Thread by @MacroTechnicals

HO HO HO - MT GLOBAL MARKETS 2019 YEARLY RECAP as of 24Dec19 wk52

1/n

• Fear to Greed
• FED & global CBs reversal
• YieldCurves
• Repo ?
• Bondhype
• FSPP
• BREXIT
• China phase
• M.PMI
• TSLA
•
...
...

all 2019 recaps, wrong and right:
threadreaderapp.com/user/MacroTech…

2/n what a freak year... 12 months ago, global stocks near the cliff, and yet again, global central banks re-acted, led by the FED

Obviously a huge basis effect coming into play, but here we go:

RiskON, with quite some bumps during the year, here the YTD stats to begin with:

3/n here the snapshot update of momentum/ trend/exhaustion scores

It has been like this for quite a while...

there are times when macro is painting one picture, central banks react, technicals take over and sentiment rides.

a lot of moving parts. always.

4/n I think we all witnessed a extraordinary year. From FEAR score 3 to currently 91/92 GREED.

Powell Put, Plunge protection team, share buy back programs, global central banks dovish, FOMO, FED balance sheet, TINA, trendfollower, BTFD and hundreds more of explainations...

5/n for me with my fixed income trading background as a macro dodo, some things were crystal clear : e.g. global M.PMI too bullish given 7-8-9 hikes from FED + global trade war. Central banks had to turn dovish. that alone led to a ED + bond rally.

until the bond hype

6/n when global business outlook becomes so weak, first reaction must be coming from bond traders, a classic deflationary theme ...

7/n what clearly spooked the old guards was the yield curve inversions. Historically they often signaled a recession 12 or so months ahead.

That was all before QE,QQE, MMT...

Too much debt led to touching the downslope of yields.

But currently we dont have bull re-steepening

8/n and we also don't have any "confirmation" yet from NFP Y/Y, Unemployment rate reversal, Consumer Confidence spread reversal ... even though they tend to be slow, lag...

9/n Credit spreads - the Risk Gauge insurance premium - may look tight, but they don't show a reversal either. Here CDX NA IG:

10/n the ever so weak looking Europe , where ECB never be able to hike, in fact ramping up QE again, with a new wave of FSPP clearly supporting credit spreads, here and across the pond. 2019 was never bearish

11/n especially when this program is trying to help on all fronts regarding the weak banks. Tear system, and FSPP. ITRAXX Financials sen & subs risk gauge 2019 one-way street.

12/n ultra low unemployment, tight credit spreads are part of the MT MRI MacroRiskIndicator, and despite being in a stretched long "overbought" cycle,stocks can't really sell-off without a trigger from those ends. corrections sure,but not a bearmarket in sight.

basis effect too

13/n my European counter MRI doesn't look that different. Extraordinary long cycle after extraordinary CB measurements after an extraordinary GFC event 2007/2008. No roll over in sight.

14/n well, new 52wk low in US credit spreads CDX, and this - almost hilarious spurious overlay - is now clearly driven by the basis effect 12 months ago, when stocks reached the low, ergo, the YoY will come down as it looks super stretched.

nevertheless, 2019 was RiskON

15/n analog to Europe, ITRAXX Main vs STOXX... 2019 = RiskOn mode all the way. Credit lead. FSPP or not. No real price discovery. But this was not RiskOff mode in 2019.

16/n since credit rally, bond hype stopped in Aug/Sep, FED cut 3x, possible China deal, what is lagging - and this is usually a leading indicator - is the business confidence.

17/n credit spreads or in these charts, implied vola VIX ... similar story, FED is one of the key drivers to calm down the markets. PMI seems low

18/n same goes for European counterpart, EX PMI and STOXX vs credit spreads over time... RiskOn mode 2019 and biz confidence can only pop up with a trade war solution.

19/n US PMI and bonds are ok in tandem, it's the basis effect of the huge YoY rally in stocks which seems so very unusual. This gap will be closed in 2020.

20/n global M.PMI vs ACWI is as much basis effect distorted too.

Emerging markets (with heavy weight China rebound) looks much more in line.

21/n anyways, global central banks' reaction to be very dovish given the trade war resulted in a rebound in global, developed and emerging markets biz confidence. But there is so much more to be done from this perspective.

