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It is not a Bear Market…

In a bear market, we would see many stocks going down. Yesterday, the Dow Jones index managed to touch all-time highs and close nearly 1% up on the day. Dax, the German stock index, is at all-time highs.

In a bear market, we would see many stocks going down. Yesterday, the Dow Jones index managed to touch all-time highs and close nearly 1% up on the day. Dax, the German stock index, is at all-time highs. This is a rotation from what has worked really well to the forgotten and neglected sectors which may have a resurgence in the days ahead.

More importantly, just before 10am in China this morning, the authorities started selling USD in the onshore spot USDCNY market, whacking it from 6.54s to 6.53 in matter of minutes and state funds started to buy stocks driving the China A50 index more than 2% from the lows. The intervention from China is a strong signal.

The weakness in the Chinese stock markets led the way down previously, and stability there will be a good sign for risk sentiment. The bears are about to meet the cavalry…


Finding Fed’s “Breaking Point”

US homebuilding has historically been a leading economic indicator; softening Purchase Applications in the face of the rise in 10y US Treasury yields in recent weeks is worth paying attention to.

Another leading indicator has historically been US corporate capital spending; there appears to be a chunk of US corporate debt that will likely need to be refinanced in the next three years.

At some level, rising rates may begin to cut into US capital spending as interest bills rise, offering the Fed more motivation to prevent yields from rising “too far.”

How far is “too far” for rates as it relates to mortgages and corporation refinancings? At the recent pace of increase in 10y UST yields, we may not have to wait too long to find out.


There are no notable events for the day ahead. Risk will predominantly be driven by US 10-year rates volatility and the inflation narrative.


1. Currencies : Keep short USD and long NZD, & CNH. USDCNH is now testing 6.55, and the momentum is strong. Stay patient and wait for the momentum to wane before adding to shorts. NZD support is at 0.7080–90, and caution is warranted given the strong USD momentum. Look for opportunities to add when momentum wanes.

2. Commodities : Silver — Support for Silver is at 24.70–80. Silver trades poorly for now. Be wary of a downside break.

Key risks: Spikes in US bond yields that lead to a stronger USD remain the key risk.

3. Equities :

Equity Index: Neutral on indices for now. The Dow powering ahead to test all-time highs is a sign that this is not a bear market in stocks but a rotation from growth to value. When the dust settles, growth stocks will regain supremacy.

Single Stocks: This rotation from tech stocks to old school sectors is presenting us with many opportunities. We have recently identified two stocks that benefit from using Tech as well as from a resurgence in old school sector prospects which have asymmetric risk vs reward profiles given the way the world is headed. Find out what they are at TrackRecord Model Portfolio.

Key risks : Higher US yields is now the driving force in markets.


As of New York Close 8 Mar 2021,

  • The 2-yr US bond yield increased 3 basis points to 0.17% and the 10-yr yield increased 3 basis points to 1.59%, causing the U.S. Dollar Index to rise +0.46% to 92.31. Expectations of strong U.S. economic growth and rising inflation sent US Treasury bond yields higher, boosting the USD’s safe-haven appeal and drove the US Dollar Index to a 3 month high against a basket of currencies. With the volatility in FX, Consumer Price Index data out on Wednesday and Producer Price Index data due Friday will be closely watched, as will the 10-year and 30-year U.S. Treasury auctions on Wednesday and Thursday, respectively.
  • The S&P 500 was up as much as +1.0% in the afternoon on the back of a pro-cyclical trade that drew support from the Senate passing the $1.9 trillion stimulus bill and news that COVID-19 vaccine shots are running at more than 2 million per day. The stimulus bill will head back to the House, where it’s expected to pass later this week.
  • S&P 500 fell from the day’s highs to close -0.5% lower on Monday, as money continued to flow out of the heavily-weighted growth stocks and into value/cyclical stocks. The weakness in high growth tech stocks contributed to the -2.90% decline in Nasdaq 100, while the value/cyclical stocks helped lift the Dow Jones Industrial Average (+1.0%) to an intraday record high. The Russell 2000 gained +0.5%.


