Quarterly Outlook
Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges
Althea Spinozzi
Head of Fixed Income Strategy
You can access all of our platforms from a single Saxo account.
ST note - copper and crude oil divergence
Junvum Kim
Sales Trader
Summary: Divergence began to appear since last month as both XAU and HG looked to have bottomed out and make multi months swing highs but CL continued to decline making a fresh low for the year breaking the double bottom $75 this week.
My sales trading team members well and truly know that I am a fan boy of Cathie Wood whose flagship fund ARKK generated huge 149% return in 2020 but this year so far YTD return of -64% on the back of QT and challenging macro backdrop as real yield soared from -1% all the way upto 1.59%, highest since 2009. I remember this tweet from Cathie that flagged the inflation expectations by looking at commodities such as gold (XAU), copper (HG) and oil (CL) which were already on their way down after all three peaking in March 22 while CPI peaked later in July at 9.1%. However divergence began to appear since last month as both XAU and HG looked to have bottomed out and make multi months swing highs but CL continued to decline making a fresh low for the year breaking the double bottom $75 this week. On the other hand, silver (XAG) and iron ore (SCO) are also showing reversal to the topside with +32% and +49% respectively so in line with the recent house view from Steen, resurgence of major commodity strength may have already begun in the anticipation of China reopening.
Some findings
- Correlation based on weekly for 2 years: XAU vs CL (0.3), XAU vs HG (0.5), HG vs CL (0.5)
- YTD return: XAU -1.88%, HG -13% , CL -4%
- EUR seasonality historically shows December is the best month since 2010 on year end $ selling.
- S&P 500 santa rally could also play out post Nov CPI (est 7.3%) and FOMC (est 50bps hike) next week as previous 11 average monthly return being +0.6% with only three occasions being negative (2018, 2015 & 2014) but median having nearly +1%.
- S&P500 forward EPS estimate is 225.52 +9% growth vs current 206.84.
- Since Covid low 14 in March 2020, S&P500 forward PE is 18 currently with recent 2022 low 16 and 2020 high ~28.
- Credit spread may have topped out at 600bps and now hovering at around 500bps with 2021 low ~200bps and 2020 high ~1,100bps
- Yield curve between 3 months and 10 year inverted to -80bps that implies the recession probability of 50% according to the old article (The Yield Curve as a Predictor of U.S. Recessions) from NY Fed.
Latest Market Insights
Quarterly Outlook
-
-
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... -
Quarterly Outlook
FX Outlook: USD in limbo amid political and policy jitters
Charu Chanana
Chief Investment Strategist
As we enter the final quarter of 2024, currency markets are set for heightened turbulence due to US ... -
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... -
Quarterly Outlook
Commodity Outlook: Gold and silver continue to shine bright
Ole Hansen
Head of Commodity Strategy
-
Quarterly Outlook
FX: Risk-on currencies to surge against havens
Charu Chanana
Chief Investment Strategist
Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperfo... -
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... -
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... -
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 ... -
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...