Head of Commodity Strategy
Summary: The non-commercial dollar long against ten IMM currency futures saw a small reduction from the highest level since December 2015. The $0.6bn reduction to $34.5bn was driven by an 8% reduction in the JPY short on renewed trade war concerns and falling equities.
The euro net-short meanwhile expanded by 561 lots to 106k lots, the highest since December 2016.
Combined dollar position against ten IMM currency futures;
In fixed income leveraged funds kept up the selling pressure in 2’s with the net-short reaching a fresh record while selling of 10’s were being offset by buying of T-bonds
The Cboe VIX received a great deal of attention as it surged in response to renewed stock market weakness. Especially the record short raised concerns about a February 2018 style blowout. In the end the weakness in stocks were orderly and so was the reduction of short VIX positions which up until last Tuesday was cut by 30k lots to 150k lots.
Bond. Long Bond(s)
With real rates being too positive, we see three scenarios: Opportunity to lock in rates at cycle high, government overreach to keep the economy afloat or a complete reset of the economy.
Steen Jakobsen,
Chief Investment Officer
Is a bond bull market ahead? Inflation still poses a risk for investors, but the moment for increasing duration to your portfolio may be approaching towards the end of the year, when central banks might be forced to cut interest rates.
Althea Spinozzi,
Senior Fixed Income Strategist
The furious rate hike cycle has brought gains in the US dollar, but with stagflation risks in Europe and the UK and weakness in the Chinese economy, USD may have more room to run. But a strong dollar could also have repercussions for US growth, emerging markets and commodity prices.
Charu Chanana,
Market Strategist
With the cost of capital rising painfully, stagflation fears are back, illuminating the fragile state of the green transformation, while giving a tailwind to nuclear power, and threatening the growth of AI-related stocks.
Peter Garnry,
Head of Equity Strategy
With supply tightness not only in energy but all commodities, the momentum in commodity prices may continue, pressuring central banks to lower real rates. That could be a good setup for precious metals, including gold, silver and potentially platinum as well.
Ole S. Hansen,
Head of Commodity Strategy
As the pandemic showed, even the US Treasury can experience seismic shifts. With the government increasing the pace of issuing bonds to support fiscal spending, the complex Treasury market and regulatory constraints could spark a liquidity event.
Redmond Wong,
Market Strategist
The tide has turned for bonds. Given the current yields, bonds have become an attractive investment, with added benefits including lower risk than stocks, increased diversification and a steady stream of income unaffected by economic changes.
Peter Siks,
Investment Coach
