The S&P 500 and the US Yield Curve
Over the very long term, there is a strong correlation between equity markets and the yield curve. Historically a steepening above 1% coincides with a correction on equity markets.
Equity Markets
S&P Futures - Daily
February 9, 2021 3
The S&P 500 continues to grind higher and is reaching the high end of its broadening wedge. It is likely to remain in its range for the time being and retest the 3’750 support.
Equity Markets
Nasdaq Futures - Daily
The Nasdaq stands in a similar pattern with a short term support at 12’890-13’000.
Equity Markets
US Sectors
Value sectors in the US are rebounding amid reflation bets and as banks are supported by a steeper yield curve. But value stocks continue to lag growth plays.
February 9, 2021 5
US Banks
US Energy MSCI Value vs Growth
Equity Markets
US Sectors
FAANGs and media stocks in particular, driven by Alphabet continue to lead the market.
In the meantime, small caps continue to overshoot, amid intense retail speculative activity.
FAANGs
US Media Russell 2000
Equity Markets
EuroStoxx 50 - Daily
February 9, 2021 7
The EuroStoxx is attempting a breakout but should retest 3’600 before confirming its direction. Stay tuned.
Equity Markets
Style rotation in Europe
Cyclical stocks are leading again, driven by reflation plays.
Equity Markets
Asian Markets
Asian markets remain in breakout mode though Chinese, Taiwanese and Korean stocks should lose momentum ahead of the Lunar New Year holiday.
The Nikkei reached its next target, driven by good earnings and reports that the government may lift its state of emergency early for some areas.
February 9, 2021 10
MSCI China - Weekly
Kospi - Weekly Nikkei - Weekly
Equity Markets
Asset Classes – Performance per Year
2021 2020 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007
US Equities S&P 500 0.6% 18.4% 31.5% -4.4% 21.8% 12.0% 1.4% 13.7% 32.4% 16.0% 2.1% 15.1% 26.4% -37.0% 5.6%
Russell 2000 7.7% 19.9% 25.5% -11.0% 14.6% 21.3% -4.4% 4.9% 38.8% 16.4% -4.2% 26.8% 27.1% -33.8% -1.6%
NASDAQ 100 2.8% 48.9% 39.5% 0.0% 33.0% 7.3% 9.8% 19.4% 36.9% 18.3% 3.6% 20.1% 54.6% -41.6% 19.2%
Global Equities MSCI World 0.4% 16.5% 28.4% -8.2% 23.1% 8.2% -0.3% 5.6% 27.4% 16.6% -5.0% 12.4% 30.9% -40.3% 9.7%
MSCI ACWI 1.1% 16.9% 27.3% -8.9% 24.7% 8.5% -1.8% 4.8% 23.5% 16.8% -6.8% 13.3% 35.5% -41.8% 12.3%
EuroStoxx 50 1.0% -2.6% 29.4% -11.3% 9.9% 4.8% 7.3% 4.9% 22.7% 19.6% -13.1% -1.8% 27.0% -41.8% 10.4%
Stoxx 600 1.5% -1.4% 27.9% -10.1% 11.4% 2.6% 10.2% 7.8% 21.5% 18.9% -8.0% 12.3% 33.4% -43.4% 2.9%
FTSE 100 0.7% -11.4% 17.2% -8.8% 12.0% 19.2% -1.4% 0.7% 18.7% 10.0% -2.1% 12.7% 27.4% -28.3% 7.4%
SMI 0.8% 4.3% 30.2% -7.0% 17.9% -3.4% 1.1% 12.9% 23.9% 19.1% -4.6% 1.2% 22.1% -33.0% -1.4%
Topix 2.4% 7.4% 18.1% -16.0% 22.2% 0.3% 12.1% 10.3% 54.4% 20.9% -17.0% 1.0% 7.6% -40.6% -11.0%
Emergings MSCI China 10.6% 29.0% 23.0% -18.7% 55.6% 1.2% -7.7% 8.3% 4.0% 22.9% -18.3% 5.1% 62.7% -51.1% 66.6%
Bovespa -1.3% 2.9% 31.6% 15.0% 26.9% 38.9% -13.3% -2.9% -15.5% 7.4% -18.1% 1.0% 82.7% -41.2% 43.6%
MSCI Emerging Markets 5.4% 18.7% 18.8% -14.3% 37.8% 11.8% -14.6% -2.0% -2.3% 18.6% -18.2% 19.2% 78.9% -53.2% 39.7%
Bonds Euro Aggregate Bond Index -0.4% 4.0% 6.0% 0.4% 0.7% 3.3% 1.0% 11.1% 2.2% 11.2% 3.2% 2.2% 6.9% 6.2% 1.4%
Euro 1-3Y Bond Index 0.0% 0.2% 0.4% -0.2% -0.1% 0.6% 0.6% 1.8% 2.0% 5.0% 2.3% 1.7% 5.8% 5.8% 3.6%
US Aggregate Bond Index -0.7% 7.5% 8.7% 0.0% 3.5% 2.6% 0.5% 6.0% -2.0% 4.2% 7.8% 6.5% 5.9% 5.2% 7.0%
US 1-3Y Bond Index 0.1% 3.1% 4.0% 1.6% 0.9% 1.3% 0.7% 0.8% 0.6% 1.3% 1.7% 2.6% 5.0% 4.6% 6.7%
US High Yield 0.4% 7.1% 14.3% -2.1% 7.5% 17.1% -4.5% 2.5% 7.4% 15.8% 5.0% 15.1% 58.2% -26.2% 1.9%
Commodities CRB Index 5.6% -9.7% 9.4% -12.4% 0.7% 9.3% -23.4% -17.9% -5.0% -3.4% -8.3% 17.4% 23.5% -36.0% 16.7%
