Macro Dragon WK #25: All about the Fed (Yawn!), with lower lows in vol & higher highs in the S&P... Macro Dragon WK #25: All about the Fed (Yawn!), with lower lows in vol & higher highs in the S&P... Macro Dragon WK #25: All about the Fed (Yawn!), with lower lows in vol & higher highs in the S&P...

Macro Dragon WK #25: All about the Fed (Yawn!), with lower lows in vol & higher highs in the S&P...

Macro 4 minutes to read
Kay Van-Petersen

Global Macro Strategist

Summary:  Macro Dragon = Cross-Asset Quasi-Daily Views that could cover anything from tactical positioning, to long-term thematic investments, key events & inflection points in the markets, all with the objective of consistent wealth creation overtime.


(These are solely the views & opinions of KVP, & do not constitute any trade or investment recommendations. By the time you synthesize this, things may have changed.)

Macro Dragon WK #25: All about the Fed (Yawn!), with lower lows in vol & higher highs in the S&P...


Top of Mind…

  • TGIM & welcome to WK #25…
  • Morning got away from KVP with a few key calls that could not be recalibrated. You know most days you get in the Spaceship ready to take over the galaxy & fight evil 24-7. Other days you get in & its clear as day, you should not be operating any heavy machinery… today is very much the latter…
  • …heavy machinery aside, not too much that is top of mind that feels new, fresh or insightful… & that is also part of the process folks…
  • … Leonardo did not do a string of Mona Lisa’s… in fact most of his works were unfinished… (tempted to leave it here & press send/publish… someone get this man a NetFlix special!)
  • Last wk was about the US inflation print, we got it – it was a banger, with a 5-handle despite an already elevated expectation of 4.7%, yet the MoM beats were nothing like the previous month’s…
  • Net-Net the mkt did not seem to care, yet there was a mish-mash of moves into the close off the wk from a cross-assets basis that kinda leaves KVP shrugging his shoulders & eloquently muttering “no idea! What that was all about.”
  • The dollar closed the wk higher, despite yields closing lower, equity volatility collapsed with the VIX -4.7% 15.65 (super conducive for the MEME|WSB names), S&P continued to grind to new ATHs with a  chart that looks set to break-out. The growth & tech segments continue to recover beautiful since the May 10thish lows, that we were lucky enough to call.

251

 

  • Compass Pathways (CMPS) clocked +20% last wk. The range of returns on the MEME|Shorted stocks that KVP is tracking did +67% to -19%, with 80% of the 30 names closing in the green for the wk. There are a number of interesting charts there including CMPS, BYND, PTON, ABNB, TY, WOOF, SDC, etc.  
  • Gold $1877 -0.74% – which has been trading weak over the last 1-2wks – is looking dodgy for the bulls around these lvls (granted two wkly drawdowns of c. -1.3%, after 4 wks of a c. +8% run, does not necessarily a trend, reverse)  & one has to also wonder if Copper $453.75 +0.19%, could retrace from these $450-455 lvls to c. $420/30.
  • One potential interpretation from the lower yields & break-evens (move higher in real rates), is that the bond market either does not care about inflation, feels that its going to be transitory, feels Biden may not have enough starch & support in the Dems to get big Fiscal Done, is simply in a retracement phase (we did go from c. 80-90bp to 170bp!), or the Fed is dead until at least end of Aug’s Jackson Hole, so really the Sep 15 meeting.
  • Or perhaps a hybrid of a number of those points.

