That Wile E. Coyote Moment
That Wile E. Coyote Moment
The Quotedian - Vol VI, Issue 17 | Powered by Neue Privat Bank AG
"A bank is a place that will lend you money if you can prove that you don't need it."
— Bob Hope
DASHBOARD
CROSS-ASSET DELIBERATIONS
Financials were in focus last week, and as described in Friday’s quickie Quotedian, that focus was leaning to the negative side. SVB, aka Silicon Valley Bank, went belly-up in under 48 hours, leaving not only the financial sector but the whole market in mid-air suspension, just like Wile E. Coyote over the canyon, shortly before he falls to the deeps.
Starting this today’s Quotedian too late on a Sunday evening, we will keep it nice and short today, focusing mainly on the statistical data for the week and a couple of charts here and there.
Let’s dive right in …
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Starting with equities, stocks were under pressure from the beginning of the week, even before the fall-out from Silvergate, Credit Suisse and SVB started, as the market eagerly awaited Fed Chairman Powell’s testimony to lawmakers on the Hill and got (unsurprisingly really) served a darn hawkish set of comments. Hence, not many places to hide in global equity markets:
By Thursday the 200-day moving average on the S&P 500 got taken out and after a short kiss goodbye on Friday never looked back:
The complacency of equity investors quickly vanished and the VIX actually saw a panic-spike moment on Friday before calming down again towards the end of the session:
Was it really just a week ago when we agreed that investors should hedge when they can, not when they have too…?
European equity indices (below the SXXP) continue to look more constructive, but should the US market continue to accelerate on the downside, there is no doubt that Europe will follow:
Pushing on, let’s have a look at equity sector performance now. If we’ve got this right, financials should be the worst performing sector on a global level:
Uh, oh. Wrong! Closely correlated Real Estate stocks did even worse! The graph above uses MSCI indices to measure performance, to which unfortunately I do not have look-through access to the constituents. But let’s take an ETF, the VanEck Global Real Estate ETF, as a proxy to have a look under the hood. Here’s the daily chart of that ETF:
Ouch. Not nice a picture with major support in calling distance. Here’s the performance of some of the members over the past five days:
Some names we can well recognise on that list …
But now, let’s also have a look at the tormented financial sector. To start, here for example the XLF - the SPDR Financial sector ETF - covering US finance companies:
That green line in the chart above and the red circles I actually ‘painted’ a few months ago and had forgotten about them. I just updated the very right-most circle and am astonished how well that line of support and resistance worked. Now, it looks ugly, to say the least…
Here are the worst performers for the week in that ETF:
In Friday’s Quotedian I compared the XLF to its European equivalent, the Lyxor STOXX 600 Banks ETF (BNK), suggesting that there may still be time to hedge via that particular ETF:
Here’s the updated version of this same chart:
And here the chart of the BNK on its own:
Ok, with that, let’s head over to the fixed income section …
Finally some good news:
Bonds (mostly) worked as an equity hedge … it’s been a while!
Most of the fixed income gains came from Friday alone, where an again stronger-than-expected jobs report (NFP), failed to push rates higher, probably as investors now start focusing on the seemingly unavoidable recession. Here’s the US 10-year yield:
And here the Bund:
The performance chart of currencies speaks for itself:
Clearly, a week where investors rushed for safe havens, as the US Dollar was stronger versus nearly everything, the only exceptions being the other safe haven currencies, Yen and Swiss Franc.
And finally (told you we need to push ahead quickly), it was a not-so-good week for commodities:
Ok, enough for today. If all goes well, you should have some breaking (Quotedian) news in your inbox on Tuesday. Until then, stay tuned …
André
CHART OF THE DAY
In the commodity space (see above),Gold is probably the most noteworthy commodity this week, suddenly looking very constructive again (another safe haven?):
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
The views expressed in this document may differ from the views published by Neue Private Bank AG
Past performance is hopefully no indication of future performance