𝙏𝙝𝙚 𝙢𝙖𝙧𝙠𝙚𝙩𝙨 𝙠𝙞𝙘𝙠𝙚𝙙 𝙤𝙛𝙛 𝘿𝙚𝙘𝙚𝙢𝙗𝙚𝙧 𝙤𝙣 𝙖 𝙥𝙤𝙨𝙞𝙩𝙞𝙫𝙚 𝙣𝙤𝙩𝙚, 𝙘𝙤𝙣𝙩𝙞𝙣𝙪𝙞𝙣𝙜 𝙬𝙝𝙖𝙩’𝙨 𝙪𝙨𝙪𝙖𝙡𝙡𝙮 𝙘𝙖𝙡𝙡𝙚𝙙 𝘾𝙝𝙧𝙞𝙨𝙩𝙢𝙖𝙨𝙨 𝙧𝙖𝙡𝙡𝙮 𝙗𝙧𝙤𝙖𝙙𝙡𝙮. 𝙈𝙖𝙟𝙤𝙧 𝙩𝙝𝙚𝙢𝙚𝙨 𝙘𝙤𝙣𝙩𝙞𝙣𝙪𝙚𝙙 𝙬𝙞𝙩𝙝 𝙤𝙡𝙙 𝙚𝙘𝙤𝙣𝙤𝙢𝙮 𝙨𝙩𝙤𝙘𝙠𝙨 𝙡𝙚𝙖𝙙𝙞𝙣𝙜 𝙜𝙖𝙞𝙣𝙨. 𝙂𝙤𝙡𝙙 𝙛𝙤𝙪𝙣𝙙 𝙜𝙧𝙤𝙪𝙣𝙙 𝙖𝙨 𝙬𝙚𝙡𝙡 𝙖𝙛𝙩𝙚𝙧 𝙖 𝙩𝙬𝙤-𝙬𝙚𝙚𝙠 𝙙𝙧𝙤𝙥. 𝙍𝙞𝙨𝙠-𝙤𝙣 𝙩𝙤𝙣𝙚 𝙥𝙪𝙩 𝙥𝙧𝙚𝙨𝙨𝙪𝙧𝙚 𝙤𝙣 𝙩𝙝𝙚 𝘿𝙤𝙡𝙡𝙖𝙧.
So here we are in Dec 2020 still in what so far has been a Recession with the biggest economic activity swings in history (drop of appx. 30% in 2Q) followed by the biggest comeback ever seen (rise of almost 35% in 3Q) (data source: www.bea.gov/data/gdp/gross-domestic-product). And yet the equities, supported by the unlimited pledges from both the Fed and the administration, managed not only to deny the Feb-March almost 40% drop, but are now up almost 15% YTD ($SPX500). 𝙑𝙤𝙡𝙖𝙩𝙞𝙡𝙞𝙩𝙮 𝙜𝙚𝙣𝙚𝙧𝙖𝙡𝙡𝙮 𝙨𝙩𝙖𝙮𝙨 𝙪𝙣𝙙𝙚𝙧 𝙘𝙤𝙣𝙩𝙧𝙤𝙡 (CBOE Volatility Index hovering around 20 pts.. Let’s take a look at what was up this week…
👉 On Monday investors got big news on the corporate M&A front. 𝙁𝙞𝙣𝙖𝙣𝙘𝙞𝙖𝙡 𝙞𝙣𝙛𝙤𝙧𝙢𝙖𝙩𝙞𝙤𝙣 𝙛𝙞𝙧𝙢 $𝙎𝙋𝙂𝙄 𝙖𝙣𝙣𝙤𝙪𝙣𝙘𝙚𝙙 𝙞𝙩’𝙨 𝙞𝙣 𝙩𝙖𝙡𝙠𝙨 𝙩𝙤 𝙗𝙪𝙮 𝙞𝙩𝙨 𝙘𝙤𝙢𝙥𝙚𝙩𝙞𝙩𝙤𝙧 $𝙄𝙉𝙁𝙊. The deal is potentially valued at as much as $44bn and would be the biggest this year. The market also still lived with the $CRM (Salesforce.com Inc) – $WORK (Slack Technologies Inc) deal reported late in the week before.
👉 Monday marked the end of a historic Nov with a slight 200 pts drop in the $DJ30 . $SPX500 and $DJ30 only saw 8 falling sessions during last month and $NSDQ100 saw 7. 𝙏𝙝𝙚 𝙢𝙞𝙙-𝙘𝙖𝙥 𝙞𝙣𝙙𝙚𝙭 𝙍𝙪𝙨𝙨𝙚𝙡𝙡 𝟮𝟬𝟬𝟬 𝙨𝙖𝙬 𝙞𝙩𝙨 𝙗𝙚𝙨𝙩 𝙢𝙤𝙣𝙩𝙝 𝙞𝙣 𝙝𝙞𝙨𝙩𝙤𝙧𝙮 𝙞𝙣 𝙉𝙤𝙫 𝙬𝙞𝙩𝙝 𝙖 +𝟭𝟴% 𝙨𝙪𝙧𝙜𝙚.
