Macro Digest: Fear is replaced by 'Nervous stability'
Chief Investment Officer
Summary: Last 24 hours we have seen positive signs of stability and liquidity coming back to the market. We still need COVID19 cases to peak to find solid grounds, but for now storm is ebbing.
What has happened?
In the last 36 hours we have seen more policy changes than in my full career of >30 year as trader!
- Germany embraced EU Issuance (Netherland still object it seems)
- FED did yield-curve-control by proxy - meaning FED will control ceiling on rates (ECB et al. will follow when we get into more "smooth sailing...")
- Helicopter money is rumor left-right-and-center in the expected Congress bill due any minute
What did market do?
- Asia +8%
- US Market single biggest move....EVER! @time of a writing DOW is up 2.000 points, S&P +7.5%, DAX +10%
- Credit spreads coming in for 1st time this cycle - one of the major signs we have been awaiting
- Silver + Gold rallied - indicating "reflation" / inflation / stimulus coming through (in 2008/09 Gold + Silver rose >50% when low was in...)
But... this is far from over but we today left the FEAR part of this bear market. It remains a bear market. Think of this as an Elliot Wave Structure - We may just have completed the Wave 3 down, now comes 4th up move, before final 5th wave down (I call this the recession / depression) move in Q3 into Q4...
FED and global government has committed grant/Helicopter money to stop the bleeding. How we trade from here depends on how we navigate the difficult path of securing social order, fabric and ultimately "fairness". Illusive terms, but if the money does not reach people who really needs them, then the next crisis will be bigger and more violent. However if we secure social order/base and institute proper price discovery and business cycle post this cycle in 2021 then we have a chance. (My main scenario)
For now though... 'Fear' is replaced by 'nervous stability' but it’s based on CONGRESS DOING DEAL NEXT 24 hours
Now we look into month end to get a feeling for redemption in funds, the overall liquidity and the end of Japanese Fiscal Year.
Analog chart on prior crisis
Credit Monitor from Saxo Trader
CDX Spread – FIRST DOWN day in this cycle…
Latest Market Insights
Q4 Outlook 2022: Winter is coming
- Winter is coming to the financial markets as central banks are tightening their grip. How spring will look is still a question.
European energy crisis: it will get worse before it gets betterThe winter in Europe will be tough, but whether the result is political chaos or sustainable, innovative solutions is still undecided.
A difficult and volatile quarter awaitsAs the year draws to an end, commodities continue to be at centre stage of the world with growth pockets political uncertainty.
The bright side: crises drive innovationThe positive spin on crises is that they come with solutions. It is worrisome that deglobalisation may be a response to this crisis.
Green transformation in China: renewable energy and beyondGoing green, China needs to span numerous energy sources to ensure stability, as every source comes with a challenge.
Asia: Intermittent solutions, but a faster renewable adoption curveAsian energy supply is being squeezed. This and the adoption of renewables may change the investment sentiment in the region.
FX: A Fed thaw needed to deliver a sustained USD turn lowerThe US Dollar can keep momentum when the Federal Reserve continues to tighten, leaving the rest to play to their drum.
Autumn can become ugly for equities and bond holders. Comfort for Dollar longsTechnical analysis suggests that equities could face a tough Q4 as could fixed income. US Dollar positions could provide some upside.
The next stock market sector to watch, with stocks going nuclearAs the world scrambles to find affordable, sustainable energy, nuclear is getting attention from politicians and investors alike.
The crypto space is getting cold when the hype disappearsCryptocurrencies face a winter of their own as retail investors and governments are asking tough questions.