Macro Dragon WK 4: Zero Probability of No Violence in the US Given Inauguration Week

Macro 8 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 WK #4: Zero Probability of No Violence in the US Given Inauguration Week 

 

Top of Mind…

  • TGIM & welcome to WK #4Its going to be a great one!

  • In case you missed the Dragons so far this year:

    Macro Dragon WK #2: Reset for the Re-Up... Final Stretch... New Year New Opportunities, Same Risks...

    Macro Dragon WK 3: Forget Noise... Focus on The Signal

  • Given that WK #4 is Inauguration wk in the US, the probability of no violence is exactly zero…. Perhaps one could argue that delta should be negative. As is sometimes the case, KVP hopes to be wrong on this… yet following the spectacle that was Capital Hill a few wks back, hard to imagine a calm & peaceful wk up ahead. Watch the gun stocks which has a massive spike last time.

  • With all that said… it sometimes has to get worse, before it gets better. Say what you want about Trump, +75m still voted for him & while he has done next to nothing structurally concrete for the benefit of hi base – he did expose some structural truths about America that have been under the rug & in the skeleton closet.

  • Would not be surprised if we see cases of Domestic Terrorism before, on & post the event… while most of this will likely be noise from a capital markets & price action perspective – i.e. you’d need the deaths of Biden|Harris and/or Trump for markets to temporarily freak out.

  • Still any actions of violence & the debacle (& almost certainly inside job) on capital Hill, does continue to deepen the room for any credible conciliation between those that voted for Team Blue & those that voted for Team Red.

  • And yes, some Republican have smartly, courageously & strategically done a U-turn (Liz Cheney positioning for 2024/2028? Or actually just demonstrating the need for leadership & accountability? Perhaps both…) – yet the vast majority are either still firmly on Team Trump (out of fear and/or loyalty) or are silently complicit. This was basically the biggest get-out-of-jail card for the Reps of the Senate (rid themselves of any association with Trump)... & they are gonna blow it. 

  • Still the Meta Regime remains one of infinite printing in an MMT world, that is focused on social stability, infrastructure & climate crisis themes… & likely to run not just for a year or two but potentially a decade or two lead by the US & EZ. So was no surprise to see Biden talking up the Fiscal bill to $1.9trn from

  • Lastly, a key tactical risk to assets this wk is what is announced by the new administration, as well as how its announced. This is likely going to be an administration that will want to set the bell-curve from the beginning, showing that there is a brand new & credible sheriff in town. So measures around a Federal Induced lock-down, 100days of masks & +100m vaccines in the first day, etc… are all things to be on the look-out for.

  • Any Federally induced lock-down would put a pause on the US economy & likely see a reversal in the Value > Growth conventional view that has been running since Q4. And would also likely see some near-term headwinds for the US-World reopening basket. If we do get a big sell-off from this, we could see a touch more legs on the USD.

  • However, if its also pretty clear that there is a lot of fiscal spending & initiatives on accommodation around the corner (Yellen in, unwinding, Mnuchin’s unwind) – then we may actually see the Equity market trade up on a lock down, as would bond prices & the USD get hosed… while Gold & Bitcoin (+Crypto) pop up.

  • Don’t mistake the tactical move up in the USD nor US yields, as a structural turn-around in what is almost certainly a multi-year US dollar bear market & a regime of negative real yields heading lower, for longer.

  • One things seems to be for sure, the continued relative outperformance of EM Assets (especially Asia & in particular North Asia, given China’s economic North Star), seems set to hold both on a tactical & strategic horizon.

 

Some SaxoStrats Specials from KVP’s peers that were likely missed during X-mas Season

 

 

Rest of the Week & Other Top of Mind Thoughts

  • US: Its long wkd given MLK Mon, yet its all about the Wed swearing in of the new POTUS – the King & Queen Maker, Joe Biden. Naturally Biden’s speech will be highly anticipated, how much it moves markets, let alone sway’s tribal anchored views, is a whole different thing.

  • There will be TIC long-term purchases, Phily Fed, housing data & flash PMIs.

  • EU: ZEW figures from the block & Germany, as well as final CPI. We do have ECB on Thu, with Flash PMIs Friday.

  • CH: Beat on YoY GDP 6.5%a 6.2%e. Monthly growth data mixed, a beat on IP 7.3%a 6.9%, miss on FAI 2.9%a 3.3%e & Retail Sales 4.6%a 5.5%e

  • UK: BoE Bailey speaking on Mon & Fri (2130 SGT & 0100 SGT), CPI, house prices, retail sales & flash PMIs.

  • CA: CPI, Housing Starts, BoC on Wed, ADP & Retails Sales.

  • AU: MI Inflation expectations, Jobs data due on Thu & Flash PMIs Friday.

