Macro Dragon:  It Does Not Matter, Until It Matters... Macro Dragon:  It Does Not Matter, Until It Matters... Macro Dragon:  It Does Not Matter, Until It Matters...

Macro Dragon: It Does Not Matter, Until It Matters...

Macro 2 minutes to read
Kay Van-Petersen

Global Macro Strategist

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.


(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: It Does Not Matter, Until It Matters...

Top of Mind…

  • O/N pretty much flat-lined session if you were looking into Dixie (DXY), SPX & UST.... yet…
  • …looking at the energy, gold & the Euro we were anything but flat
  • WTI was +20% to 17.05, Brent Crude +5% to 21.90, Gold +0.965 to 17223 & EURUSD -0.43% to 1.0766. We’ve talked about the risks to the Euro-zone, our CIO Steen Jakobsen is generally the bearish he has been in the decades of following the dynamics out there, our chief Economist Christopher Dembik is slightly more constructive: EUCO Review: There is hope
  • Still watch the European open today… usual suspects EURUSD, EURJPY, EURCHF, BTPs, Bunds, Dax etc…
  • And yes gold is looking great for the upside technically & price action wise, even with DXY at 100. And yes, the bull case on our mini-gold series will come… $4000 is initial tgt that KVP & incidentally CIO Steen Jakobsen is thinking… obviously we will have to let our Chief Commodity Commander Ole Hansen, set the formal House target…
  • To KVP at least, the key point here is that the convexity for gold is highly skewed to the upside… highly skewed… there will likely come a time when this puppy will be putting in back to back days of +$25, +$50, +$100… no one is paying attention to gold… it does not matter, until it does… & that’s Macro in a nutshell. Think $2,000 is very doable before year end... could go on, on this... yet lets save it for The Bull piece
  • Are the lows in, in energy?
  • Only easy questions here on the Macro Dragon…
  • …KVP does not know… he does not think they are in, yet we have come off a lot & a few more days of intense rallying cannot be ruled out. Can also imagine we have a wave where energy rallies as the US is set to open up in increments, then the unescapable reality of demand not going back to Jan 2020 levels being completely laid bare, before we crash again.
  • The challenge for energy… given that all the storage is taken up, production is still sky high (demand shortfall is -20mbd to -30mbd depending on how you look at it) there is going to be a lag in any constructive change in lower supply dynamics. The more switched on players who are playing a structural bounce in energy are doing it through Brent Crude (better structural parameters than WTI) & much further along the curve…
  • It’s worth noting USO has continues to redistribute its exposure from c. having it across two months, to then three, to I believe now at least four – latest KVP heard it was 20% Jun, 50% Jul, 20% Aug & 10% Sep, which would reduce pressure (as well as unwind / blow-up risk) to the next scheduled rolling period of May 5. What a lot of people fail to understand is that USO had already finished rolling last wk, i.e. there is a misconception that they were chiefly responsible for Monday’s May contract move to -$37, -300%.. yet this was just supply demand – this short interview with the CME Chairperson is crisp, spot on & worth the watch.
  • Whilst still on energy, Ole flagged that NatGas bears watching was looking like it may have a break upwards technically & tends to benefit form lower oil… so perhaps next big leg down in oil… there is a spread trade there…
  • Next key date – now that USO has diversified the time decay of their exposure – is really going to be the expiry of the current contracts so run up to
  • Not worth talking about PMIs… & the mkt still could not give a fudge about jobless numbers in the US… that’s right 1 / 6 US works (17%) are without a job. And the markets don’t care… it does not matter… until it matters. The US at back end of 2019 had c. +$15trn in consumer spending, the cast majority of that will be from the people working.
  • Now 17% of them are out of work, that number is still likely to go up (granted we are likely past peak job loss velocity)… that is going to not just have a huge deflationary impact on their ability to spend but also ripple into the remaining 83% (& dropping) – who have also been forced to save during this period – who are likely not going to be rushing out to spend when the economy opens.
  • Yes we’ll see an initial & natural boost… discretionary spending as a theme in the US is going to be in dead waters for a while… unless your doing something very niche & in the echelons of wealth where their discretionary spend has 0 correlation with the economic cycle.
  • So would KVP go limit short SPX here?
  • Nah… but short the discretionary spending XLY etf vs. say long the utilities XLU etf?
  • That resonates & think there is some shelf life there, because utilities have transcended being defense… in a world with no yield there will be a structural bid in the utilities space. Funnily enough YTD their performances are not much different. XLU -10.3% & XLY -12.0%
  • Lastly here is a link to a recommended reading book list that our regional CEO, Adam Reynolds, All-Star StashAway Founder & CIO Freddy Lim (awesome book recommendation by the way – on of KVP’s Top 10 for sure) & KVP were featured on.
  • Now these are great books, yet what is potentially ‘wrong’ with the list?
  • TGIF & have a great weekend out there – be well.

-

On The Radar Today…

Flash PMIs (Thu), when + how do we reopen (May-Aug) themed week 17

  • JP: All industries Activity
  • US: Durable Goods Orders, UoM Consumer Sentiment
  • EZ: GER IFO Business Climate
  • UK: Retail Sales

-

Good luck to everyone out there, be nimble & position accordingly.  


Namaste,

KVP

Disclaimer

The Saxo 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 is not intended to and does not change or expand on this. 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 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 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 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 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 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/en-hk/legal/disclaimer/saxo-disclaimer)

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments. Saxo does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo or its affiliates.

Saxo Capital Markets HK Limited
19th Floor
Shanghai Commercial Bank Tower
12 Queen’s Road Central
Hong Kong

Contact Saxo

Select region

Hong Kong S.A.R
Hong Kong S.A.R

Saxo Capital Markets HK Limited (“Saxo”) is a company authorised and regulated by the Securities and Futures Commission of Hong Kong. Saxo holds a Type 1 Regulated Activity (Dealing in Securities); Type 2 Regulated Activity (Dealing in Futures Contract); Type 3 Regulated Activity (Leveraged Foreign Exchange Trading); Type 4 Regulated Activity (Advising on Securities) and Type 9 Regulated Activity (Asset Management) licenses (CE No. AVD061). Registered address: 19th Floor, Shanghai Commercial Bank Tower, 12 Queen’s Road Central, Hong Kong.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Trading in leveraged products may result in your losses exceeding your initial deposits. Saxo does not provide financial advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo does not take into account an individual’s needs, objectives or financial situation. Please click here to view the relevant risk disclosure statements.

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.home.saxo/en-hk/about-us/awards.

The information or the products and services referred to on this site may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and services offered on this website are not directed at, or intended for distribution to or use by, any person or entity residing in the United States and Japan. Please click here to view our full disclaimer.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc. Android is a trademark of Google Inc.