Macro Dragon: WK # 45 - Blue Tsunami, Fed, RBA, BoE & Brexit
Summary: Macro Dragon = Cross-Asset 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.
Macro Dragon: Blue Tsunami, Fed, RBA, BoE & Brexit
Top of Mind…
- Happy Monday Folks & Welcome to WK # 45…
- If you are a global macro gal or dude, hope you rested up & had a relaxing wkd – if you have not, well you still likely got 24-36hrs before things start getting ‘real’ from a tactical perspective
- What kind of wk are you trying to have up ahead? Wishing everyone a profitable wk & as smooth navigation as possible
- Markets: Obviously big risk off wk last wk, with volatility spiking close to +40% on the VIX 38%, the dollar climbing by well over 100bp with DXY 94.04 +1.4%, Dax 11557 down close to -9%, S&P 3270 close to -6%, gold 1878 down -1.2%, WTI 35.79 -10.2%. A lot of FX names felt the squeeze from G10 names like USDNOK +3.2% 9.5362 to EM FX like USDRUB +4.2% 79.40
- Best performers? Well Bitcoin $13,823 was +6% for the wk, following a +14% previous wk – its now up 4 wks in a row whilst the rest of the markets have been in a risk-off environment. UST futures were -0.10% at 138-07, unlike their Bund cousins that were +0.51% at 176.15.
- Focus: There is a ton on this wk, yet the clear focus (rightly or wrongly) will be on the US elections, whilst on the Dragon, KVP has been on the Blue Tsunami theme from back when it was an outlier – obviously anything is possible, including anchor bias – hence our tactical trade view scenarios around the US elections over the wkd…
Macro Dragon: Trading the US Elections on a Trump or Biden Victory, Let Alone A Contested Scenario...
…remember the epitome of a world class trader or/& investor is to consistently compound wealth overtime regardless of the outcome. Once again, its about daily-weekly-monthly process over out come
We’ll obviously be covering the election run-down Asia Wed’s morning, for the latest cut from our in house specialist, these are John “Big Hat” Hardy’s takes:
John was also generous enough to offer the following for those looking to follow the coverage in detail from various outlets:
Election Night resources
If you are looking at what to watch on Election Night to track the unfolding results, here are a few ideas. Besides the usual live coverage of major US news networks (via YouTube) like ABC and others, the CNN coverage should also be available there as it was in 2016, when it tended to be heavy on the live result updates. Also, look for written live blogs on major newspapers and TV networks, but also on FiveThirtyEight.com.
The FiveThirtyEight website offers the most comprehensive guide to each state’s election results, both in terms of poll closings, but also with a spin on the likely speed of counting and the partisan patterns that will unfold on election night due to different rules in early- and mail-in voting. A simpler, but very nice graphic overview on 270towin.com website is also available on poll closing times. Also note their great, interactive electoral map you can use as results come in or to test different scenarios.
- Do note we just got US + CA daylights savings time over the wkd – so they are 11 hrs behind, instead of 12 hrs if you are in the SGT/HKT/CST zones.
- For what its worth, KVP still thinks we’ll know very quickly that Trump has lost [TX, FL, NC falling to Biden ] despite votes still to be counted & some states having slower reporting systems (i.e. some states have been counting the mailed ballots as they have come in, others have to start on the actual election night).
- The media will then focus on how it was obvious, but the focus is really on congress & more specifically the Senate. Once we get confirmation of the blue tsunami the market will then focus on the next stimulus/relief bill coming from the US. Hard to see a deal being struck – just given how visceral things have gotten on Capital Hill – yet there will definitely be a HUGE level of uncertainty taken off the table & room for upside in the very near-term.
- It will then be a question of how long to wait until we get a goliath fiscal spending package & plan, Bidenomics – as well as whether the market decides to focus on that & wait, or sell-off. Naturally what the Fed does in the meantime, will be a function of just how bad any risk-off gets… again, the more we sell-off going into the US elections, the bigger the convexity to the upside regardless of outcome.
- The risk continues to be to the upside. With the likes of energy (XLE energy etf) continuing to be the no brainer space both on a tactical & strategic horizon.
