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?
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Macro Dragon WK 16: Calm & Dangerous...
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.)
KVP
Macro Dragon WK # 16: Calm & Dangerous...
Top of Mind…
- TGIM & welcome to WK #16…
- So Powell over the WK on CBS’s 60 mins, pretty much saying expecting US economy to get hotter, yet they are going to be accommodative – as he see’s a risk where a faster reopening also coincides with a resurgence in Covid infections
- From KVP’s standpoint, we are likely not going to see Powell saying…
- “Hey I think we were a touch conservative on moving in 2023/2024 back in the midst of the sell-off (as should always be the case)… & we are likely going to adjust our targets at either the Jun 16 or Sep 22 quarterly forecast meetings…”
- Yet that’s what the Macro Dragon is picking up between the lines…
- For the rest cross-assets wise, nothing screaming out on the Macro Dragon – most things seems to be either in consolidation, or within recent trading ranges. With the one exception of US equities in the form of the S&P 500 breaking higher, as it should in an asset inflationary world.
- From a Currency, Commodity & Bonds perspective, waiting for trading range tops & bottoms to be challenged – whilst trying to anticipate what could be the next trigger that moves us from the market feeling “priced in” to new signal for a “repricing” one way or another. Still EURUSD back over 1.1900 recently? "Hogg wash me thinks"…
- On single stock names, there are always opportunities – yet even there most things on our radar seem to be consolidating… everything else being equal, this tend to be bullish given the underlying convexity of the asset class.
- Whilst the Macro Dragon’s creed is that there are always opportunities – there are also times to make money & times to sit tight, Calm & Dangerous, waiting for the right opportunities to present themselves.
- For now, KVP tactically remains in the latter camp. Strategically, KVP remains constructive on equities as a whole – yet will point out once again that the surface of the equity market, does not highlight the divergences within sectors (positive & negative yield sensitive sectors, i.e. financials & insurers vs. say utilities & healthcare, value vs. growth, etc.).
2Q SaxoStrats Outlook
- Also check out our 2Q Outlook that focuses on Scarcity & captures the latest analysis & thoughts from the SaxoStrats team
- KVP’s very own cut is entitled:
“In a Globe Drowning in Capital, Speculation is Eating the World”
Rest of the Week & Other Reflections
- From a central bank perspective globally, likely the biggest focus from a Macro perspective, will be the central bank rate decision out of Turkey this Thu – given Erdogan’s sacking of the previous governor that had overseen over 850 bp in hikes.
- Economists are expecting the central bank to hold rates at 19.00% e/p, yet given the new governor seems to be an Erdogan pawn – one should not be surprised if we see a major reversal in tightening of policy, despite a ‘business as usual’ set of rhetoric.
- Worth noting USDTRY has moved from 7.2185 (prior to the sacking of the previous governor, to the current 8.1780 lvls. That’s a +13% move in just the spot price in c. 3wks. Its one of the few currencies that has broken out of recent trading ranges.
- Another focus will be earnings now that 1Q is under the belt, as is usually the case the financials will lead the pack. So watch out for some of the usual suspects including Goldman, JPMorgan, Wells Fargo, Citigroup, Bank of America, etc. Generally speaking KVP is bullish on higher yields, which means he’s bullish on financials, yet feels insurers are in a sweater spot.
- Coinbase (crypto exchange) is also set to list this wk, which judging from its c. +$1bn in revenue a year is a legit business that once again underlines that crypto, blockchain & digital assets are here to stay.
- Econ wise US inflation (2.5%e 1.7%p, 1.5%e 1.3%p), retail sales, Beige Book, Housing Data & Capacity Utilization will give us clues as to the health & pace of the US economy, as well as vaccination drive.
- CH will have usual monthly growth numbers, as well as new loans & money supply figures due, in addition to the big kahuna data point of 1Q GDP 18.5%e 6.5%p (yes, that is due to the low base effects of 1Q20).
- Europe data is light with regional + block CPI measures, IP for the block & German ZEW + 30yr bond auction on the docket.
- Canada get the BoC Business Outlook Survey today. We have business confidence surveys due out of Australia & New Zealand, in addition to Aussie jobs data on Thu.
- CBs: New Zealand 0.25%e/p, Turkey 19.00%e/p & South Korea 0.50%e/p.
- Fed: Lots of Fed speak this wk, yet key focus will be Powell on Wed speaking at the Economic Club of Washington. Clarida is also set to speak twice this wk on Thu.
- Lagarde due to speak on Wed.
- Hols: No major mkt hols this wk.
- Dragon Interviews U-Tube Channel for easier play-ability…
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Start-End = Gratitude + Integrity + Vision + Tenacity | Process > Outcome | Sizing > Position.
This is The Way
Namaste,KVP