Steen's Chronicle: Macro Q1

Dear All,

 

Although I did sent you a macro presentation yesterday, I now have the "finished" product of our medium to long-term macro narrative ready….

 

2018 was for us: The Four Horsemen, now… 2019 will be The Global Policy Panic

 

There is also main conclusions, plus my present asset allocation and we are entering "full risk on" mode as we navigate January, trade wars, Brexit and the likes.

 

For those who read yday's presentation there is many new charts and a new structure/flow..

 

We will shortly also publish our Q1 Macro Outlook  - please follow on Home.SAXO

 

Enjoy the weekend and as always "safe travels"….

 

 

Med venlig hilsen  |  Best regards
Steen Jakobsen  |  Chief Investment Officer

 

Saxo Bank A/S  |  Philip Heymans Allé 15  |  DK-2900 Hellerup
Phone: +45 39 77 40 00  |  Direct: +45 39 77 62 23  |  Mobile: +45 51 54 50 00

 

Research: http://www.tradingfloor.com/traders/steen-jakobsen

Please visit our website at www.saxobank.com

 

 

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Macro Digest: Too much priced into 2019 already

• Market has done a 180 degree turn on direction of US yield – from talking 400+ bps in 10Y US to now trading @270 bps!  (see chart blow)  // Furthermore "market" is now pricing FED to cut rates in 2019!!!

 

• This is VERY unlike in the present narrative carried by Fed – a pause – our position since Q3-2018 – very likely, but a direct cut is NOT what Fed is looking or even preparing for…

 

• Having said that we still see "recession light" in 2019 as the Four Horsemen – our 2018 macro theme still is playing out negatively and now on reported data…

 

• There will be "trade deal light" but as with other Trump "deals" they are not worth the paper they are signed on. China and US both needs this – hence we will get "something"

 

• Inflation has collapsed – increasing REAL YIELDS, so despite lower nominal rates the overall "price of money in real terms" still punitive….

 

• We still expect "cycle-low" in markets to be here in January……

 

 

 

Our take / Investment  change:

 

Move from OVERWEIGHT US FI to slight UNDERWEIGHT……..Selling US 10 Y Futures @ 121 29/32 w a 122 29/32 stop.

 

 

 

 

 

This was our 2018 macro theme…

 

Price of money rising (QT, FED hikes, ECB lowering support and BOJ stealth, but PBOC expansion into panic)

Quantity of money "collapsing" … QT, aftermath of China deleverage, macro prudential one-off (RBA(housing), less ECB and BOJ)

Anti-globalisation – Trump in 2018 was all about CHINA negative…

Energy – prices hit highs in US dollar but ever higher in weak EM currencies – net impact: less consumption

 

 

 

The 2019 Macro theme:  Global Policy Panic.

 

Already seen:

 

• RRR cut in China – promises of tax cuts and monetary easing.
• FED Powell – looking at down-side risk….
• RBA in rhetoric panic over state of lending, SME and housing…..
• ECB dovish as ever… and a new incoming President an issue…

 

 

 

This email may contain confidential and/or privileged information. If you are not the intended recipient - or have received this email by mistake - please notify the sender immediately and destroy the email. Any unauthorised copying, disclosure and/or distribution of the contents and/or attachments in this email is strictly prohibited.

Email transmission security and error-free delivery cannot be guaranteed as information could be intercepted, corrupted, destroyed, delayed, incomplete and/or contain malware (virus). The sender of this email, therefore, does not accept liability for any errors and/or omissions in the contents of this message, which may arise as a result of email transmission.