- Outside of the US Elections: Keep a watch out for the RBA – Eleanor Creagh’s preview – BoE & of course the Fed on Thu (if that’s not a back stop on potential market fall-out, then KVP does not know what is). We also have final PMIs across the board, plus the works out of the US with ISMs, NFP & U/R. Brexit discussions continue & still ignored for the most part, with latest focus in Europe & US, really being on resurgence on Covid. Soon market will focus on when & how can they expect the next policies to come through.
- Earnings: Last wk was the big one with the MAGA names reporting, check out Peter Garnry’s debrief in Investors will fall in love with technology stocks again. Summary:
The earnings from the US technology quartet of Apple, Amazon, Google, and Facebook were strong and much better than expected. Apple disappointed by not providing an outlook, Amazon triggered nervousness of the relative lower market share in cloud infrastructure and Facebook disappointed on its forecast for daily and monthly active users across its markets in the US and Canada. Google on the other hand delivered so strong results that investors were excited. However, all earnings releases were in aggregate very strong and investors love affair with US technology stocks is not over yet as Nasdaq 100 is still offering strong cash flow generation and a clear growth trajectory
This wk KVP will be watching the large names such as PayPal, QualComm, AstraZeneca, Linde (Ind. Gas), T-Mobile US, Alibaba, Bristol-Myers, Toyota & Berkshire Hathaway. Being one for looking at off the beaten track, we’ll also be hearing from Beyond Meat & Compass Pathways – note links are previous flags on the names, so focus on big-picture as KVP does not tend to have a view on a quarter to quarter basis… that’s not a Macro game… that’s an Equity Long/Short game.
- Mon: Mondelez, PayPal, Estee Lauder
- Tue: Humana
- Wed: Softbank, QualComm, MercadoLibre
- Thu: AstraZeneca, T-Mobile, Daikin, Nintendo, Linde, Duke Energy, Booking Holdings, Enel, Square, Uber, Alibaba, Bristol-Myers, Dominion Energy, Becton Dickinson, Regeneron
- Fri: Toyota, Allianz, Nippon, CVS, Enbridge, Berkshire Hathaway
- Economics: Final PMIs, ISMs + US NFP/UR
- Central Banks: RBA 0.10%e 0.25%p [ditto for the 3yr YCC], BNM 1.75% e/p, Norges 0.00% e/p, BoE 0.10% e/p, FOMC 0.25%e/p
Minutes due out of Brazil & Japan.
- Fed Speak: No one scheduled…
- Holidays: Japan is out on Tue Nov 3 – always potential for a yen lag/overshoot when they get back in, depending on what news we are getting US Tues night.
- Other: Good luck & profitable trading for the wk, US Elections & month of November. Also note we got daylights savings over the wkd in North America.
Start-to-End = Gratitude + Integrity + Vision + Tenacity. Process > Outcome. Sizing > Idea.
This is the wayKVP
Quarterly Outlook Q2 2022
Quarterly Outlook Q2 2022: The End Game has arrived
- Shocks from covid and the war in Ukraine have forced the global financial and political world to change, but what will the end game be?
Productivity and innovation have never been more importantAs the world economy hits physical limits and central banks tighten their belts, could equities be facing a 10-15% downside?
The great EUR recovery and the difficulty of trading itIf the terrible fog of war hopefully lifts soon, the conditions are promising for the euro to reprice significantly higher.
Tight commodity markets – turbocharged by war and sanctionsWith supply already tight, commodities keep powering on. But will it last for yet another quarter?
Between a rock and a hard placeGeopolitical concerns will add upward price pressures and fears of slower growth, while volatility will remain elevated.
The Great ErosionInflation is everywhere and central banks try to combat it. But will they get it under control in time?
Australian investing: Six considerations amid triple Rs: rising rates, record inflation and likely recessionWhile global financial markets are struggling in an uncertain world, the commodity-heavy Australian ASX index is poised to keep a positive momentum.
Cybersecurity – the rush to catch up with realityWith the invasion of Ukraine, governments and private companies are rushing to reinforce their cyber defenses.