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— Douglas Adams
DASHBOARD
AGENDA
CROSS-ASSET DELIBERATIONS
Today’s QOTD says it all - no apologies for sending this Quotedian out a few hours late offered.
Let’s dive right in …
The weekly performance statistic on global equity benchmarks is actually pretty interesting:
Despite Friday’s late rally on Wall Street, US stocks underperformed strongly this week. Clearly, the sell-off after Wednesday’s FOMC meeting, with longer-duration stocks leading to the downside, can be described as ‘irritable Powell syndrome’.
At the same time, it seems it was only a week ago that we discussed how cheap the Chinese and Hong Kong stocks are (basically because it was only a week ago). We concluded that “catching a falling knife” is only for the not faint at heart, but for those with the guts rewards can be Solomonic. And so it was:
The chart above shows a classical bear trap (undercut of support) and then a quick recovery. Zooming out on the same chart, the longer-term constellation would suggest another 10% or so upside, roughly where the downtrend line and the 200-day moving average coincide, which would still leave the chart in a cyclical bear:
But as suggested, this is for astute risk managers only, i.e. investors who know how to take trigger a stop loss…
In general, Friday brought some very interesting price action, and whilst the adages coming to mind include “one day doesn’t make a trend’ and ‘never on a Friday, some of them are well worth keeping an eye on.
BUT, we will observe them on Tuesday morning, to see if there was follow-through on Monday … so, stay tuned!
Sector performance continues to confirm my point that “strength begets strength” on a weekly basis:
Energy and other tangible sectors up, and long-duration (aka intangible) sectors down. Here is the chart of sector performance YTD:
Before turning to bonds, here’s also the usual stat on the Top 25 year-to-date performers in the US and Europe and their weekly results:
Turning to fixed income, it was another complicated week for this asset class:
The weakness in bond markets came mainly courtesy of yields edging higher,
and to a lesser extent due to a rising credit risk premia:
Currency markets were truly astonishing this week. Looking at the 5-day performance table alone would let you conclude that the US Dollar was weak throughout the week:
But then cross-checking with Friday’s performance table, we realise that nearly all of the strength came during that one day:
This is how those two performance tables look on a chart (DXY):
Finally, with the US Dollar having weakened in to the week’s end, it comes to little surprise that the commodity complex by and large had a ‘good’ week:
In precious metals, the lesser precious (Silver and Platinum) stood out, with Silver gaining close to 8%. On the chart it seems that Silver is at important junction:
The other metal that saw a huge rally was copper, up close to eight percent on Thursday alone:
Again, some follow-through is necessary, but the move looks important on the chart:
Time to hit the send button. Tomorrow is US mid-term election, but that should be a subject for Wednesday.
Have a great day!
CHART OF THE DAY
One of the more interesting features of last week was that despite being a very volatile week for stocks and bonds, measures of volatility were actually noticeably lower. As the chart below shows, did volatility (VIX - green line), volatility of volatitly (VVIX - blue line) but also bond volatility (MOVE - red line) decline substantially. Especially the latter is noteworthy, as bond vola had been unusually elevated for the past 12 months.
Stay tuned …
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DISCLAIMER
Everything in this document is for educational purposes only (FEPO)
Nothing in this document should be considered investment advice
Past performance is hopefully no indication of future performance