Resumo do Relatório
TPW FridaY Musings: Classic Cover
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And by Classic Cover I am not talking about someone covering a famous song but rather the classic business magazine cover which doubles as a contrarian indicator. This week it is The Economist with its Brazil – Dismal Decade cover which I expect will go down in history as an absolute classic example of the genre.
The Cover comes on a day the BRL rallied strongly to further a recent 12% or so up move against the USD. EWZ, the Brazil ETF, is up 45% off its Fall 2020 low though still close to 20% below its 2018 high. You would think someone at The Economist would run a check before doing this – after all it’s not the 1st time.
Given the unprecedented nature of the post Covid environment I think technical analysis can be very helpful across the multi asset space. In fact, a number of key segments are on big technical levels including Apple which just broke under its 200day support as a Big Tech bellwether and US Fixed Income with both AGG and TLT bouncing against resistance; JP Morgan notes that April – May’s real yield rally puts UST at risk.
Does this mean we should buckle up for a rate rise inspired big tech selloff? No, I don’t think so – Crypto Carnage wasn’t enough to do it, the QQQs are 7% above its 200DS and as I noted in last week’s monthly, JP Morgan’s work suggests US growth stocks have not been this cheap relative to the broad SPY in roughly 35 years (chart 4 for those interested).
No, I think the action will be in the FX market and the USD in particular. All the other major assets have had big moves: stocks, bonds, commodities… FX is the one that has been meandering around. In the 2H I expect the USD to break its support and have a meaningful decline underpinned by the coming very important shift from staggered global reopening to a global synchronized recovery.
Last point – I think it will be very important to not get off the (new leadership) train too early – whether it be US Value, non US equity, Commodities etc. There is soooo much room for these segments to catch up – here’s a stat to contemplate – MS reports that ownership of US Fin and Energy are in the bottom 10% of the last decade levels. XLE is up 45% and XLF 30% YTD. Run AXCWX vs US past decade to see what I mean – near mind boggling.
Jay Pelosky
Estrategista Global - TPW Advisory
Nova York, EUA
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