Summary – A top-down review of interesting calls and comments made last week in Treasuries, monetary policy, economics, stocks, bonds & commodities. TAC is our acronym for Tweets, Articles, & Clips – our basic inputs for this article.
Editor’s Note: In this series of articles, we include important or interesting Tweets, Articles, Video Clips with our comments. This is an article that expresses our personal opinions about comments made on Television, Tweeter, and in Print. It is NOT intended to provide any investment advice of any type whatsoever. No one should base any investing decisions or conclusions based on anything written in or inferred from this article. Macro Viewpoints & its affiliates expressly disclaim all liability in respect to actions taken based on any or all of the information in this article. Investing is a serious matter and all investment decisions should only be taken after a detailed discussion with your investment advisor and should be subject to your objectives, suitability requirements and risk tolerance.
1.Markets Last Week
VIX falling hard is bullish as the last week proved. But is VIX breaking below 16 actually bearish?
US Indices:
- VIX down 5.1% to 15.37; Dow up 50 bps; SPX up 31 bps; RSP up 25 bps; NDX up 1%; SMH up 3.5%; RUT up 84 bps; MDY up 30 bps; XLU down 4.5%;
Isn’t the equity put-call ratio analogous to VIX?
- Subu Trade@SubuTrade – 12-6 – Equity Put/Call Ratio fell to 0.43, the lowest since May! In the past 20 times this happened, $SPX was lower 75% of the time a week later.
Remember the Zweig Breadth Thrust that “almost” happened last week! Do you say “poof” or do you close the window?
- Subu Trade@SubuTrade – Fri 12-5 – Zweig Breadth Thrust Indicator is at 0.535. A Zweig Breadth Thrust has *NOT* been triggered. The window is now Closed. However, a Breadth Thrust was *almost* triggered last Friday ⬇️
And, in contrast to 3 weeks ago,
- The Market Ear@TME – Top of range – “Discretionary investors have raised exposure only to the top of the cautious range they have been in since March” (Deutsche Bank)
Key Stocks & Sectors:
- AAPL down 3 bps; AMZN down 1.5%; GOOGL up 40 bps; META up 3.9%; MSFT down 1.8%; NFLX down 6.8%; NVDA up 3.1%; MU up 31 bps; BAC up 56 bps; C up 5.1%; GS up 3.5%; JPM up 63 bps; KRE up 2.8%; EUFN up 31 bps; SCHW up 1.2%; APO up 4.8%; BX up 3.9%; KKR up 5.8%.
Dollar was down 46 bps on UUP & down 52 bps on DXY:
- Gold down 40 bps; GDX down 2.6%; Silver up 3.2%; Copper up 3.2%; CLF down 5.8%; FCX up 5.2%; MOS down 3.6%; Oil up 1.1%; Brent up 61 bps; OIH up 5.7%; XLE up 1.5%;
A negative view about the Dollar below:
International Stocks:
- EEM up 77 bps; FXI up 91 bps; KWEB up 5 bps; EWZ down 3.2%; EWY up 3.8%; EWG up 1.2%; INDA down 1.4%; INDY down 1.2%; EPI down 1.5%; SMIN down 3%;
Naturally you would expect Treasury rates to go down & Treasury ETFs to go up. They did but only modestly.
- 30-year Treasury yield up 12.4 bps on the week; 20-yr yield up 12.7 bps; 10-yr up 12 bps; 7-yr up 11.6 bps; 5-yr up 11.2 bps; 3-yr up 9 bps; 2-yr up 6.4 bps; 1-yr up 0.4 bps;
- TLT down 2.3%; EDV down 2.9%; ZROZ down 3%;
This is the big deal next week with the Fed decision & presser on Wednesday. First below is a view from Jim Paulson that economic growth has slowed to unacceptable levels. He explained:
- “I think the economy is fairly weak actually across the array of different data. Real GDP yr/yr is 2% and you have employment at 8/10th of a percent; retail sales only up 1.3%; industrial production up 0.9%. Those are really unacceptably weak levels… and what bothers me is I think its continuing to get weaker & will into the New Year.”
- “The good side of all this is … that we are not just going to have 125 bps cut by the Fed, but I think the economy is going to slow sufficiently that the full focus of policy officials is going to be trying to avoid recession and restart/maintain this recovery. And I think they’re going to bring a lot more policy juice. And I think its going to continue thru mid-year. It will be the first time we have had a major full-on policy support in this entire bull market and I think we are going to like the results as investors. “
On the other hand, below is an interesting view from Rick Rieder of BlackRock who says that “Fed Rate Cut Is Not a Lock This Month“.
3. Michigan look-alike if not Big Blue!
Yes, we know that something fairly interesting happened in the World this past week, something that has driven all sorts of strategy stuff on TV and in print. We should be talking about that. But we would rather focus this week on something very dramatic & something very fundamental that happened – an event that has Never happened before – Indiana University becoming No. 1 in College Football.
Perhaps that’s why the pre-game outlook was like:
Despite this & once again, Ohio State bites the dust in a choke-like performance. Not to Michigan this time but to a team that looks like & is built like traditional Michigan. This game was a virtual replica of the 2024 Michigan win over that highly ranked OSU team with stars. And the obvious reasons were the same. The two lines kept the game close & finally OSU kicker Fielding missed an easy field-goal just like he had missed one last year in Columbus, Ohio against Michigan.
The underlying reason was the same. For the past 4-5 years, OSU has been built like a fast racer to win the National Championship while the Big Ten is still built to be a powerful truck. This year, Michigan did not have the bodies on the Defensive or Offensive lines. But Indiana did. In a battle of attrition, the Indiana lines kept pushing OSU lines back, especially in the most important 4-th down inside the 10-yard line. A quick look showed that knee of the OSU quarterback touched the ground before the ball crossed the 1st-down line. So the next time in a similar circumstance, OSU decided to kick a 27-yard field goal & the kicker missed. And Indiana kept getting first downs in the remaining 2:40 minutes & kept the ball from OSU.
This has been the story of the last 4 OSU losses to Michigan & that of this year’s loss to Indiana. And let’s not forget that the spirit of Nick Saban lives on inside Curt Cignetti, the Indiana coach, as it does inside Kirby Smart, the Georgia coach. Fancy, fast football looks awesome & is a fun to watch. But the key to football are the two lines and the drives they generate or stop.
Last week was the penance that delivered the rewards this week.
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