“The price of success is hard work, dedication to the job at hand, and the determination that whether we win or lose, we have applied the best of ourselves to the task at hand.”
-Vince Lombardi
Last week, Keith and I made the long trek from Connecticut to Quebec City with high expectations of winning the largest youth hockey tournament in the world. To our dismay, and despite a heroic efforts by our boys, we fell short of the goal.
Now to be fair, we had one of the tougher draws in the tournament. One which ultimately saw us square off against the top 12-year old hockey team in Quebec, but that’s life. Sometimes you win and sometimes you lose. The real test of course is what we as coaches and our boys as players do with the lesson of losing.
As a coach, I’m never disappointed in a loss as long as, to Lombardi’s point in the quote above, we’ve done everything we can to achieve a positive outcome. The ironic beauty of losing is that it gives you more to work on and improve than winning does.
Stock market operating, much like any real-time competition, is not for the faint of heart and it provides many opportunities for losing and ultimately improvement. But one thing any successful stock market operator will tell you is that, overly focusing on losses is a complete waste of time. The game ahead of you is the one to be played.
Back to the Global Macro Grind…
So what’s going on this morning in global macro land? Are we going to win or lose?
Well, as my colleague Christian Drake says in his daily internal data dump:
“New day, same rouge pervading the heat map color-scape across RoW macro”
And to highlight this point we’ve once again incorporated the daily data map as the Chart of the Day. As you can see, more than half of the global macro data points we are tracking slowed versus last month.
To highlight the most important…
- Eurozone Construction Output was down -3.7% Y/Y to close the year, confirming all things EZ high-frequency macro already knew.
- Meanwhile, in global canary news, Taiwan exports cratered -12.9% Y/Y to start the year
- The tanking in Japan Machine Orders continued to the dissonant tune of -35.6% Y/Y.
Suffice to say, neither measure is heralding an inflection in Global Activity, Trade Volume or Industrial Production … and also carries the obligatory caveat that this represents January data and thus reflects only a partial capturing of the virus impact.
So despite the glimpse of positive animal spirits we saw in the stock market yesterday, the data just is what it is ... mediocre at best.
Meanwhile at the most recent Presidential debate, a full on hockey game broke out between the candidates. Gloves were off and hay makers were thrown, but if there was one key takeaway it’s that former Vice President Biden’s candidacy is in fumes.
We aren’t rookies to the political prognostication game, so we get that things can change rather quickly. But checking recent polls, fundraising and the political betting markets, we can see an interesting tale beginning to shape up. Based on Real Clear Markets and the political betting market, Sanders sits at 50.1% at getting the nomination, Bloomberg is at 26.7%, Mayor Pete is at 12.2%, and Biden is now sub 10% at 9.5%. Now of course a lot can change, but Biden’s outlook duration for this to change is narrowing every day. If you want to talk about political brouhaha’s, Trump versus Sanders would be one for the ages in the general election. And thankfully we have our Washington team in place led by JT Taylor ready to read the tea leaves on this one.
Setting aside the bull market in Bernie Sanders contracts, the true bull market in global macro is in the U.S. dollar. Higher Highs yesterday and up again this morning as the market continues to acquiesce to the #Quad4 outlook and the disinflationary impulse of lower demand and a strengthening reserve currency. Alongside this Gold continues to work as well in the face of a strong dollar haven flows, falling real rates and expectations of further central easing continue to backstop “shiny door stops”.
Viva la dollar, my friends!
Our immediate-term Global Macro Risk Ranges are now:
UST 10yr Yield 1.50-1.65% (bearish)
SPX 3 (bullish)
RUT 1 (bearish)
NASDAQ 9 (bullish)
Utilities (XLU) 68.03-71.25 (bullish)
REITS (VNQ) 95.06-100.84 (bullish)
Shanghai Comp 2 (bearish)
Nikkei 230 (bearish)
USD 97.99-99.85 (bullish)
Oil (WTI) 49.00-53.90 (bearish)
Nat Gas 1.74-2.05 (bearish)
Gold 1 (bullish)
Copper 2.52-2.64 (bearish)
Keep your head up and stick on the ice,
Daryl G. Jones
Director of Research
