Charles-Henry Monchau

Chief Investment Officer




Chart #1 —

US inflation figures triggered a record drop in bond yields


The event of the week was the release of US consumer prices for October on Thursday. While the figures have been above expectations 9 times in the last 10 months, inflation for October finally surprised on the downside. The increase from September was 0.4%, below consensus expectations of 0.6% and bringing year-on-year inflation to 7.7%, the smallest increase since January. The core index (which excludes food and energy) fell back to 6.3%, after hitting a 40-year high of 6.6% in September.
US Treasury yields fell sharply in response; the 10-year US Treasury yield ended Thursday at 3.81%, down from 4.17% at the end of the previous week. The daily change in the 2-year US Treasury yield was the largest on Thursday since the global financial crisis of 2008.


Daily change in US 2-year Treasury yields

pic 1 - Daily change in US 2-year Treasury yields

Source: Crescat Capital, Bloomberg


Chart #2 —

The S&P 500's best ever performance on an inflation release day


On Thursday, the S&P 500 recorded its best daily performance for a CPI release date since 1949. The Nasdaq 100 jumped 7.5%, its biggest gain since March 2020.
For investors, these encouraging figures could soon prompt the US Federal Reserve to pause in its tightening of monetary policy.


Performance of the S&P 500 on US inflation release dates


pic 2 - Performance of the S&P 500 on US inflation release

Source: : S&P Dow Jones Indices


Chart #3 —

Nearly 25% rise in 2 days for “unprofitable tech” stocks


This is one of the market segments that has suffered the most this year. Following the release of the inflation figures and the rebound of the Nasdaq, the small and medium-sized technology stocks (represented here by the Goldman Sachs Unprofitable Tech basket index) rebounded by 25% in two days.

Performance of the “Goldman Sachs Unprofitable Tech basket”


pic 3 - Performance of the “Goldman Sachs Unprofitable Tech

Source: Bloomberg,

Chart #4 —

We are entering the best year of the 4-year presidential cycle


The mid-term elections in the US did not produce the Republican red wave that was anticipated. At the time of writing, Congress is (narrowly) moving into Republican hands, while the Democrats managed to retain a majority in the Senate. The US is therefore heading towards a divided government which could lead to a number of budgetary decisions being blocked and - potentially - to a new debt ceiling episode. A political situation that will not necessarily displease the markets. History shows that the third year of the presidential cycle (2023 in this case) is the most favourable for risky assets (including the S&P 500). These statistics partly explain the renewed optimism currently seen in the markets.

S&P 500 performance by year of the presidential cycle

pic 4 - S&P 500 performance by year of the presidential cycle

Source: Goldman Sachs Global Investment Research



Chart #5 —

The worst week for the dollar since March 2020



Dollar spot index daily variation

pic 5 - Dollar spot index daily variation

Source: Bloomberg


Chart #6 —

FTX's valuation went from 32 billion dollars to zero in record time


A new scandal rocked the crypto sphere last week. FTX, the world's 2nd largest crypto exchange platform (and
1st in the US) is indeed an icon of the digital asset world. FTX has raised capital from some of the biggest names in venture capital and institutional management: Sequoia, Tiger, Blackrock, SoftBank, Singapore's sovereign wealth fund Temasek and the Ontario Teachers' Pension Fund. The FTX wallet is used by millions of users worldwide. After skyrocketing from $1 billion to $32 billion in just over 12 months, FTX lost it all in the space of 72 hours.
A recent Coindesk article highlighted a particularly disturbing fact: almost 40% of the assets held on the balance sheet are made up of (or collateralised by) FTX's digital tokens, FTTs. In a sense, FTX's borrowings have been used to fuel the rise in FTT's share price, 75% of whose outstanding tokens are held by FTX.
Binance, which is the world's leading crypto exchange and one of the largest investors in FTX, then realised the extent of the danger. By declaring that it wanted to sell the FTTs
it held, Binance triggered a liquidity crisis that sounded the death knell for FTX. The main reason for the collapse was excessive leverage backed by illiquid and unsegregated assets.


FTX had raised capital from the largest institutional investors


pic 6 - FTX had raised capital from the largest institutionalSource: Crunchbase


Chart #7 —

Bitcoin's collapse is comparable to the biggest crashes in the history of financial markets


Since the highs of November 2021, bitcoin is down 77%. A staggering decline that rivals some of the greatest crashes of all time. Indeed, only the crashes of Mississippi & South Sea Co (during the Roaring Twenties), Dotcom in 2000 and the housebuilders in 2008 did worse (according to BofA calculations).
In the space of 12 months, the market capitalisation of crypto-currencies has fallen from over $3 trillion to under $900 billion.


The biggest crashes of all time

pic 7 - The biggest crashes of all time


Source: BofA


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