Gold -2.6% 25.1% 18.3% -1.6% 13.5% 8.1% -10.4% -1.4% -28.3% 7.1% 10.1% 29.6% 24.4% 5.8% 30.9%
WTI Crude Oil 10.4% -20.5% 34.5% -24.8% 12.5% 45.0% -30.5% -45.9% 7.2% -7.1% 8.2% 15.1% 77.9% -53.5% 57.2%
Dollar Index 1.1% -6.7% 0.2% 4.4% -9.9% 3.6% 9.3% 12.8% 0.3% -0.5% 1.5% 1.5% -4.2% 6.0% -8.3%
Hedge Funds HFRX Hedge Fund Index -0.2% 6.8% 8.6% -6.7% 6.0% 2.5% -3.6% -0.6% 6.7% 3.5% -8.9% 5.2% 13.4% -23.3% 4.2%
Global Indicators
Risk Appetite
February 9, 2021 12
Our Risk Appetite Index sharply bounced back to a strong risk appetite level.
Global Indicators
2000 2200 2400 2600 2800 3000 3200 3400 3600 3800 4000
-5 -4 -3 -2 -1 0 1 2
Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21 Feb-21
Risk Appetite Index S&P 500
Implied Volatility
Implied volatility is back to the low end of the post Covid trading range
Global Indicators
The Dollar Index - Daily
February 9, 2021 14
The Dollar Index remains in breakout mode and is making a pause with a support at 90.50.
We see a rebound to 92 as a first target and then 94.
FX & Metals
The EUR/USD - Daily
The Euro rebounded on its 100D MA for the time being and is testing its intermediate resistance level.
We maintain our 1.19/1.185 near term target and then 1.16.
FX & Metals
Gold – Daily
February 9, 2021 17
Gold rebounds on higher inflation expectations but now needs to cross the 1’850-1’870 resistance to resume its uptrend.
FX & Metals
Gold – Monthly
On a long term picture, Gold is coming from a nearly 10 years correction and has the potential to make a $900 breakout in the coming months with a $2’750 to $3’000 target.
FX & Metals
Silver – Daily
February 9, 2021 19
Silver retreated as expected and is now ready for a fresh up-leg with a $30 target.
FX & Metals
Platinum – Daily
Platinum is confirming its breakout and has ample room to rebound with a first target at 1’225.
FX & Metals
Bitcoin
February 9, 2021 21
Bitcoin is now reaching unchartered territory following Tesla’s decisions to hold bitcoins and accept payment in the cryptocurrency. Short term support lies at $42k with a projection target at about $50k. Stay tuned.
FX & Metals
Cryptocurrencies
Cryptocurrencies in general remain caught in a speculative frenzy led by Ethereum.
FX & Metals
US 10Y Treasury rates
February 9, 2021 23
Bond Yields are rebounding as investors now price in a rebound of inflation. The benchmark 10Yr rate stopped at 1.20% for the time being but should break out when the economy recovers further.
Rates & Credit
Yield Curve
The US yield curve continues to steepen and now European bond markets also seem to price in the reflation story and the Euro curve should tick up as well.
US 2-10 YC
Germany 2-10 YC 10Y Bund Yield
Equity Markets
US Corporate Bonds
February 9, 2021 25
Rate sensitive Investment Grade Corporate Bonds are turning around while High Yield bonds continue to be driven by risk appetite.
Rates & Credit
US High Yield
US High Yield spread are tumbling again and the average yield fell below 4% for the first time on record.
But the current market conditions do not reflect the decreasing quality of issuers, the upcoming boom of bankruptcies in 2021 and the risks facing the economic recovery. Be cautious
Rates & Credit
Crude Oil
February 9, 2021 27
WTI Crude Oil is supported by reflation plays and could retest the high end of its trading range at $60-$62.
Long term, we believe that structural imbalances between supply and demand will support prices.
Commodities
CRB Commodity Index
The whole commodity complex (energy, base metals, agriculture products) is also getting closer to a major resistance level as seen by the price action of the CRB index.
Commodities
Contacts
February 9, 2021 29
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