Macro Dragon: WK#16 - US in today, most of world out
Global Macro Strategist, Saxo Bank Group
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: WK#16 - US in today, most of world still out
Folks as a pin going forward during this turbulent times, let us please remember:
The Covid-19 crisis with all its challenges, stress, chaos & opportunities will also eventually pass. What defines humanity & ourselves as individuals is how we both individually & collectively act under adversity. Think of how you want to look back over this period, doing your part to keep your family healthy, society healthy & functioning. Keeping a cool head, when others are losing theirs, maintaining an objective list of positive aspects & negative aspects of the policy responses & economic shock the world is / could go through. And lastly gratitude, sympathy & empathy for one another. Parts of Asia got / are getting through this & so too shall the RoW.
The one big positive from all this, is it reminds us we are all One. Plus we are not at the top of the food chain. Covid-19 does not care if you are rich, poor, what your ethnicity & skin color are, what passport/s you hold, nor what you age or profession is. Our greatest achievements are almost always those that we collectively do with others & sometimes as in this case, potentially as species.
Lastly keep your mind open to growth & opportunities.
Top of Mind…
- For some of us the Easter wkd is over, as the US gets back in today – yet for most of the world (HK, NZ, AU, CA, DK, EZ), today is still a holiday & they will not be back in until Tue
- Asia morning so far has started out with US futures down a little over -1% at 2749… normally this would be key… yet given the swings we have been having over the last few wks, one needs to get ± 3-5% to really warrant significance on equity indice moves
- Still – worth bearing in mind another epic US session last wk, where over 4 days the SPX rose +12%, eclipsing the mar wk where it rose +10% - marking the best wk then, since 1938
- S&P cash is now “only” -14% YTD as of Friday’s close. Technically this is a MASSIVE lvl, as it marks a 50% retracement lvl form the 2192 lows. The moves from the low – even for a bear market regime (assuming that is still where we are, KVP continues to think so) – have been spectacular, with a +25% uplift from the lows
- The bears will say this is it, this is where you go pile on the shorts big time, potentially having a stop above the 61.8% lvl of 2935 (next big resistance lvl), & be targeting the 2650 (38.2%) & 2475 (23.6%) lvls
- The bulls will argues the opposite, this is where you double your position with a stop just under the 2650 lvl & target the 2935 & 3110. They will say that technically we have advanced out of the bear-market given the +20% run. Those wanting bigger positions & hence tighter stops could place them at c. 2560, just south of the lows of last wk at 2574
- So apart from the new wk always brining opportunities & challenges needing solutions, what can we expect for wk 16?
- There will be a lot of “The Future is Already Here” data points, i.e. econ data that we know should be Chiwawa poop abysmal – so not sure any news there, either way watch out for:
- CH: 1Q GDP out of China, -6.0%e +6.0%p YoY, QoQ -11.2%e 1.5%p. KVP is no economist (thank god! I joke, I joke…), yet those figures don’t seem low enough for a country that pretty much shutdown to 0 activity for close to 4m. On that same Fri 17 Apr, we will get the usual monthly numbers – this time for Mar, so more relevant than Feb which was a wash. We got IP -9.9%e -13.5%p, RS -12.5%e -20.5%p, FAI -15.0%e -24.55p. Again being no economist (yet acting like one), let me propose that we could see beats on IP & FAI. Right now given sentiment globally, any economic beat is likely positive (i.e. skew is towards a reaction from good data rather than bad). Before all this though, we should have Trade data due out on Tues, with export & import exceptions at -13.9% & -10.0%
- US: Apparently Retails Sales are expected at -8.0%e vs. -0.5%p, these probably have elements of pre-lockdown & its like next months RS that are going to be extra Chiwawa. We also have empire state, capacity utilization, IP, Fed’s Beige Book (good one for overview of the country), Wed US Crude Oil Inventories are not critical with previous wk coming in at 15.2m (ATHs over last +10yrs), Thursday Jobless show (we’ve clocked +16m in last 3wks, it took us 2yrs to get to c. 10m post the GFC… granted a lot of the 16m jobs will come back… yet not all of them), Philly fed, Building Permits & Housing Starts
- Lastly on the US, it’s worth noting we have FOMC member Williams speaking – which could give clues as to what could be coming next from the Fed, post their latest initiatives (buying
JunkHigh Yield Bonds) last Thu going into the US long wkd. So what’s up next? Yield Curve Control? Equity ETF Purchases? Nothing is off the table – that is one of the few things that KVP can give you a 200% guarantee. People who can re-write the rule books never run out of ammunition
- EZ: Regional CPIs out of GER & FRA, plus overall block CPI of 0.7% e/p headline & 1.0% e/p CORE
- UK: Worth noting Bojo is out of hospital (good man), BoE Quarterly Bulletins & Credit Conditions Survey, BRC Retail Sales Monitor
- CA: BoC meeting, mfg. sales, ADP Non-Farm
- AU: MI Inflation Expectations, Employment Change -30.0k e 26.7k p, 5.4% e 5.1% p
- NZ: Visitor travels… You know KVP, just had to put that one in there!
- Other: Worth noting there are IMF mtgs these coming wkd, which are likely going to focus on the plight of EMs amidst Covid-19
We could continue to be in a gang buster period of volatility both to the up & down side until at least mid-Apr to back-end of May. Some, time decay is needed in the system, both from a Covid-19 spread (past peak velocity upwards), even bigger & even better government / fiscal / monetary policy response, to overall heads of governments giving this the 2nd & 3rd order consequences thinking that it needs. This to shall pass. Keep you minds & hearts open.
Key thing that KVP is trying to figure out is, how much of the economic fall-out & massive unemployment is correctly priced in – seems ludicrous to run on a V-shaped economic recovery across all sectors.
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