read: Trump social media feed post), equities should be able to drift higher into early September

• The rally is broadening, with a rotation from tech stocks to (nearly) everything else is taking place

• Bond yields are pushing higher, which eventually could unsettle equity investors

• We remain USD bears, but also see a trading opportunity in the EUR/USD

• Gold (and silver) have possibly found a bottom

Our Quote-of-the-Week suggests to “never short a dull market” … and the S&P 500 proved that once again to be true on two fractal levels. The first was that dull (well, maybe frustrating is a better word than dull in this case) period (red box) from early June to Augst 4th, when the market finally broker higher:

Now, we had a mini-fractal of this over the past two weeks (blue zone). Let’s zoom in on that via the hourly (60 minutes) chart:

Hence, it seems that the patch of least resistance is to the upside, which is further underlined by market breadth.

For example has the S&P 500 equal-weight index being clogging in new all-time high (ATH) after new ATH on a nearly daily basis since early August:

The advance-decline summation ratio has long been confirming the break-out in the S&P 500:

The key chart is probably the following one, showing that “the rest of the market”, i.e. the S&P 500 minus the Mag 7 (grey), has been able to disengage itself from those seven dominant stocks (red) of the past few years:

Given the elevated weighting of those seven stocks in the Nasdaq-100, it is then no surprise that the normal, cap-weighted version of that index has not done a new ATH yet:

However, I think the equal-weight version (QQQE) of the index is the tell of what’s gonna happen next:

And finally, the new ATHs in US small cap stocks is more prove that the economic/business cycle expansion is real:

But new highs are not a US market exclusive. Here’s the STOXX 600 Europe index:

In Asia, Japan’s tech-heavy Nikkei 225 has not reached new ATHs:

However, the broader Topix Index (>1,600 members) has done so after only a mild set-back:

This demonstrates two things: a) that the Summer “correction”, was not only in the US, but in markets around the world, driven by higher-beta, higher-momentum tech stocks, and b) that the rally is broadening.

Another chart highlighting the momentum-crash witnessed in July is the one of Korea’s KOSPI - despite being up 25% from its July 30th lows, it is still down by about the same percentage since the top in late June:

Moving to sector observations, Bloomberg’s RRG (Relative Rotation Graph) is another beautiful way of demonstrating the shift away from tech only to nearly everything else:

Especially industrial

and financial stocks