U.S. stimulus is map for infrastructure bonanza

Notable Snippet: Last week, the American Society of Civil Engineers said it would take $6 trillion to repair the country’s dams, highways and water facilities. Senator Joe Manchin, a key moderate Democrat, told Axios on HBO on Sunday that $4 trillion could be on the table if it’s paid for with tax increases, including bumping the current corporate tax rate from 21% to 25%.

THEMATIC CONTEXT: “It is becoming clearer that US policymakers are going to be forced to make a difficult choice in 2021: Crush the US economy, or crush the USD. There remains a question about the path in the near term, but the political inertia seems to be clear — when push comes to shove, the USD will likely be sacrificed to save the economy. We will be looking to sell USDCNH on rallies.” — 18th Jan 2021 (See 18 Jan 2021: TrackRecord Market Obs)

“What’s more important that Biden’s promise of more cash be it to individuals or the economy, is his constant emphasis on “radical change”. Game theoretically speaking, the narrative forces the action and this is especially true for a new president who will be forced to make an impact, and he sure did paint himself into a corner where people are expecting a lot. We believe his administration will be great for asset prices and finite assets, especially those with growth, will continue to outperform.” — 5th Jan 2021

Yellen says COVID-19 having ‘extremely unfair’ impact on women’s income, jobs

Notable Snippet: The COVID-19 pandemic has had an “extremely unfair” impact on the income and economic opportunities of women, U.S. Treasury Secretary Janet Yellen said on Monday, calling for long-term steps to improve labor market conditions for women. She noted that women’s participation in the workforce was already lower in the United States before the pandemic than in Europe, another issue that needed to be addressed. “I think it’s absolutely tragic, the impact that this crisis has had on women, especially low-skilled women and minorities,” Yellen said, noting that while people at the top of the economic scale had continued to do well, those nearer the bottom, who had already been struggling, had been hardest hit.

THEMATIC CONTEXT: “Yellen has called for increased government spending to boost the U.S. economy out of a deep recession brought on by the coronavirus and has frequently cited growing economic inequality in the United States as a threat to America’s values and its future. At Treasury, she would have a major role in influencing U.S. fiscal and tax policy, tools she did not have at the Fed, which she chaired from 2014 to 2018. She was the Fed’s vice chair from 2010 to 2014.” — 19th Sep 2020

“Inflation tends to operate with a lag and can be hard to correct once it starts. In the grand scheme of things, this is good for Gold and Silver, we continue to advocate that they are a buy on dips, the strong upward velocity of equities will transmit to Gold and Silver once the euphoria runs its course on the risk seeking asset class, although it’s still key to note that large supranational tech companies (AMZN, MSFT etc) are also seen as hard assets at this point in time.” — 26th July 2020

Pfizer/BioNTech COVID-19 vaccine neutralizes Brazil variant in lab study

Notable Snippet: The COVID-19 vaccine from Pfizer Inc and BioNTech SE was able to neutralize a new variant of the coronavirus spreading rapidly in Brazil, according to a laboratory study published in the New England Journal of Medicine on Monday. Blood taken from people who had been given the vaccine neutralized an engineered version of the virus that contained the same mutations carried on the spike portion of the highly contagious P.1 variant first identified in Brazil, the study conducted by scientists from the companies and the University of Texas Medical Branch found.

THEMATIC CONTEXT:Vaccine efficacy is a key development to monitor. Societies around the world have a bifurcation of sorts where some countries are still experiencing the full brunt of Covid-19 while others are having Covid-19 fatigue and just want to get on with their lives. Vaccine is the key to level the field with herd immunity and markets are clinging onto this hope. If severe allergic reactions halt the process, this will weigh on risk sentiment, what we need to know now is if these allergic reactions are within the scope of expectations.” — 7th Jan 2021

COMMENTS/IMPACT: This is great news for the real economy, which inadvertently is a strong tailwind for Energy, Cyclicals and Industrials. These are sectors we are bullish on and have built positions in.
Get access to our full Model Portfolio.




Phan Vee Leung
CIO & Founder, TrackRecord

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