Healthy retracement in Break-Evens across 2-5-10yr horizons

252

  • No new hard views these sides… yet worth noting that summer should see the classic volume dissipate as the institutions get off their desks & gladly venture forth from their small home offices. Which leaves one wondering, low vol, lower volume, advantage WSB|MEME crown… at least until the next string of NFP numbers & the Aug-Sep phase of the year.
  • So Fed is meant to be a dude & a paint drying event – which naturally means there is tail-risk to the downside for a number of assets (except vol, dollar, financials, insurers, cyclicals) if for some reason there seems to have been a lot of tapering being discussed and/or there is a big upward adjustment in the inflation forecasts. Again, these are low delta events.
  • Cannot help but thing, the more switched on consistently profitable traders are structuring part of their portfolio to benefit from a potential move from the Fed in late Aug to Sep. Whether that is puts & put spreads on US duration or just an etf like TLT, upside calls on the dollar, puts on US10yr bond, downside expression on equities… not yet too sure… but the markets are the ultimate buffet, players choice.
  • For now we are in goldilocks lala land… & that by itself creates it own set of opportunities.
  • One last thing, Turkey could be fireworks given the CBOT rate decision on Thu – post Erdogan last wk saying rates are again too high. Remember we have had 3 central bank governors in 2yrs, rates are at 19%, inflation is rampant, they used up all their reserves & oh, the vast majority of Turkey’s trade is dependent on the USD. If you think we cannot see another massive cut as was previously the case, clearly you are already forgetting the key lesson from 2020 – that ANYTHING IS POSSIBLE!  

253

  • Don’t forget Biden is still on the European tour with chats with Erdogan (Mon) & Putin (Wed) also on the register.

Rest of the Week & Other Reflections

-

Start<>End = Gratitude + Integrity + Vision + Tenacity | Process > Outcome | Sizing > Position.

This is The Way

Namaste,

KVP

Quarterly Outlook 2024 Q3

Sandcastle economics

01 / 05

  • Macro: Sandcastle economics

    Invest wisely in Q3 2024: Discover SaxoStrats' insights on navigating a stable yet fragile global economy.

    Read article
  • Bonds: What to do until inflation stabilises

    Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain inflation and evolving monetary policies.

    Read article
  • Equities: Are we blowing bubbles again

    Explore key trends and opportunities in European equities and electrification theme as market dynamics echo 2021's rally.

    Read article
  • FX: Risk-on currencies to surge against havens

    Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperform in Q3 2024.

    Read article
  • Commodities: Energy and grains in focus as metals pause

    Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities in Q3 2024.

    Read article
Disclaimer

Saxo Capital Markets (Australia) Limited prepares and distributes information/research produced within the Saxo Bank Group for informational purposes only. In addition to the disclaimer below, if any general advice is provided, such advice does not take into account your individual objectives, financial situation or needs. You should consider the appropriateness of trading any financial instrument as trading can result in losses that exceed your initial investment. Please refer to our Analysis Disclaimer, and our Financial Services Guide and Product Disclosure Statement. All legal documentation and disclaimers can be found at https://www.home.saxo/en-au/legal/.

The Saxo Bank Group entities each provide execution-only service. Access and use of Saxo News & Research and any Saxo Bank Group website are subject to (i) the Terms of Use; (ii) the full Disclaimer; and (iii) the Risk Warning in addition (where relevant) to the terms governing the use of the website of a member of the Saxo Bank Group.

Saxo News & Research is provided for informational purposes, does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. No Saxo Bank Group entity shall be liable for any losses that you may sustain as a result of any investment decision made in reliance on information on Saxo News & Research.

To the extent that any content is construed as investment research, such content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication.

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments.Saxo Capital Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Capital Markets or its affiliates.

Please read our disclaimers:
- Full Disclaimer (https://www.home.saxo/en-au/legal/disclaimer/saxo-disclaimer)
- Analysis Disclaimer (https://www.home.saxo/en-au/legal/analysis-disclaimer/saxo-analysis-disclaimer)
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)

Saxo Capital Markets (Australia) Limited
Suite 1, Level 14, 9 Castlereagh St
Sydney NSW 2000
Australia

Contact Saxo

Select region

Australia
Australia

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.home.saxo/en-au/about-us/awards

Saxo Capital Markets (Australia) Limited ABN 32 110 128 286 AFSL 280372 (‘Saxo’ or ‘Saxo Capital Markets’) is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms, Financial Services Guide, Product Disclosure Statement and Target Market Determination to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Saxo Capital Markets does not provide ‘personal’ financial product advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Capital Markets does not take into account an individual’s needs, objectives or financial situation. The Target Market Determination should assist you in determining whether any of the products or services we offer are likely to be consistent with your objectives, financial situation and needs.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc.

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website is not intended for residents of the United States and Japan.

Please click here to view our full disclaimer.