Three Macro Charts

 

“We can chart our future clearly and wisely only when we know the path which has led to the present.” ― Adlai Stevenson I, 23rd Vice President of the United States of America

A short piece with three macro charts and limited commentary.

1. Global Risk

Data validating recessionary fears have been the flavour du jour recently. The below is a chart of the MSCI All Cap World Index and the twelve-month moving average of the Citi Macro Risk Index, which suggests that a cyclical upturn in global equities is probable.

It is not the magnitude rather the direction of the risk index that acts as a cyclical indicator.

A similar sell-off to that witnessed in the fourth quarter of 2018 is not inevitable in the fourth quarter of 2019.

2. Cyclical USD

A custom leading index of global financial conditions suggests the cyclical trend for the USD is lower, even as the secular trend of the greenback remains intact.

 

3. Secular Trend in Real Yields

Quoting the National Bureau of Economic Research:

“The large and growing US current account deficits resulted from the large volume of foreign savings pushing in, as indicated by the declining US real interest rates, and not from US ‘profligacy’.”

The below chart is of the sum of foreign reserves held by China and Japan (inverted) and the real US 10 year treasury yield, for the period starting right after the Asian Financial Crisis.

The Asian Financial Crisis set in motion the trend of rising current account surpluses in Asia that were funneled back into the US. One major leg that furthered the trend, Chinese savings being recycled into US assets, has been broken by the protectionist policies of the US and economic challenges China is facing up to domestically.

The recycling of Asian current account surpluses into US assets is coming to end at the same time the US is entering a demographic driven inflationary phase, as argued by the Bank for International Settlements.

The secular tailwinds that drove down real yields in developed economies are weakening.

Thanks for reading and please share!

This post should not be considered as investment advice or a recommendation to purchase any particular security, strategy or investment product. References to specific securities and issuers are not intended to be, and should not be interpreted as, recommendations to purchase or sell such securities. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. 

Charts & Markets – 11 Jun, 2018

 

Ibovespa Brasil Sao Paulo Stock Exchange Index

It has been a rough few weeks for Brazilian capital markets. In the short-term, the sell-off should be getting close to being done. We would not be surprised to see a rally soon.

IBOV Index (Ibovespa Brasil Sao 2018-06-11 10-51-06

Straits Times Index

Singapore’s equity market is attempting to break out of its 9 year trading range.
STI Index (Straits Times Index S 2018-06-11 10-38-28
Singapore Airlines

Like the broader market, Singapore Airlines has been sideways for many years and is now near the high-end of its trading range.

SIA SP Equity (Singapore Airline 2018-06-11 10-37-00

Tadawul All Share Index

Saudi Arabia’s stock market is at three-year highs with investors fully expecting MSCI to upgrade the Saudi market to emerging market status on 20 June.

SASEIDX Index (Tadawul All Share 2018-06-11 10-42-06

SABIC

The largest company in the Saudi market by market cap is making a run for 10 year highs.

SABIC AB Equity (Saudi Basic Ind 2018-06-11 10-43-14

Al Rajhi Bank

The largest bank and second largest company in the Saudi market recently recorded 10 year highs.

RJHI AB Equity (Al Rajhi Bank) U 2018-06-11 10-46-34

Uranium 

After a prolonged bear market, is uranium making an inverse head-and-shoulders bottoming pattern?

UXA1 Comdty (Generic 1st 'UXA' F 2018-06-11 10-28-28

Uranium Participation Company

A pure play on uranium, is also carving out a similar pattern.

URPTF US Equity (Uranium Partici 2018-06-11 10-31-35

 

Fast Retailing Co

The largest constituent of Japan’s Nikkei 225 Index is trying to make a run for the 2015 highs.

9983 JT Equity (Fast Retailing C 2018-06-11 10-55-16

SoftBank Group

On the other hand, the second largest constituent of Japan’s Nikkei 225 Index looks in bad shape.

9984 JT Equity (SoftBank Group C 2018-06-11 10-54-59

Chipotle Mexican Grill

Is the worst over for Chipotle? It looks it wants to go higher.
CMG US Equity (Chipotle Mexican 2018-06-11 12-29-10

Starbucks

The stock has gone nowhere since mid-2015. Is the next leg lower and through the three-year trading range? We would not bet against it happening.

SBUX US Equity (Starbucks Corp) 2018-06-11 11-23-51

Darden Restaurants

A much more difficult call to make but we think this might be heading much lower eventually as well.

DRI US Equity (Darden Restaurant 2018-06-11 12-30-54

TripAdvisor

Another stock coming back from the dead. Looks like it could go much higher.
TRIP US Equity (TripAdvisor Inc) 2018-06-11 14-46-11

Mattel Inc

A little less obvious but toy maker Mattel may not be the worst contrarian long out there. 
MAT US Equity (Mattel Inc) UXA 2018-06-11 12-36-41
This post should not be considered as investment advice or a recommendation to purchase any particular security, strategy or investment product. References to specific securities and issuers are not intended to be, and should not be interpreted as, recommendations to purchase or sell such securities. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.