BofA survey reporting Fund Managers are net *underweight* Cash for the first time since 2011... "Cash is Trash" ImageTo be fair, we can think of at least 2 asset classes which are probably better bets than cash as defensive assets (and maybe 2-3 others for those with a long/short latitude)https://twitter.com/topdowncharts/status/1780347938067116292
Higher for longer risk is becoming reality for US Treasury Yields
As geopolitical risk looms, bonds — typically a safe haven defensive asset, which typically rally in times of risk and uncertainty — are… getting further sold-off.There’s two reasons for this: 1. Further flare-up and escalation in the Middle East geopolitics is likely to push up oil prices, inflation, and bond yieldsbut perhaps more important; 2. The main underlying current is one of reacceleration and inflation resurgence risk, and that is setting the tone and arguably speaking louder than the evolving geopolitical risk backdrop.We saw a shot across the bows last week on this with the stickier than expected underlying inflation measures… meaning that all those expected Fed rate cuts everyone was looking for are as a minimum going to be smaller and later than expected, and the tail risk is
Gold volatility has ticked up, but no where near previous extremes
Gold volatility has ticked up, but no where near previous extremes --> Room To RunThe time to fade the breakaway in gold or get cautious is when volatility spikes (which indicates exhaustion of the move (basically fear and/or greed expressed in the options market)) -- not yet. $Gold - main 2406(GCmain)$$VanEck Gold Miners ETF(GDX)$$SPDR Gold Shares(GLD)$ Imagehttps://twitter.com/Callum_Thomas/status/1778689690029457782
3 Key Factors are going to determine the path of Industrial Metals
Image3 Key Factors are going to determine the path of that chart above...Global: Reacceleration vs RecessionChina: Stimulus vs DownturnThematics: Capex boom1）On Reacceleration vs RecessionRecently seeing more evidence for the former-leading indicators turning up-manufacturing PMIs rebounding-global trade volume recession endingBasically we are seeing a good old fashioned hard cyclical upturn, bolstered by the inventory cycle2）On China Stimulus vs DownturnIt's complicated:-the property downturn remains entrenched--this is not good for commodities-but: a pain point seems to be activated--February saw a -50bp RRR cut and -25bp rate cutStimulus is coming...3）On ThematicsA multi-pronged Capex Boom is underway-clean energy transition and EVs-infrastructure investment-reshoring and factor buildin
Equity survey down notably, but still just net-bullish
Equity survey down notably, but still just net-bullish $S&P 500(.SPX)$$SPDR S&P 500 ETF Trust(SPY)$ ImageYour equities view/positioning is (primary reason in brackets):Bullish (Fundamentals)31.2%Bullish (Technicals)19.9%Bearish (Fundamentals)29.5%Bearish (Technicals)19.3%Bond sentiment further net-bearish as higher for longer risk rises, Fed rate cut probability fallsImageYour *bonds* view/positioning is (primary reason in brackets): [Bearish = rising yields] [Bullish = falling yields]Bullish (Fundamentals)32.9%Bullish (Technicals)6.6%Bearish (Fundamentals)48.1%Bearish (Technicals)12.3%https://twitter.com/Callum_Thomas/status/1776751138571976982
The rally in Gold $Gold - main 2406(GCmain)$ is *not* (yet) a retail thingRetail implied allocations to gold (via ETFs) are still at the bottom of the range, barely moved [despite gold breaking out to new all-time highs, and beating stocks YTD, up more than 10%]Imageso who's buying then?ImageRetail/ETFs again...This time *Flows*Despite a stunning breakout, no flows. Gold previously topped out and took a breather when ETF flows got overheated. No risk of that right now...Imagehttps://twitter.com/Callum_Thomas/status/1777059764025057399
Chart of the Week - The Calm US high yield credit spreads have dropped down to the bottom end of the range, and likewise equity volatility has been lulled into slumber... And fair enough, the macro backdrop has improved, financial conditions have eased, and sentiment has been overwhelmingly bullish as stocks move up to the right. It echoes what I recently noted with Emerging Markets, where the composite risk pricing indicator (EM credit spreads, sovereign CDS pricing, equity volatility, and FX volatility) was approaching a record low. There is definitely an upside from The Calm: it can form a self-reinforcing feedback loop where lower volatility enables confidence effects; a more bullish mood, which plays out in higher asset prices, cheaper and more freely available funding. BUT It also in
Chart of the Week - Where's the Value? "past results are not indicative of future returns" The other day I showed a chart of the combined relative price performance line of Global Small Value stocks vs US Large Growth stocks. In case you didn’t see it, the picture is one of a 17-year long relative bear market... US Large Growth has outperformed Global Small Value more than 5x over that period. Global Small Value sure must suck, right? Well, one consolation is a relative value trinity has emerged… Small vs Large, Value vs Growth, Global vs US are all now trading at steep relative value discounts, as the chart below shows. Investment product advertisements are always littered with “the past does not equal the future“ disclaimers, but in our context here those words actually mean something… I