My Goldfish could have told me this…
This proves that really, statisticians are generally paid to compile lots of data and then make a random guess.
The US Retail Sales grew at +0.7% month-on-month vs expectations of a contraction of -0.7%, This proves that really, statisticians are generally paid to compile lots of data and then make a random guess. Imagine if you were in school and your answer to an exam question is the total opposite direction of what it’s supposed to be.
As I always say, forecasts like this don’t really seem to outperform the random predictions that my goldfish gives me.
The other thing about this number is that the US consumer remains healthy despite the recent surge in delta cases. With lower than expected inflation and higher than expected consumer growth, this is a sign that the economy is very much in a Goldilocks situation — Not too hot, and not too cold.
In a nutshell, the party goes on. Enjoy it while it lasts.
Don’t try to sell the top
That is definitely what most people want to do, selling at the top and being the hero who managed to ride the entirety of the trend. But when we are in the midst of riding a trend, we will never know when the top really is.
Everyday as the markets hit new all-time highs, it seems like the definite peak is imminent and you may be tempted to close your positions because you don’t want to feel the pain of leaving some money on the table when the market retraces.
However, if you constantly aspire to sell the absolute top, it is likely that you would have closed your positions at the All-time highs many weeks ago. The price of being able to hold on to your positions and ride a supertrend is that you will often close out your positions when the market is in retracing from the highs and struggling to make new highs.
That’s just the result of “Letting your profits run” and it’s something that you have to learn to live with if you want to be a trader that will consistently book outsized profits in a trending market.
EU CPI is expected to come in at +3.0% today. The number will help dictate the monetary policy of the ECB and it is important given the calls of tapering by the hawkish members of the ECB from Germany. A weak number will weigh on the EUR.
Keep short USD and long NZD, & CNH. A bit of a USD retracement, but it’s just another day of randomness in FX. Stay patient.
2. Commodities: Uranium & Energy — This supercycle uptrend will have setbacks along the way. The key is to hold on to your hats and enjoy the ride.
Key risks: Spread of the delta strain and comments from Fedspeakers which may affect the tapering timeline
Equity Index: Long Nasdaq futures. Welcome the dips. It’s quadruple witching day for the US equity futures and options market tonight, so be aware of the possibility of increased volatility. Stay long and patient. Look to buy dips on approach of support levels at 13950–14000.
Single Stocks: Although the broader market is stable, our TrackRecord Model Portfolio continues to outperform. Stay invested.
Key risks : Spread of delta strain and the Fed tapering timeline.
WHAT HAPPENED YESTERDAY
- US Retail Sales surpassed expectations, coming in at 0.7% (vs -0.7% expected). This was unexpected given how the Delta variant ran rampant over the last month.
- US Initial jobless claims came in at 332k (vs 325k expected). The Philadelphia Fed Business Outlook Index also beat expectations at 30.7 (vs 18.7 expected). The better than expected data are signs that the economy continues to grow strongly and that should give confidence to the Federal Reserve reassurance if they should decide to eventually taper their bond buying programme.
- US 10-Year Treasury Bond rose 3 basis points to 1.34%. The 2-yr bond rose 2 basis points to 0.23.
- Stronger USD across the board with the USD Index up +0.35% due to stronger economic data increasing the risk of the Fed tapering soon and weaker risk sentiment arising from rising tensions between the Western coalition and China.
- Stocks finished lower with the S&P 500 and Dow Jones decreasing -0.2%. The Nasdaq and the Russell 2000 both rose by +0.1%. Despite the better than expected retail sales, the equity market seems to be unaffected and was relatively weak.
HEADLINES & MARKET IMPACT
Notable Snippet: Legislation moving through Congress would make 12 weeks of paid family and sick leave available to most workers, and remove the U.S. from the small list of countries that are currently without such a policy.
The exact details of the plan could still change, but experts say the historic public health crisis from which we’re slowly emerging has pushed the debate on the need for a federal paid leave policy over the edge.
This policy, which would likely be administered by the U.S. Treasury Department or the Social Security Administration, would make it so that nearly all workers qualify for paid leave, as long as they’ve earned some wages in the last six months, said Kathleen Romig, a senior policy analyst at the Center on Budget and Policy Priorities.
The typical worker could get two-thirds of their wages replaced for up to 12 weeks each year, or for a cap of $4,000 a month. The lowest-paid workers would see about 80% of their income continued during the time off. Part-time and self-employed people should qualify, too.
COMMENTS/IMPACT: This move will contribute to the labour force participation rate in the US which in turn will boost the employment situation in the US and help with growth in the US economy in time to come.
Notable Snippet: After a rough summer, President Joe Biden is getting ready to spend the autumn fighting for tax increases on the wealthy and corporations.
Biden will speak Thursday at the White House about why Congress needs to raise taxes on the wealthiest Americans and corporations in order to fund his “Build Back Better” agenda.
“The President will lay out what’s at stake in the fight to ensure that our economy delivers for middle class families, and not only for those at the top,” said a White House official, speaking in background to preview the speech ahead of its delivery.
COMMENTS/IMPACT: Like in China, a stronger middle class will benefit the economy. Expect economic growth and higher asset prices in the days ahead.
Notable Snippet: Prime Ministers Scott Morrison of Australia and Boris Johnson of the United Kingdom joined Biden virtually for the announcement of the partnership.
“Today we’re taking another historic step to deepen and formalize cooperation among all three of our nations because we all recognize the imperative of ensuring peace and stability in the Indo-Pacific over the long term,” Biden said from the East Room of the White House. “This is about investing in our greatest source of strength, our alliances,” Biden said.
The U.S. and U.K. will also assist Canberra in acquiring nuclear-powered submarines, which will allow Australia’s navy to help counter Chinese nuclear-powered vessels in the region.
The U.S., Australia and the U.K. also plan to deepen technology sharing across emerging security arenas like cyber, artificial intelligence and quantum technologies. The three countries alongside Canada and New Zealand already share extensive intelligence through the Five Eyes alliance.
COMMENTS/IMPACT: The rift between the Western and Eastern hemispheres widens. This move is likely to hurt Australian exports should China retaliate. Stay aware.
Phan Vee Leung
CIO & Founder, TrackRecord