👉 Gains followed on Tuesday as December settled in. Both $SPX500 and Nasdaq Composite notched all-time highs. 𝘼 𝙣𝙚𝙬 𝙖𝙣𝙙 𝙨𝙪𝙧𝙥𝙧𝙞𝙨𝙞𝙣𝙜 $𝟵𝟬𝟬𝙢 𝙗𝙞𝙥𝙖𝙧𝙩𝙞𝙨𝙖𝙣 𝘾𝙤𝙫𝙞𝙙-𝟭𝟵 𝙨𝙩𝙞𝙢𝙪𝙡𝙪𝙨 𝙥𝙡𝙖𝙣 𝙬𝙖𝙨 𝙧𝙚𝙫𝙚𝙖𝙡𝙚𝙙, out of which almost $300m is supposed to support small businesses. Further trials of breaking the stalemate over the coming stimulus are being made, but with not much effect for now.
👉 On Wednesday 𝙐𝙆 𝙗𝙚𝙘𝙖𝙢𝙚 𝙩𝙝𝙚 𝟭𝙨𝙩 𝙘𝙤𝙪𝙣𝙩𝙧𝙮 𝙩𝙤 𝙖𝙥𝙥𝙧𝙤𝙫𝙚 𝙩𝙝𝙚 $𝙋𝙁𝙀 -𝘽𝙞𝙤𝙉𝙏𝙚𝙘𝙝 𝙫𝙖𝙘𝙘𝙞𝙣𝙚, pouring further optimism into the market. Indices closed at yet new highs on that day.
👉 Thursday’s read of the 𝙬𝙚𝙚𝙠𝙡𝙮 𝙟𝙤𝙗𝙡𝙚𝙨𝙨 𝙘𝙡𝙖𝙞𝙢𝙨 𝙝𝙞𝙩 𝙖𝙩 𝟳𝟭𝟮𝙠 (𝙫𝙨. 𝟳𝟴𝟬𝙠 𝙚𝙭𝙥) – 𝙩𝙝𝙚 𝙡𝙤𝙬𝙚𝙨𝙩 𝙧𝙚𝙖𝙙𝙞𝙣𝙜 𝙤𝙛 𝙩𝙝𝙞𝙨 𝙧𝙚𝙘𝙚𝙨𝙨𝙞𝙤𝙣. Peaks early in the year were as high as 7m. Indices finished the day flat to slightly red.
👉 A more important 𝙉𝙤𝙫 𝙢𝙤𝙣𝙩𝙝𝙡𝙮 𝙣𝙤𝙣𝙛𝙖𝙧𝙢 𝙥𝙖𝙮𝙧𝙤𝙡𝙡𝙨 𝙧𝙚𝙖𝙙 𝙤𝙣 𝙁𝙧𝙞𝙙𝙖𝙮 𝙘𝙖𝙢𝙚 𝙖𝙩 𝙤𝙣𝙡𝙮 𝟮𝟰𝟱𝙠 𝙫𝙨. 𝟰𝟳𝟬𝙠 𝙚𝙭𝙥 𝙖𝙣𝙙 𝙩𝙝𝙚 𝙪𝙣𝙙𝙚𝙧𝙡𝙮𝙞𝙣𝙜 𝙞𝙣𝙩𝙚𝙧𝙣𝙖𝙡𝙨 𝙬𝙚𝙧𝙚 𝙬𝙚𝙖𝙠. And yet the bad headlines did not manage to spoil the party on Wall street as we seem to be in a usual mood with a Fed put: „𝙜𝙤𝙤𝙙 𝙣𝙚𝙬𝙨 𝙞𝙨 𝙜𝙤𝙤𝙙, 𝙖𝙣𝙙 𝙗𝙖𝙙 𝙣𝙚𝙬𝙨 𝙞𝙨 𝙗𝙚𝙩𝙩𝙚𝙧, 𝙗𝙚𝙘𝙖𝙪𝙨𝙚 𝙬𝙚’𝙡𝙡 𝙜𝙚𝙩 𝙢𝙤𝙧𝙚 𝙨𝙩𝙞𝙢𝙪𝙡𝙪𝙨”.
👉 𝙀𝙛𝙛𝙚𝙘𝙩𝙞𝙫𝙚 𝙬𝙚𝙚𝙠𝙡𝙮 𝙞𝙣𝙙𝙚𝙭 𝙘𝙝𝙖𝙣𝙜𝙚𝙨: $SPX500 +1.7%, $NSDQ100 +2.2%, EuroStoxx600 +0.2%, $GER30 -0.3%, $JPN225 +0.4%.
𝗢𝘁𝗵𝗲𝗿 𝗺𝗮𝗿𝗸𝗲𝘁𝘀 𝗲𝘃𝗲𝗻𝘁𝘀:
👉 𝘽𝙤𝙣𝙙𝙨: the US yield curve (10y-FF) kept steepening towards 90bps (main move was on the long end of course with 10Y now yielding 97bps), steepening seen also the German curve (10Y Bunds-3M) at 19bps with 10Y Bunds at -0.54%. High Yield Spreads keep falling towards 4.
👉 𝘾𝙤𝙢𝙢𝙤𝙙𝙞𝙩𝙞𝙚𝙨 (𝙚𝙭 𝙤𝙞𝙡): Gold ($GLD) bounced after a two-week plunge (up 2.9% on week), so did Silver ($SLV) (up almost 7% on week).
👉 𝙊𝙞𝙡: added slightly to the gains from previous week. Up 90bps on week.
👉 𝘾𝙪𝙧𝙧𝙚𝙣𝙘𝙞𝙚𝙨: DXY (Dollar Index) was vulnerable ad fell 1.1% on week, $EURUSD +1.3%.
Major macro events: (times are CET; source: tradingeconomics.com):
Next Week’s major macro events:
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