  • NZ: Milk Auction, Visitor Arrivals & 4Q CPI 1.1%e 1.4%p due on Fri (0545 SGT)

  • CBs: Quite a number we have decisions out of Malaysia, Canada, Brazil (Chance they are more hawkish than is expected despite economists seeing 2.00%e/p), Norway (already have less dovish / more hawkish skew relative to other CBs), Turkey (big girl hikes in 4Q20, expected to stay on hold at 17%... yes seventeen percent), Euro-Zone, South Africa, Indonesia & Japan.

  • Hols: US out on Mon on MLK day.

 

Dragon’s Heavy Rotation…

More of these on the way – editing ran into year-end, house moves & the like. What can we say, can’t rush greatness. Yet two more Dragon Interview coming up before the month is over – they are stuck with my editor… patience… KVP cannot do it all… apparently…

In case you missed it previously – been super well received, thx for feedback, sharing  & support on this project folks - the first in a string of exclusive Dragon Interviews series with exceptional professionals with skin-in-the-game, across different strategies, asset-classes & backgrounds.

We kicked off with Singapore Based, AVM Global Opportunity, run by the talented & always exceptional Ashvin Murthy. Who in KVP’s view is world class in his approach, process & even more importantly trade construction & money management. Point being, if the process is pristine & consistent, the returns will take care of themselves overtime. 

The timing of the interview is uncanny as it was at the cusp of the last US presidential elections that AVM was launched. It’s worth noting since the interview, the fund has also been nominated for the Singapore’s Best Hedge Fund of 2020, given its consecutive five straight positive months at the start of this volatile year.

Please click here for interview link.

You can follow & learn more about AVM here.

 

      -

      Start-to-End = Gratitude + Integrity + Vision + Tenacity | Process > Outcome | Sizing > Idea.

      This is the way 

      KVP

      Quarterly Outlook

      01 /

      • Macro Outlook: The US rate cut cycle has begun

        Quarterly Outlook

        Macro Outlook: The US rate cut cycle has begun

        Peter Garnry

        Chief Investment Strategist

        The Fed started the US rate cut cycle in Q3 and in this macro outlook we will explore how the rate c...
      • Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

        Quarterly Outlook

        Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

        Althea Spinozzi

        Head of Fixed Income Strategy

      • Equity Outlook: Will lower rates lift all boats in equities?

        Quarterly Outlook

        Equity Outlook: Will lower rates lift all boats in equities?

        Peter Garnry

        Chief Investment Strategist

        After a period of historically high equity index concentration driven by the 'Magnificent Seven' sto...
      • FX Outlook: USD in limbo amid political and policy jitters

        Quarterly Outlook

        FX Outlook: USD in limbo amid political and policy jitters

        Charu Chanana

        Head of FX Strategy

        As we enter the final quarter of 2024, currency markets are set for heightened turbulence due to US ...
      • Commodity Outlook: Gold and silver continue to shine bright

        Quarterly Outlook

        Commodity Outlook: Gold and silver continue to shine bright

        Ole Hansen

        Head of Commodity Strategy

      • FX: Risk-on currencies to surge against havens

        Quarterly Outlook

        FX: Risk-on currencies to surge against havens

        Charu Chanana

        Head of FX Strategy

        Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperfo...
      • Equities: Are we blowing bubbles again

        Quarterly Outlook

        Equities: Are we blowing bubbles again

        Peter Garnry

        Chief Investment Strategist

        Explore key trends and opportunities in European equities and electrification theme as market dynami...
      • Macro: Sandcastle economics

        Quarterly Outlook

        Macro: Sandcastle economics

        Peter Garnry

        Chief Investment Strategist

        Explore the "two-lane economy," European equities, energy commodities, and the impact of US fiscal p...
      • Bonds: What to do until inflation stabilises

        Quarterly Outlook

        Bonds: What to do until inflation stabilises

        Althea Spinozzi

        Head of Fixed Income Strategy

        Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain ...
      • Commodities: Energy and grains in focus as metals pause

        Quarterly Outlook

        Commodities: Energy and grains in focus as metals pause

        Ole Hansen

        Head of Commodity Strategy

        Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities i...

      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)


      Business Hills Park – Building 4,
      4th Floor, office 401, Dubai Hills Estate, P.O. Box 33641, Dubai, UAE

      Contact Saxo

      Select region

      UAE
      UAE

      Trade responsibly
      All trading carries risk. Read more. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more

      Saxo Bank A/S is licensed by the Danish Financial Supervisory Authority and operates in the UAE under a representative office license issued by the Central bank of the UAE.

      The content and material made available on this website and the linked sites are provided by Saxo Bank A/S. It is the sole responsibility of the recipient to ascertain the terms of and comply with any local laws or regulation to which they are subject.

      The UAE Representative Office of Saxo Bank A/S markets the Saxo Bank A/S trading platform and the products offered by Saxo Bank A/S.