The war is not over yet…
A humanitarian crisis is brewing, and social unrest is a matter of time if this keeps up.
Despite the lessons of the past year, many governments still cling to the delusion that the fight against the virus can be won without social distancing and a change in the way we conduct our everyday lives.
Massive celebrations for a festival and numerous election rallies across India have led to an explosion in the number of infected cases. Daily infected cases are increasing at more than 350K and the healthcare system is breaking at the seams.
A humanitarian crisis is brewing, and social unrest is a matter of time if this keeps up. While markets are relatively unaffected by this, this is a risk to the world that needs to be monitored and addressed.
A Miners Roadmap To Where We Are
While we’re waiting for Bitcoin to level off from its recent retracement, it’s timely to revisit the longer term macro cycle and get a read on where we sit inside of it. Miners are now surpassing peak revenues last seen at the top of the 2017 bull market. Historically, when miners pass prior all-time-highs in revenue, price goes through a very strong consolidation band marking a kind of “halfway point” in the bull run.
Chart Of Miners Revenue
Through this lens, as seen visualised in the chart above, Bitcoin is probably just setting up for its second leg of its bull run of 2021.
Having successfully aligned market expectations, the Federal Reserve is almost certain to repeat the message that QE tapering is not on the near-term horizon when it meets this week (Thu). The Bank of Japan is also not expected to diverge from recent language when it announces its latest policy decision (Tue). Traders are therefore likely to turn their focus on the US earnings season, which will heat up in the next few days.
1. Currencies : Keep short USD and long NZD, & CNH. The resistance for USDCNH is at 6.55–6.57. Support for NZD is at 0.7140–50. Stay short USD and look for chances to add.
2. Commodities : Uranium — Long Uranium stocks. Find out what’s in our TrackRecord Model Portfolio .
Key risks: US bond yields seem to have stabilised for now. Sudden spikes may lead to a stronger USD and weaken risk sentiment. US-China tension could dent risk sentiment if it continues to rise.
3. Equities :
Equity Index: : Long Nasdaq futures. Small pullback on the headlines of Biden’s capital gains tax increase proposal did not last. Stay long.
Single Stocks: Fundamentals continue to favour the continued rally of risk assets in the weeks ahead. Don’t miss out on the asymmetric opportunities we have highlighted in our TrackRecord Model Portfolio.
Key risks : Higher US yields and inflation fears are the key risks.
WHAT HAPPENED YESTERDAY
As of New York Close 23 Apr 2021,
- U.S. New home sales surged 20.7% month-over-month in March to a seasonally adjusted annual rate of 1.021 million (expected 912,000) from an upwardly revised 846,000 (from 775,000) in February. March marked the highest annual rate for new home sales since August 2006. On a year-over-year basis, new home sales were up a whopping 66.8%, having lapped a very depressed comparison period due to the pandemic.
- U.S. Treasuries traded little changed for the third straight day despite the strong new home sales report. The 2-yr yield remained unchanged at 0.16%, and the 10-yr yield increased 1 basis point to 1.58%. The U.S. Dollar Index declined -0.6% to 90.82. WTI crude futures settled higher by +1.1% to $62.15/bbl. On a related note, California Governor Newsome announced that the state will stop issuing new fracking permits by 2024. Bitcoin, slumped as much as -5% and fell below $50,000 for the first time since early March 2021 but is starting the Asia morning on a positive note with a strong recovery above 51,000.
- S&P 500 advanced +1.1% on Friday, recouping all of Thursday’s tax proposal related decline, as investors bought the dip in most sectors of the market. The Nasdaq (+1.4%) and Russell 2000 (+1.8%) outpaced the benchmark index while the Dow Jones Industrial Average trailed with a +0.7% gain.
- Shares of Intel (INTC 59.24, -3.33, -5.3%), Honeywell (HON 224.51, -4.75, -2.1%), and American Express (AXP 144.30, -2.86, -1.9%) struggled in negative territory following their earnings reports, contributing to the relative underperformance of the Dow. Each of these companies topped EPS estimates, but INTC issued downside Q2 guidance and AXP missed revenue estimates.
HEADLINES & MARKET IMPACT
EU to shortly sign world’s largest vaccine deal with Pfizer
Notable Snippet: The European Commission said it expects to seal the world’s biggest vaccine supply deal within days, securing up to 1.8 billion doses of Pfizer’s (PFE.N) COVID-19 vaccine for the next few years as a debate rages over unfair access to shots for the world’s poorest people. The vaccines from the U.S. drugmaker and its German partner BioNTech would be delivered over 2021–2023, Commission President Ursula von der Leyen said during a visit to Pfizer’s vaccine plant in Puurs, Belgium.
THEMATIC CONTEXT: “This was the reason for the selloff in cyclicals and risk assets. Poor vaccination drives have been Europe centric so far. Nonetheless the virus has no partiality and the world is only as strong as the weakest link, Europe’s vaccination drive will be a crucial barometer for recovery in the developed world and will be one of the pace setters for cyclicals.” — 24th Mar 2021
PM Modi says India shaken by coronavirus ‘storm’, U.S. readies help
Notable Snippet: The United States said it was deeply concerned by the massive surge in coronavirus cases in India and was racing to send aid to India. India’s number of cases surged by 349,691 in the past 24 hours, the fourth straight day of record peaks, and hospitals in Delhi and across the country are turning away patients after running out of medical oxygen and beds.
THEMATIC CONTEXT: “Countries should not rest on their laurels because viruses do not take days off. As countries with successful vaccine drives continue to open up while those who are slow to inoculate and are nonchalant about safety practices fall back into the doldrums, we will see a bifurcation in economic activity even across developed world economies and we suspect this will show up in FX rates.” — 20th Mar 2021
“We are only as strong as our weakest link, especially when it comes to pandemics. We have learnt that China is not a silo in 2020, India is a ticking time bomb for the rest of us and this is precarious for industrials, cyclicals and energy.” -23rd Mar 2021
EU blames China for endangering peace in South China Sea
Notable Snippet: The European Union called out China on Saturday for endangering peace in the South China Sea and urged all parties to abide by a 2016 tribunal ruling which rejected most of China’s claim to sovereignty in the sea, but which Beijing has rejected. The EU last week released a new policy aimed at stepping up its influence in the Indo-Pacific region to counter China’s rising power. China is increasingly worried that Europe and other countries are heeding U.S. President Joe Biden’s call for a “coordinated approach” towards China, which had so far materialised in the form of sanctions over its security crackdown in Hong Kong and treatment of Uyghur Muslims.
THEMATIC CONTEXT: “Is America’s political posturing into an increasingly multipolar world too late? We believe that Biden touting American leadership again may lead to more cohesive policies and will be better for certain trade relations, but will not change the fact that the world is deeply entrenched into the splintering of economic factions that is fuelled by de-dollarization efforts. Any Dollar strength that arises from this should be sold into as the greenback is facing headwinds both domestically (record twin-deficits) and internationally (de-dollarization).” — 5th Feb 2021
Phan Vee Leung
CIO & Founder, TrackRecord