22/n of course, one of the bigger concerns is the HK situation. HSI is performing on global stocks correlation, but it's quite a sign to see this huge gap between China and HK PMIs.

23/n like many stock markets, Crude oil has jumped hugely on a yoy basis effect too.

24/n Global PMI vs MSCI YoY.

25/n deflationary theme G7 govviess and bond hype in 2019

26/n putting ISM biz confidence, Bond Yields YoY, Credit Spreads YoY and SPX YoY in context, it's obvious that this gap can not last for a long time. Basis effect will be one part of the equation.

27/n since G7 or DM bonds very much move in sync, good correlation, there was no need to be long all bonds. For some, US was the outlier for long Q1+Q2 (I don't mean ASW FX hedgers). Once the hype was seen,low rated BTPs, BONOs could have been a place to short that rally in Q3+Q4

28/n and since the typical retail trader doesn't really trade these 100Y duration monsters Austria (or "don't cry for me"- Argentina)...

[ bond FOMO hype was written on every wall if you remember ...]

EM Argentina is a different story of course

29/n no, instead of playing Austria 100Y, one of the bond trades in Q3/Q4 was shorting super expensive 30Y BUXL futures.

30/n one of the talk in 2019 was the apparent total collapse and even default of Deutsche.

many reasons why Bunds as a save haven took place, but DBK is a restructuring case now.

31/n ja, and ze German yieldcurve tanked, bull-flattening, due to trade war, weak German economy, US curve flattening, and probably also with DBK weakness.

same chart pattern as before

32/n one of the performers 2019 = Greece.

Was trinkst du so, Uzo !

Like marmite,either you hate or you love it,but yield-hungry special funds and "other factors", led to a giant bond rally. Greece PMI was all year one of the top in Europe. Stocks, GREK, and Greece banks roared

33/n another outstanding move in 2019 were Turkish yields. US sanctions were an early threat, CBRT on the headlines for various reasons, some bad, some good (massive rate cuts). Stocks, TUR and bonds performed bigly, Turkish Lira though a dog 2019

34/n another late and more predictable move late in 2019 = UK

Since BoJo took over the steering wheel with his aggressive narrative,(+ of course with FED cuts too),Cable rallied, bonds tanked,yields higher, steeper curve, banks soared, cyclicals > defensives

until "hard Brexit"

35/n US 2019 big performer = home builders... with FED back to cutting rates, long end yields dropping like a stone, 50-yr low unemployment rates, that wasn't a surprise...was it?

36/n 2019 was also a constant talk of FED, from hawkish to neutral to dovish. 3 cuts.

and then:

"knock knock"
"who's there?"
"The Repo-man"

QE or not-QE.
"It's technical"

It certainly was a boost for confidence for some bulls. full stop.

37/n the seasonality pattern was "back to normal", except performance was 2x or 3x.

Q1+ and Q4 tend to be positive. And 2019 was not different. We know why :-)

38/n and with a 95% correlation to SPX, DAX wasn't that different in 2019 as the pattern belongs. PMI at 43 or not, SPX leads global stocks. FED leads global central banks. US yields lead global yields.

39/n VIX seasonality : pattern in general "in line", but 2019 started extremely high after the Q4 2018 sell-off fear and then in Q4 after 3 cuts, basically totally smoothed down in a steep contango curve.

some say it's close to complacancy.

40/n and then there was Bitcoin...

off from a low base, BTC more than 4-folded, only to lose 50% again to settle around +100% for 2019.

some folks had overlays of EuroDollar Futures and wonder why BTC isnt back to 14k...

41/n and then there was $TSLA .

supposed to be in default. fraud.
yet, it just hit $420 "funding secured level".

Bond traders meant to be much more sensitive and led a cool rally in 2019.

until now though. quite a divergence here.

42/n Did we all notice Trump’s letter to Pelosi ?

43/n and what about Greta , Time Person Of The Year 2019 ?

44/end

and with this, I would like to conclude. A year we will never forget. I learned a lot. Experienced a lot, Good and Bad.

Thank you for the following, I wish you now a happy xmas, be safe. enjoy.

so long. cheers Kai 🎁🎅🏻🎄

xx

PS: next book and then I will be so smart

@threadreaderapp unroll ! merry xmas