What A Wonderful World
The Dow ETF (DIA) has not closed (on a total return basis) below its 200-day moving average since March 2016, the longest streak in its history.
None of the previous record-similar streaks in nowhere near the current streak we're in.
Using the lyrics of Louis Armstrong beautiful song, we are offering you here a ride around the world to see if things are as wonderful as the US markets suggest. Spoiler alert: Not so much.
I see trees of green...
Market Cap (billions), 4 largest companies in the world (3/9/09 - Today):
- Apple (AAPL): 74 >>> 1,069
- Amazon (AMZN): 26 >>> 952
- Microsoft (MSFT): 135 >>> 830
- Google (GOOGL): 92 >>> 819
Combined: $327B >>> $3.67T; over 1000% gain
Wage growth in the US just hit their best level since the financial crisis
Inflation seems ready to jump higher
The Fed continues to reduce the size of its balance sheet. Over the past week, the Fed balance sheet is down another $11B and taking into consideration how strong the economy/jobs/wage/inflation look like - they must keep pushing rates higher
In case the above chart isn't clear enough, here's another one that shows how the Fed, (not so) slowly but (certainly) surely, shift things around
It's not wonder then that the 1-month Libor rate to 3-year US Treasury Yield had their highest weekly close since 2008.
By the way, while the US 2-Year Treasury Yields hits 2.7%, its highest level since July 2008, there are 15 countries around the world that still have negative 2-year yields.
Following the strong NFP numbers last Friday, a hike in September in now priced at 99.8% probability. Probability of another hike in December (to 2.25%-2.50%) is now 77.6%. That would be the 9th hike since the Fed started the normalization process in December 2015.
Red roses too...
(We are mostly focusing on the "Red" here rather than on the "Roses"..)
At the low as $252.25 last Friday (9/7/2018), Tesla (TSLA) traded 35% below the post "funding secured" high of $387.46 (8/7/2018)
MSCI Argentina ETF (ARGT) hits a 19-month low, down 30% year-to-date and 35% from its January high.
Indonesian equities (EIDO) hit a 27-month low, down 23% year-to-date and 29% from their January high.
Facebook (FB) closes at its lowest level since April, down over 8% YTD and over 25% from its all-time high in July.
US trade deficit with China just hit a record high; not the best (political) timing I guess...
How the trade war may end? Consider this:
China trade surplus with US: $31BN
China total trade surplus: $27.9BN
China would be running a trade deficit if the US is excluded
European banks are so weak (performance wise) relative to the market. At some point this will be the best thing to buy but not now!!!
Some keep on saying that I pick on Spain for nothing...
- Spanish Banks: Not The Type Of Mushrooms You Wish To Eat
- Dirty Dancing: The Spanish Flamenco Is Severely Impacted By The Brazilian Samba
Traditional-historical ties to Latin America are making Spanish banks (BBVA, SAN) very exposed and very vulnerable.
The Turkish recent collapse is a misfortune, but only the icing on the cake. The bread and butter (Latin America, Spain itself and Europe as a whole) is the main problem.
With the local currencies in Argentina, Brazil, Turkey, Russia, South Africa losing 20%-70% this year (and with China and India not too far behind), it's enough to think only about the currency exchange effects that play a major role in here, let alone the state of the economies.
After two bearish articles, I promised that I'll give Italy a rest...
- Italy: 'Everything Is Awesome, Everything Is Cool'? Only In The Lego Movie
- Italy: Giving A Boot To The Boot Country
After all, Starbucks (SBUX) just opened its first store in Milan last week so the country deserve a break (from me) or a frappuccino (from them)...
Nonetheless, I won't have a clean conscious without mentioning what Carlo Cottarelli - a former IMF director as well as Italy’s former prime minister designate - told CNBC:
Ok, I've said it.
Russian 10-year bond yields are above 9% for the first time since May 2016.
So much so, that Russian bond yields climbed above South Africa’s for the first time since oil collapsed more than two years ago
I see them bloom for me and you...
(Some bloom, some gloom...)
Deutsche Bank's (DB) Torsten Slok just said that "The risks of overheating and higher rates continue to be much higher than the risk of a recession"
However, even in Germany things start cracking...
And I think to myself what a wonderful world
US Equities had a minor pullback last week and are now 1% below their all-time high. For comparison, the average country ETF is 25% below its all-time high
US equities outperforming every country ETF around the world in 2018
2018 Total Returns (in USD), based on MSCI Equity ETFs (for countries). Guess who is leading the way? Guess who is closing the list? No surprises, either way...
US (SPY): +9%
Mexico (EWW): +1%
France (EWQ): -2%
India (PIN): -3%
Canada (EWC): -4%
Japan (EWJ): -5%
Australia (EWA): -6%
UK (EWU): -6%
Russia (ERUS): -8%
Italy (EWI): -8%
Germany (EWG): -9%
China (FXI): -10%
South Korea (EWY): -13%
Brazil (EWZ): -18%
Indonesia (EIDO): -20%
South Africa (EZA): -26%
Argentina (ARGT): -27%
Turkey (TUR): -51%
Bottom line: The US Rule The World
Nonetheless, bear in mind that:
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