MT GLOBAL MARKETS Momentum & Sentiment Recap as of 27Mar20 wk13 thread 1/n
• huge global monetary +fiscal rescue packages signal “don’t worry about liquidity+funding”...but
• volatilities across assets peaked
• RiskOn week
• Shortest bear market ever?
• Chart of the month👇
• huge global monetary +fiscal rescue packages signal “don’t worry about liquidity+funding”...but
• volatilities across assets peaked
• RiskOn week
• Shortest bear market ever?
• Chart of the month👇
2/n let’s recap this: with half the global economy in forced literal standstill, it forced the biggest monetary (ZIRP/NIRP/QE) and fiscal liquidity rescue package ever. The global leveraged debt bubble burst and COVID-19 triggered more, much more debt. bravo
3/n standstill forced companies to draw revolver credit lines. Acute cash flow problems exposed. Good news this week: primary corp debt market was relatively active, and so was secondary (even with wider bid-ask, but it is not frozen, which is important)
4/n biggest fear in this recession is liquidity/refinancing risk. Credit Default Swaps as a risk gauge (here US major banks) spiked, but have come down a little, that's hugely important.
5/n e.g. bonds/yields/spreads of "top" companies like AMZN quickly rebounded, ...
6/n ...however, there will be plenty of companies (here WeWork bond) who are struggling, perhaps worse.
There will be a wave of rating downgrades, or a wave of Chapter11 in various sectors... despite the FED/fiscal rescue signal. They won't bail out every company
There will be a wave of rating downgrades, or a wave of Chapter11 in various sectors... despite the FED/fiscal rescue signal. They won't bail out every company
7/n but this week, mirroring overall RiskOn , CDX and ITRAXX CDS indices showed a large risk premium drop. Good news ! (bear market rebound or bottom yet to be seen)
8/n update on the CDS indices Y/Y RiskOn/Off periods (inv scales)
9/n update CDX Y/Y vs SPX Y/Y "model"
fastest RiskOff ever, but strong rebound this week after being extremely oversold plus FED+Fiscal package.
fastest RiskOff ever, but strong rebound this week after being extremely oversold plus FED+Fiscal package.
10/n US$ funding / Bank credit risk though has not recovered.
11/n also seen here: front end ED still hugely inverted, the whole other curves now almost in normal slope as FED went to ZIRP. This slope is now a recession curve. MMKT will stay at 0% for a long time. Probably longer than post GFC.
12/n US in full ZIRP
13/n Volatility across assets are coming down sharply. here VIX and futures curve.
Still highly elevated though with a huge backwardation curve = not out of the woods yet.
Still highly elevated though with a huge backwardation curve = not out of the woods yet.
14/n FX vola also off peak , but most curves remain in backwardation too.
15/n Bond vola also off the recent peak. same picture across assets classes.
16/n Global Markets Assets weekly performance wk13: RiskOn , green board . short cover, longs, FED/fiscal signal, many reasons.
17/n update Global Markets YTD as of wk13
18/n wk13 FX pairs performance overview
19/n update global assets momentum / trend / exhaustion scores as of wk13
20/n Macro/Technicals spreadsheet
• BoC another emergency rate cut
• BoI cut75bp
• flash Manufacturing, but especially Services PMI as expected weak
• the fiscal rescue package column is incorrect, needs change, sorry.
• BoC another emergency rate cut
• BoI cut75bp
• flash Manufacturing, but especially Services PMI as expected weak
• the fiscal rescue package column is incorrect, needs change, sorry.
21/n US Macro: obviously the chart of the week belongs to the initial jobless claims.
Expectations ranged between 1.5-4.0 millions. Half the country in forced lockdown and this is the result. And probably not a one-off. millions more with file in coming month. ugly
Expectations ranged between 1.5-4.0 millions. Half the country in forced lockdown and this is the result. And probably not a one-off. millions more with file in coming month. ugly
22/n with M. & S.PMI Business confidence plunging, so will Consumer confidence.
US GDP is driven by consumer spending, but first they need to keep the jobs. Unemployment rate will spike.
US GDP is driven by consumer spending, but first they need to keep the jobs. Unemployment rate will spike.
23/n actually all coming PMIs, ISM, NMI, ESI etc will be weak, that's old news now and priced in, the question is how long will they stay weak ?
This week German IFO as expected tanked. GDP obviously will crater. both lagging at this COVID-19 situation.
This week German IFO as expected tanked. GDP obviously will crater. both lagging at this COVID-19 situation.
24/n here as an example IFO Y/Y vs DAX Y/Y.
25/n but with early hints of China PMIs, last week flash PMIs in EU/US, and IFO, here is a glance of what to expect for next week ISM and NMI. both will of course crater. question how deep and for how long is now relevant.
26/n "it ain't over until the fat lady sings". The FED used to be the lady. Their message is clear: unlimited QE for CP/MBS/Corp/Agency/UST plus ZIRP.
The other fat lady is COVID-19. Lockdown. And after all curves flatten (incl more tests), how slow is the recovery ?
The other fat lady is COVID-19. Lockdown. And after all curves flatten (incl more tests), how slow is the recovery ?
27/n US NYA market breadth is on the floor
28/n NYA advance/decline is still bearish, but showed small rebound
29/n NYA new highs vs new lows still in a downtrend.
30/n here an overview attempt of major SPX drawdown, crashes and bear markets.
Every downtrend and recession have different reasons, structures, but usually have plenty of vicious bear market rallies.
The monetary +fiscal rescue is huge,no doubt,so is the global lockdown.huge
Every downtrend and recession have different reasons, structures, but usually have plenty of vicious bear market rallies.
The monetary +fiscal rescue is huge,no doubt,so is the global lockdown.huge
31/n here an attempt of various major bear markets, probably not in correct % scale, but the X-time axis is correct.
Coming from a 10+yr stretched cycle. COVID-19 was an accelerator. Monetary/Fiscal package will help for sure. But I highly doubt, this is already completely over.
Coming from a 10+yr stretched cycle. COVID-19 was an accelerator. Monetary/Fiscal package will help for sure. But I highly doubt, this is already completely over.
32/n many reasons for rebound:
33/n "+20% off low indicates a new bull market" ... really ?
34/n “+20% off low indicates a new bull market”... let’s hope this was the bottom, and business / consumer confidence will go straight up from now on, no chapter11, no downgrades, jobless claims back to 200k, UE rate stays at 4%......
35/n this is why I love TradingView charts.
• cycle/mkt rolled over
• global economy in standstill
• largest CB QE+ fiscal rescue ever
• read between the lines and balance the uncertainty vs certainty vs history, it's tough to call bottom already
tradingview.com/x/UiKZ5iHG/
• cycle/mkt rolled over
• global economy in standstill
• largest CB QE+ fiscal rescue ever
• read between the lines and balance the uncertainty vs certainty vs history, it's tough to call bottom already
tradingview.com/x/UiKZ5iHG/
36/n we are all witnessing history here, unprecedented forced global economy shut down, city/country lockdowns, travel bans, supermarket shelves plundered, queuing up now in 2m distance. This is a game changer and will leave a big mark on many aspects.
37/n I really wish everyone good health or speedy recovery if infected. World will go on, and the biggest question is how will the recovery shape look like ? V ? IMHO hard to believe. U ? let's hope so. L ? let's hope not.
For now, have a nice Sunday. x
For now, have a nice Sunday. x
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