Sentiment among consumers in Germany keeps deteriorating as persistently high inflation encourages people to save & blots out chances of a recovery before year-end
GfK German Consumer Sentiment Index drops to -26.5 in Oct from -25.6 in Sep. An indicator BELOW 0 signals YoY contraction in private consumption. Source: HolgerZ, Bloomberg
This chart by Goldman shows the regime change which has been in place over the last few weeks
Despite the rise in 30-year real yields, short duration stocks (i.e value and the likes) were underperforming long duration ones (i.e IT/growth stocks). Things are now normalizing as short duration stocks are progressively catching up in terms of relative performance. The growth/IT basket probably needs 30-year real yield to reverse trend in order to outperform again...
Oil is up 30% this quarter but is there more to come?
As tweeted by The Kobeissi Letter, Russia and 3OPEC are now cutting a massive 4 million barrels per day of crude oil production. This is the highest level of production cuts outside of recessions over the last two decades. As Saudi Arabia and Russia extend production cuts of 1.3 million barrels per day, supply is going to remain limited for a while. OPEC has proven multiple times over the last three years that they are committed to higher oil prices. Source: The Kobeissi Letter, JP Morgan
A tale of two type of investors...
who will be right? Hedge Funds continue to short treasuries at historic levels while asset managers are building their largest long positions ever recorded! Source: FT, Barchart
Housing | According to Bankrate.com‘s data, US 30-Year fixed-rate mortgage reached 7.78%, the highest rate since August 2000
*This situation is expected to have a significant effect on closed sales from September to November. Source: C.Barraud
For The First Time In 13 Years, The Fed Is Cutting Workers As It Books $100 Billion In Losses
The FED has booked $100 billion in losses in recent months on operations that currently involve paying more in interest to banks on reserve deposits at the Fed than the central bank earns from its roughly $7.5 trillion portfolio of bonds and mortgage-backed securities. Source: www.zerohedge.com, Bloomberg
FTSE MIB Index testing double support
FTSE MIB Index is testing again major support zone and December uptrend. Keep an eye on this level. Source : Bloomberg
TIPS - A Revival in Focus!
Long-term U.S. Treasury Inflation Protection Securities (TIPS) have witnessed a significant double-digit decline since the start of 2022, despite the presence of high U.S. inflation. While the inflation-linked component has acted as a safety net, providing a cushion of around 10% over 20 months, the surge in the 10-year real rate from -1.0% to 2.2% over the same period has had a marked and negative impact on the total TIPS yield (-14%). Yet, the question lingers: Is now the opportune moment to contemplate TIPS? We are currently at a level of LT real rates (2.23%) not seen since 2008. Interestingly, TIPS exhibit a lower beta compared to U.S. Treasuries (currently standing at 0.8). This attribute becomes especially valuable in light of the considerable volatility in U.S. interest rates (with the MOVE index still >100). hould we delve into the realm of inflation-linked bonds, which constitute a global market valued at over $3.5 trillion? This consideration gains significance as uncertainties surrounding inflation persist, driven by factors like de-globalization, supply shocks, increased fiscal spending, and the ongoing transition to renewable energy sources. Source: Bloomberg
