Macro Dragon WK 15: Saxo’s 2Q Outlook + US Dominance Theme with Yields Higher, Gold Much Lower, USD Higher, US EQ > RoW EQ

Macro 8 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: Saxo’s 2Q Outlook + US Dominance Theme with Yields Higher, Gold Much Lower, USD Higher, US EQ > RoW EQ


Top of Mind…

  • TGIM & welcome to WK #15…

  • For those back from the Easter WKD, hope you capitalized on some well needed R&R, plsu reading + reflecting, some quality time with people that you love & of course some selfless time by yourself.

  • Most folks are still out until Tues, including most of Europe, Australia, New Zealand & China – meaning its really gonna be the US setting the potential bell-curve on the start of the wk

US Dominance Theme

  • Again re-iterating something that is not yet consensus in positioning from a cross-asset basis (yet) but will be by E-2021, the US Dominance theme – for those of you who may have missed the re-published latest Dragon Interview, would encourage you to pay attention to AVM’s Ashvin view on the US Dominance Theme…

  • From KVP’s take some things to reflect on in regards to the theme:

  • The DXY at these 93 lvls (two wkly closes above the 200DMA of 94.481) likely has an easy move to the 96lvls before we have even gotten to the critical Jun 16 Fed meeting.

  • Gold $1730, is heading much lower… the $1676 lows last wk on the 30th of Mar is but a taste. The bulls will say the c. 1680 line has held well, the bears will be point out then why do we keep testing it & why are we not breaking back above the key $1770 lvl? KVP reckons we are heading to the $1500-$1600 lvls at least on Gold over the next 1-2months (that’s a -9% to 12% move) – with the lows likely being set around the time we get the first Fed hike, which could be upgraded to 2022.  

  • Yields with UST at 1.72 (1.7742 was set last wk, when gold was 1676), have a path of least resistance to the upside. We are seeing trillions being added to bills, before even one is out of the kitchen… $3trn in infra is now $4trn & there is more on the table.

  • The Macro Dragon is not surprised… this is why we went from being bullish risk from the US Nov elections, to being mega bullish post the Blue Ninja Sweep of the Senate in Jan. This administration is dead set on delivering on what they promised, plus making up for 4yrs of a presidential debacle in regards to execution on nearly everything.

  • The Fiscal Dominance regime is here to stay, this is not a drill.

  • The US bond market is the biggest in the world & if yields are going up there, it will pull yields up globally. USTs are not gonna ‘rest’ until c. 2.25% to 2.50% & if then it will be a function of how much we are spending.

  • Bottom line, the world largest economy at +$22trn (c. +25% of global GDP), with the deepest equity (+$50 trn) & government bond markets (c. $20 trn), plus also having +60% of the global reserve currency & the biggest spending on the fiscal front… is going to likely be growing at +6% to +8% in the 2H of the year. That will be the equivalent of +$1.3trn to +$1.8trn in growth, or the equivalent of larger than Turkey, Mexico or Australia on the low end to bigger than a Russia, South Korea or Canada on the high end. 

  • Why would one look to EM or the RoW to compete with that level of both percentage & nominal growth? i.e. the risk-premium in other countries just does not justify that.  

  • This is the point that folks operating in Investing, Macro & especially life forget – it’s a relative world & it’s by no means a maximalist world. You can moan about the debt lvls going up in the US economy, yet where else will you find that level of transparency, rule of law, talent, resources, ecosystem, size, yield, etc.

2Q SaxoStrats Outlook

Rest of the Week & Other Reflections

  • Easy to read too much or too little into last wk’s price action, given both month finish/start, as well as more importantly the 1Q to 2Q transition. I.e. there can be a lot more noise than signal on those calendar transitions due to rebalancing & other structural needs.

  • You know what is a lot of signal & very little noise? That’s right… US jobs numbers… another blowout session on the NFPs… including upgrades on previous numbers. This economy is going from Moto, to Moto Moto (hot hot)…

  • Mar NFP came in at 916k vs. 660k that was expected. Plus Feb figures got upgraded by almost 100k from 379k to 468k.

  • The unemployment rate is at 6% at expected from a previous 6.25%. It worth noting that a year ago, in Apr 2019 the U/R got to 14.8% from a previous Mar figure of 4.4%. The handle pre-Covid was 3.5%.

  • Don’t forget that the one sector that has not fully re-opened up yet is the F&B space, which pre-Covid was responsible for c. 10m workers. Its likely not going to be a linear move lower, especially at the amazing progress that the vaccines have been making in the US.

  • Econ wise this wk, final service PMIs due this will +  US ISM Services 58.3e 55.3p.

  • CBs: Rate decision out of Australia’s RBA on Tues

  • Hols: Most major markets (outside of the US & CA) are not back in until Tues

  • Other: We got daylights saving time shift over the wkd for AU & NZ.

  • Dragon Interviews U-Tube Channel for easier play-ability…

-

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

The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research 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. To the extent that any content is construed as investment research, you must note and accept that the 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 under relevant laws.

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

Saxo Bank (Schweiz) AG
The Circle 38
CH-8058
Zürich-Flughafen
Switzerland

Contact Saxo

Select region

Switzerland
Switzerland

All trading carries risk. Losses can exceed deposits on margin products. You should consider whether you understand how our products work and whether you can afford to take the high risk of losing your money. To help you understand the risks involved we have put together a general Risk Warning series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. The KIDs can be accessed within the trading platform. Please note that the full prospectus can be obtained free of charge from Saxo Bank (Switzerland) Ltd. or the issuer.

This website can be accessed worldwide however the information on the website is related to Saxo Bank (Switzerland) Ltd. All clients will directly engage with Saxo Bank (Switzerland) Ltd. and all client agreements will be entered into with Saxo Bank (Switzerland) Ltd. and thus governed by Swiss Law. 

The content of this website represents marketing material and has not been notified or submitted to any supervisory authority.

If you contact Saxo Bank (Switzerland) Ltd. or visit this website, you acknowledge and agree that any data that you transmit to Saxo Bank (Switzerland) Ltd., either through this website, by telephone or by any other means of communication (e.g. e-mail), may be collected or recorded and transferred to other Saxo Bank Group companies or third parties in Switzerland or abroad and may be stored or otherwise processed by them or Saxo Bank (Switzerland) Ltd. You release Saxo Bank (Switzerland) Ltd. from its obligations under Swiss banking and securities dealer secrecies and, to the extent permitted by law, data protection laws as well as other laws and obligations to protect privacy. Saxo Bank (Switzerland) Ltd. has implemented appropriate technical and organizational measures to protect data from unauthorized processing and disclosure and applies appropriate safeguards to guarantee adequate protection of such data.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc.