Marquee Finance by Sagar: Month In Charts

Month In Charts: March 2026!

Sagar Singh Setia — Wed, 01 Apr 2026 14:02:03 GMT

The 2020s are turning out to be the decade of epic exogenous shocks.

Nobody could have modelled the “pandemic”, the 2022 Russian invasion of Ukriane, “the tariff saga” of 2025 and the most largest disruption in the energy markets in history due to the Iran-Israel/US war of 2026.

Let’s examine 15 charts to analyse the global macro and the 2026 energy shock!

Led by a nearly 60% rise in crude oil prices in a single month, DBC is the top YTD performer.
Thanks to the commodities outperformance, LATAM markets continued their winning streak with the benchmark ETF: ILF up 17% YTD.
Gold lost its sheen after a stellar rally in January and is now up 8.6%.
The US continues to underperform both its DM and EM peers. While the Emerging Market ETF EEM is up 3.8% YTD, the MSCI European ETF IEV is down 1% compared to the 4.4% loss for SPY and the 6% loss for the QQQ.
Surprisingly, long-term bonds provided some cushion and outperformed the US equities.

It’s not only the tech sector that has been a laggard; rising private credit concerns have also led to a massive sell-off in financials, with XLF the worst performer YTD.
Energy (XLE) has broken all records and seen the biggest outperformance relative to the S&P 500 since the 1990s.

The Leveraged Long/Short ETF Volumes indicator helps predict bottoms. However, during the 2022 bear market, the indicator slumped and stayed low.
This is the one metric you should absolutely track.
Source: Topdown charts

The tech investors will have to endure extreme pain over the next few months (maybe years) as Mr Market resets valuations. Once known for hoarding cash and buybacks, the big tech companies are now turning net cash negative as FCF plummets due to trillions of dollars of capex.
As a result, the S&P Tech forward PE valuation premium over the S&P 500 has compressed to 2019 levels.

While oil prices are hovering around $100/b, product prices are off the roof and well above 2022 levels.
The biggest rise is seen in jet fuel prices, which have surpassed $250 in Singapore. We will see bankruptcies among airlines if prices persist for more than a quarter, and travellers will likely prefer short-haul destinations for vacations due to soaring airfares (inflation?).

It’s not only the fuel prices, but the transportation costs have also skyrocketed.
The Baltic Dirty and Clean Tanker indices are now approaching record highs. Also note that the insurance premiums have also seen insane increases, leading to elevated freight costs.

Interestingly, energy’s share of consumer spending has fallen over the past few decades and is now less than 5%.
However, the lowest 20% (bottom quintile) of consumers are the most affected by higher energy prices.
Unsurprisingly, Trump’s approval rating has plummeted to record lows.

Consider it a coincidence, every US recession from the 1970s up to the Global Financial Crisis coincided with a doubling of oil prices.
The oil spike during the 2022 Russia–Ukraine conflict did not trigger a recession due to the fiscal impulse and pandemic savings; however, as you remember, economists also called for a recession in 2022.
Will we be second time lucky?

Thanks to the rise in energy prices, bond vigilantes wreaked havoc in the bond markets as Mr Market prices in a “RATE HIKE”.
The moves have been extremely aggressive, with markets pricing in more than an 80 bps hike by the ECB due to energy-induced inflation.

The war’s macroeconomic aftereffects were visible in Germany, with the latest ZEW Survey shocking the street. ZEW Economic Sentiment collapsed to the negative territory (-0.5) from 58.3 reported in February.
When we look at the internals, the manufacturing sector was responsible for the negative readings.
Furthermore, chemicals will be the worst hit in the coming months as supply chain disruptions lead to force majeure and production cuts.

One of the biggest differences between the energy shocks of 2022 and 2026 is consumer health. Consumers were flush with excess savings accumulated during COVID-19 when the 2022 energy shock hit Europe.
However, the UK’s labour market is extremely weak today, and consumer health has deteriorated significantly.
Although markets are currently focused on the inflation shock, they have yet to fully price the potential growth shock.
One of the data points we place a lot of weight on for China is Total Social Financing (TSF).
China’s banks extended 900 billion yuan ($130 billion) in new yuan loans in February, down from 4.71 trillion yuan in January and missing estimates.
PS: Total social financing growth typically shows seasonal increases at quarter-end.

Two of the largest manufacturing giants in Asia, which depend on the Middle East for 80% of their needs, are Japan and South Korea.
Furthermore, Japan receives the majority of its oil imports via the Strait of Hormuz, but if it utilises its SPR (which it has announced), it can manage its oil needs for more than six months.

While Oil in $$$ (Brent) is still miles away from its 2008 ATH ($150), oil prices in local currency have surpassed their ATHs.
Ironically, except for the Taiwan Dollar ("heavily managed float"), among major non-China Asian economies, Brent crude has never been this expensive.
Source: BBG

BONUS CHART: US software has witnessed a bloodbath as concerns rise post the release of Anthropic’s new models. As a result, US software v/s tech is now the cheapest on record.
Some of the companies are trading at valuations last witnessed in the GFC or Covid. Time for bargain hunting?

Disclaimer

This publication and its author are not licensed investment professionals. The author & any other individuals associated with this newsletter are NOT registered as Securities broker-dealers or financial investment advisors with the U.S. Securities and Exchange Commission, Commodity Futures Trading Commission, or any other securities/regulatory authority. Nothing produced under Marquee Finance by Sagar should be construed as investment advice. Do your research and consult with your certified financial planner or other dedicated professional before making any investment decisions. Investments carry risk and may lose value; Marquee Finance By Sagar LLC, Marqueefinancebysagar.substack.com or Sagar Singh Setia is not responsible for loss of value; all investment decisions you make are yours alone

Month In Charts: January 2026!

Sagar Singh Setia — Wed, 04 Feb 2026 13:03:02 GMT

2026 began on a chaotic note as Trump once again stunned the world with his policies and tariff threats.

The biggest risks for 2026 are giving jitters, as BTC, private equity giants, and software names are witnessing an unbelievable bloodbath.

Let’s examine 16 charts to analyse the global macro and cross-asset movements in the global financial markets.

In continuation of the 2025 trend, Gold, along with LATAM equities, has been ripping since the beginning of the year.
While the LATAM benchmark ETF: ILF is up 20.5% YTD, Gold is up by more than 14%.
The US continues to underperform both its DM and EM peers. While the Emerging Market ETF EEM is up 8.94% YTD, the MSCI European ETF IEV is up 5% compared to the 1.1% gain in SPY and the 0.3% gain in QQQ.
Thanks to the JGB rout, long-term bonds remain the biggest underperformers, with the flagship TLT flat YTD.

Historical data suggests that 87% of the time when January yielded positive returns for the S&P 500, the year gave a positive return.
Furthermore, the average gain was 12.24%.

When we dig deeper into the equity market internals, we can see we hit an inflection point in October last year, as value has outperformed growth since then.
We can cite multiple reasons for the same, ranging from weakness in tech, earnings recovery in value stocks and valuation comfort.
Source: Topdown Charts

Looking at sovereign bonds, the data indicate that positioning has become extremely light as USTs have been in a bear market.
Moreso, the valuations are now attractive. Thus, we won’t be surprised by a “rally” in bonds.
Source: Topdown Charts

While USTs are unloved, corporate bonds have been witnessing massive inflows.
The Global Corporate Bond spreads, as measured by the BBG Global Corporate Statistics Index, have reached pre-GFC levels.

Even the High Yield (HY) spreads are at post-COVID lows and can’t get any tighter than they are today.

Coming to macro, we are witnessing a contraction in real disposable personal income as incomes have failed to grow despite higher GDP growth.
On the contrary, the Real PCE has been trending higher, suggesting that lower-income consumers are drawing down their savings, while the spending is buoyant in the high-income consumers due to the wealth effect.
Source: BCA Research

Nothing moves the needle at the Fed as a weaker labour market.
While the labour market remains in a low-fire, low-hire paradigm, JayPo’s favourite indicator (Vacancies/Unemployed) has plummeted to 2017 levels.

Undoubtedly, there has been a cyclical recovery in the US economy, as the recently released ISM data portrays; however, the Heavy Truck Sales have fallen off a cliff.
While a deeper investigation into the reasons is needed, some market participants believe it’s online sales that have eroded demand.
Source: EPB Research

Across the Atlantic, industrial orders in Germany climbed by a whopping 5.6% MoM, led by large defence orders.
If the uptrend remains intact, we expect the German economy to enter a gradual recovery path.
While growth seems to be recovering, CPI is back below 2%, confirming that the ECB engineered a soft landing.

The UK has been facing a deterioration in the labour market and a slowing economic activity, led by weak consumption.
However, there is a ray of hope, as the UK PMI future output expectations have surged to a multi-year high, suggesting a recovery might be on the horizon.

There is no end to the Chinese property crisis, as the balance-sheet recession and the massive overbuilding of the past decade, coupled with worsening demographics, are leading to a freefall in home prices.
Unsurprisingly, the existing home prices are down 30 to 40% since mid-2021 in the 4 main cities.

The Japanese Government Bond (JGB) market once again led a global bond sell-off after Japanese Prime Minister Takaichi announced a snap election.
The two-day move in the 30Y JGB was a 6SD move, prompting Bessent to call his counterpart to soothe nerves.
For the stability of global financial markets, moves in the Far East matter more than ever.

January saw the US take an unprecedented action by arresting Venezuelan President Maduro and his wife from their home in an unimaginable operation conducted by the elite Delta Force.
Behind the geopolitical win, the motive was to tap the billions of barrels of heavy crude that Venezuela possess, which will be beneficial for US refineries.
Silver saw extremely historic moves in January, and at one point, it was up more than 45% (the highest monthly gain since the Hunt Brothers squeeze).
Nevertheless, despite an enormous 40% fall from the peak, Silver closed the month 19% up, and created history with 9 consecutive green candles and 6 consecutive closings above the upper Bollinger Band.
It was mayhem for traders as traditional technical analysis completely failed.
It was not just Precious Metals and base metals that witnessed insane moves; natural gas, notorious among traders as the most volatile asset class on the planet, had the biggest move in the last 35 years.
The US benchmark natural gas price rose 75% over just five trading sessions as the US was hit with one of the worst snowstorms of the last five decades.
Source: BBG, Javier Blas

BONUS CHART: While deterioration in demographics has been a significant concern in South Korea and Japan, it’s China which is undergoing a rapid population decline. Due to the infamous one-child policy, deaths have exceeded new births for the last 4 consecutive years. As a result, China’s population has plunged, leading to unforeseen consequences for the government, people and corporations.
Source: BBG

Disclaimer

Month In Charts: November 2025!

Sagar Singh Setia — Fri, 05 Dec 2025 03:30:32 GMT

November saw a major scare as the AI story got an intriguing twist.

Sam Altman hinted that the Federal Government should backstop trillions of dollars of AI Investments.

Furthermore, the private credit scars from “cockroaches” were still afresh in investors’ minds.

As a result, we saw more than a 5% fall in the benchmark US indices, led by AI names.

Let’s examine 14 charts to analyse the global macro and cross-asset movements in the global financial markets.

Gold is on track to have its best year since the 1970s. Furthermore, the shiny yellow metal is at the top of the list with 60% YTD returns.
As right-wing renaissance sweeps LATAM, the equity markets are cheering the political transition. As a result, the benchmark ILF ETF is up 57% YTD.
Despite macro challenges and a trade war, Chinese equity markets, for the second consecutive year, continue to outperform their developed-market peers. Overall, the Emerging Market ETF EEM is up 31% YTD compared to IEV (Europe) 32%.
Despite AI bubble fears, the US remains a stark underperformer with the S&P 500 sup only 18% YTD (S&P 500).
Due to various headwinds, long-term bonds remain the biggest underperformers, with the flagship TLT up only 5.5% (total return).
Commodities (ex-PMs) have also lagged, as oil has been in a bear market.

Due to structural reasons, the neutral rate is now expected to be significantly higher than the pre-COVID era. As a result, bonds fail to provide the cushion that they used to in an equity drawdown (60/40 PF).
Nevertheless, bond allocations reached major lows at both the last two major stock market peaks (2000, 2007) and served as bear-market harbingers.
Source: Topdowncharts.com

An intriguing divergence is observed when we dig deeper into the cyclical GDP components (responsible for a recession).
During the 2001 recession, we saw a massive decline in equipment as the dot-com bubble burst, leading to a sharp drop in tech capex. Today, we are witnessing the opposite: residential (housing) is gradually contracting, while AI capex is driving a surge in equipment.
Source: EPB Macro

The AI capex, which has raised concerns in the investment community due to its circular nature, has seen a parabolic rise and now accounts for nearly half of the total capex of S&P 500 companies.
Thus, unsurprisingly, the AI-related names have been the drivers of the mega bull market since the launch of ChatGPT.
Source: Topdowncharts.com

Initially, AI CAPEX was funded by equity; however, we are now witnessing a significant rise in debt issuance by companies engaged in the AI race, especially in data centres.
As a result, investors have been buying insurance (CDS) to hedge their AI exposure, thereby raising CDS prices for highly leveraged names such as Oracle.
Source: BBG

When we leave the large-cap AI names, the market internals paint a very different picture.
Midcaps and Small caps are reasonably valued compared to mega caps or large caps.

Coming to the labour markets, we are witnessing stress building up as the unemployment rate reached a fresh cycle high in the latest NFP reading (September).
As the layoffs rise due to AI-related productivity gains, the job gains are on a gradual decline, as often seen before past recessions.

Digging deeper, we can conclude that the softening in the labour market has been rising since last year, with no improvement.
Full-time employment as a % of the labour force, excluding the COVID era, is now back to 2018 levels.

Across the Atlantic, we are detecting divergent trends in the cyclical economy.
While the UK is undergoing a significant deceleration in Industrial Production, we are witnessing a gradual recovery in France and Germany’s industrial production.

The situation in the UK is alarming, as weakening labour market is now raising eyebrows.
The CBI Industrial Trends Total Orders indicate that the Unemployment Rate will rise by more than 100 bps soon, leading to a recessionary outcome.

The property bubble is still deflating in China, as data reveal that new activity has stalled completely.
The new property starts (absolute) has fallen to the levels last seen in 2004. Furthermore, the New Property Sales have also plunged to the levels last seen more than a decade ago.
Source: GS

The UST-JGB 30 Year spread has been tightly correlated with the move in the USDJPY pair, with a rising spread leading to higher USDJPY.

This was primarily due to a hawkish Fed and the BOJ's “contrarian” view (dovish).

However, since June this year, we have seen the spread tighten significantly as USTs outperformed JGBs for reasons known to everyone.
Mean reversion soon?

As mentioned earlier, LATAM equity markets have been a stark outperformer.
A custom basket of the top 5 markets (including Mexico) has outperformed the benchmark ACWI Index by more than 20%.

Source: Topdowncharts

BONUS CHART: The freight markets are witnessing a massive spike in freight rates across the board. Although oil prices are at multi-year lows, higher freight rates, higher insurance (especially for Russian oil), and higher refining margins suggest that pump prices might have bottomed out.
Source: BBG

Disclaimer

Month In Charts: October 2025!

Sagar Singh Setia — Wed, 05 Nov 2025 14:02:40 GMT

As we approach the end of one of the craziest years ever, the pundits got the cross-asset moves incorrect throughout the year, missing some of the most ferocious rallies in equity and precious metals.

Let’s examine 17 charts to analyse the global macro and cross-asset movements in the global financial markets.

The shiny yellow metal continues to shine with stellar returns of 50% YTD.
In the equity universe, the surprise has been the much-ignored LATAM equity markets, as they have become the top-performing equity markets this year. The benchmark ILF ETF is up 43% YTD.
Chinese equity markets, for the second consecutive year, continue to surprise and outperform the developed market peers. In the last two months, the benchmark Emerging Market ETF EEM has seen a scorching rally led by the Korean stocks. As a result, EEM is up 32% YTD.
Although the US erased some of the underperformance in the last month, it is still up only 16% YTD (S&P 500).
Due to various headwinds, long-term bonds remain the biggest underperformers, with the flagship TLT up only 7% (total return).
Commodities (ex-PMs) have also lagged behind, as oil has been in a bear market.

As the official government data was unavailable due to the US Government Shutdown, today we will focus on various metrics of the equity markets.
One of the indicators that has historically been accurate for marking the top in equity markets is the margin debt. Although the nominal margin debt has risen to historical levels (also taking into account levered ETFs), margin debt as a % of Nominal GDP is still below the 2021 peak.
Source: Deutsche Bank

When we closely examine the valuations, tech valuations have surpassed the 2021 peak but remain below the levels of the dot-com era. On the contrary, the rest of the markets are fairly valued. Note that, due to the K-shaped economy, the earnings of select companies, especially those in consumer staples, have been disappointing.

In the US, due to the Mag 7 explosive growth, the Growth has outperformed value stocks by the widest margin on record.
However, when we examine the DM Ex-US and the EMs, we observe an opposing trend, with Value outperforming Growth, especially post-COVID.
Source: Topdown Charts

As the hyperscalers’ cash flow dries up, they have now tapped the bond markets to raise billions of dollars of capital for their gigantic capital expenditure needs.
The issuance in Investment Grade markets has hit record highs this year and is on track to eclipse the supply of the last few years combined.
Something you can’t miss if you trade fixed-income markets.
Source: BOFA, Mike Zaccardi

We received two opposing dissents in last month’s FOMC, as Schmid voted against a cut, while Miran, as expected, voted for a 50-basis-point cut.
As a result, we are witnessing the most divided Federal Reserve in history, as it becomes increasingly challenging to achieve its dual mandate.

NFIB Survey indicates that inflationary concerns are once again rising among small businesses.
As we have mentioned, tariffs will eventually hurt, and with the Fed on a cutting spree, the inflation story is not over yet.

The stress is rising alarmingly in the private credit universe, with desperate measures being undertaken by firms to avoid defaults.
As the “cockroaches” emerge rapidly, the top 3 listed private equity firms have been facing significant pressure since last month.
Across the Atlantic, the market expects the next ECB action to be a hike in 2027.
Inflation has returned to the ECB’s 2% target, and the macroeconomic data suggest that the ECB has successfully engineered a soft landing, despite the unthinkable.

One of the casualties of the Russian-Ukrainian war and the preposterous energy policies of the German Government (Energiewende) has been industrial production.
Europe’s manufacturing powerhouse has been in a secular decline, as evident in the Manufacturing New Orders.

The UK’s labour market softened further as the Unemployment Rate has now risen to 4.8% and is alarmingly close to the 5% mark.
With inflation still running above 3%, the stagflationary conditions are building up in the UK.

Over the last two months, the FTSE has been an outperformer in the European equity universe, as momentum has been strong following the enormous breakout.
We believe 10k is on the cards, as a lower GBPUSD acts as a tailwind for British equities.

The deflationary bust in China continues unabated, as the PPI has been in negative territory for the last three years, and the CPI has been languishing at 0%.
Nevertheless, this will prompt the PBOC and the Chinese government to ease policy further and undertake fiscal measures to boost consumption.

Unsurprisingly, China has a lion’s share of the Rare Earth Global production.
As the US awakens from a deep slumber, it will take years before it catches up, especially in the refining stage, which is the one where China nearly holds a monopoly.
Thus, the leverage that China holds globally will remain for at least a decade.

Kospi (South Korea’s benchmark index) underwent a monstrous breakout and was up nearly 20% last month, the highest since April 1999.
However, the concerning part was that only a handful of stocks led the majority of the upmove, a phenomenon also witnessed in NIKKEI.

In the land of the rising sun, inflation has cooled significantly from its highs, as rice prices have declined considerably from their peak.
Furthermore, as the BOJ refrains from raising rates and fiscal purses are set to loosen under the newly appointed PM, there is a risk that USDJPY may surprise FX traders and breach the coveted 155 mark.

BONUS CHART: One of the biggest buyers of Gold has been Central Banks, as they have been accumulating Gold in hordes post the Russia-Ukraine war.
However, certain countries, such as India (RBI), which have been the biggest buyers, have reduced their purchases in the past few months as Gold went parabolic. On the other hand, Poland and Kazakhstan have been steady buyers.

Disclaimer

Month In Charts: August 2025!

Sagar Singh Setia — Sat, 30 Aug 2025 14:31:13 GMT

While August didn’t experience the same level of cross-asset volatility as we witnessed last year (remember the panic triggered by the Japanese), Trump’s decisions continue to create ripples across the market.

The Fed’s independence was called into question when Lisa Cook, a Fed Governor, was fired by Trump. This was the first time in history that the US President fired a Federal Reserve Governor.
The US is ready to launch an all-out attack on Venezuela, which will lead to a rise in geopolitical risk premiums for various assets. The attack appears imminent, given the significant military buildup.
Since the Russia-Ukraine war began in 2022, US and Russian relations have been extremely strained. However, that changed this month as the Russian delegation, led by Putin, met Trump in Alaska, raising hopes of a ceasefire. However, there has been no progress since.

Despite the chaos, our outstanding performance continues, with the PF now up 19% YTD and outperforming the benchmark by more than 150 basis points.

PS: Before we begin, we will increase our paid subscription prices to $29.99/M or $ 299.99/Yr starting 1st September 2025.
Note that subscribers who are currently enrolled or will enrol by September 1st will be subscribed at the mouth-watering current prices ($24.99/$249.99) “FOREVER”.
Furthermore, those who have subscribed at the original price of $14.99/$149.99 two years back will see no change in their plans.
Therefore, anyone who wants to take advantage of a 16% lifetime discount can subscribe until midnight on August 31st at the current prices (last 48 hours).

Let’s examine 16 charts to analyse the global macro and cross-asset movements in the global financial markets.

As we near the end of Q3, Gold remains the undisputed king this year as the shiny yellow metal has given a return of 25.12% YTD.
In the equity universe, Chinese equity markets, for the second consecutive year, continue to surprise and remain the top performers. LATAM America (ILF) and European ETF (IEV) are up 21% YTD but have underperformed in the last two months. The US erased some of the underperformance in the last month, but is still up only 9-11% YTD.
Due to various headwinds, long-term bonds remain the biggest underperformers, with the flagship TLT up only 2% (total return). Commodities (ex-PMs) have also lagged as oil has been in a bear market.

The macro data in August has confirmed the worst fears of market participants as the probability of stagflation has increased dramatically.
The ISM Services Dashboard indicates that while the prices component has skyrocketed to 70 (one of the highest readings in recent years) and has remained persistently high, the Employment component has been below 50 (and is falling), indicating contraction.
While we can’t infer the macro outcome from one dataset, most of the indicators are signalling a high probability of stagflation.
Since more than 60% of the US economy is based on consumption, any dent in consumption will be a drag on growth.
The CEO Confidence is often a good indicator of how corporate America feels about the consumption story. Whenever we have experienced a “growth scare” in the past, the CEO Confidence has plummeted dramatically.
We are now witnessing a rebound in the CEO Confidence after the tariff saga led to a sharp fall. Thus, no alarming signal here.
Another measure to gauge consumer sentiment is the University of Michigan Consumer Sentiment Index. Historical data suggests that whenever the consumer sentiment has dropped below 60, we were in a recession or an extremely low growth period.
When the April equity crash occurred, consumer sentiment dropped to levels last seen during the 2022 bear market. However, it has since rebounded but remains in the danger zone.
The strength in the US economy in the past few years has been due to the high “peacetime” fiscal deficits that the country has been experiencing.
Although the spending pattern has remained unchanged, the deficit has decreased in recent quarters as tariff revenues began to materialise. As a result, the tax rate as a % of GDP has increased to more than 18%.
Source: EPB Research
In a dull August, we witnessed a significant market shift when JayPo delivered his Jackson Hole speech.
However, despite a knee-jerk reaction in risk assets, the rally faded as confirmation from JayPo emerged that the neutral rate in the coming years will be significantly higher than it was in the last decade, due to conditions that were not within the Fed's control.

Moving to markets, there has been a huge uproar on social media in the past few weeks about the valuation.
Certain valuation indicators, such as the Price/Sales ratio and the CAPE Ratio, suggest that we may have surpassed the valuation levels of the dot-com bubble.
When we look at the Real Earnings Yield (calculated at S&P500 Earnings Yield - 10Y TIPS), we are nearly reaching the extremes that we witnessed in the euphoric 2021 heights.
Source: Topdown Charts

Due to the policies (and vision) of Trump’s administration, the healthcare sector has taken an enormous beating this year.

Once favourites among conservative investors and those who love defensive stocks, the healthcare sector's weight as a percentage of the S&P 500 has dropped to multi-decadal lows.

Has the time come to bottom fish, or are we headed lower?

Europe’s manufacturing hub has experienced a decline in the past few quarters.
Germany has been unable to recover from the 2022 energy crisis that paralysed its industrial base. While the CPI has moved down considerably to the 2% target, industrial production has failed to recover, and the unemployment rate has jumped sharply over the last 24 months.

Unlike the Fed, the BOE has a single mandate of stable inflation (2%).
Nevertheless, the UK has been facing a rise in inflation in recent months.
Despite the CPI coming in hotter than expectations, in a historic revote, the BoE cut rates this month.
However, don’t expect a rate cut now in 2025 as the inflation menace needs to be controlled.

The UK 30-year bond yields jumped to the highest levels since 1998 and are now higher than 100 bps from the famous Liz Truss episode when Sterling touched parity.
Note that this is an unusual development, as yields typically fall when the Central Bank cuts its benchmark rates. Fiscal policy is primarily responsible for this anomaly.
The Chinese macro data has failed to rebound despite a promising mild recovery in early Q2.
Due to tepid retail sales and industrial production data, we expect slower GDP growth.

After 4 years, the Chinese Money Supply, as measured by M2 growth YoY, is in a strong uptrend, a change that's transpiring after a long time.

In previous episodes of double-digit Chinese M2 growth, commodities have outperformed significantly.
Despite weak macro data, the Shanghai Composite has broken out and closed this month at its highest levels since 2015.
As record amounts of domestic liquidity flow to the Chinese equity markets, we believe that there is a high probability that we will get fresh ATHs in the Chinese markets in the next few months.

In the land of the rising sun, industrial production had a strong rebound.
The data have been volatile as tariff front-loading led to a spike in late Q1.
However, if the trend continues, expect positive “global” economic momentum.

BONUS CHART: Global ex-US equities have broken out through a major long-term overhead resistance level to new all-time highs, with strong (and improving) breadth.
The tailwinds have been the greenback entering a bear market and the valuations, as every country in the world is trading at least 20% cheaper than the USA.
Source: Topdown Charts

Disclaimer

Month In Charts: July 2025!

Sagar Singh Setia — Fri, 01 Aug 2025 13:03:18 GMT

July brought back the memories of the Meme Stock mania that ruled the equity markets in 2021.

With most shorted stocks (stocks with high short interest) soaring overnight, investors' greed and euphoria were unprecedented last month.

The Central Banks globally had a status quo as pressure builds in the US for Jerome Powell to cut rates despite macro indicating resilient economic activity and bottoming out of inflation.

PS: Before we begin, we will increase our paid subscription prices to $29.99/M or $ 299.99/Yr starting 1st September 2025.
Note that subscribers who are currently enrolled or will enrol by September 1st will be subscribed at the mouth-watering current prices ($24.99/$249.99) “FOREVER”.
Furthermore, those who have subscribed at the original price of $14.99/$149.99 two years back will see no change in their plans.
Therefore, anyone who wants to take advantage of a 16% lifetime discount can subscribe until midnight on August 31st at the current prices.

Let’s look at 13 charts to determine the global macro and cross-asset moves in the global financial markets!

As the US equity markets led by the AI megacaps enter stealth mode, it has a long way to catch up to the global markets. Chinese benchmark ETF: MCHI is up by more than 24.7% YTD, beating the yellow shiny metal, which is up by 24.3% and has been on a tear due to the trade war and geopolitical situation.
Furthermore, long-duration bonds have been a total disappointment for the third year running, as the US administration has no intention of reducing the deficits. Thus, investors are demanding higher term premiums. The benchmark TLT is up 1.62% YTD (total return).

After Trump struck trade deals with the EU, Japan and Korea, it becomes clear that the average tariff rates will be around 15%.
However, economists are puzzled about the lower-than-expected inflation prints in the last two months. Many market participants expected that tariffs would lead to higher inflation. However, there have been data quality issues.
Since May, the BLS (government) has been just estimating what they think inflation is.

With inflation well below 3% and a healthy labour market (though debatable), the Fed, led by JayPo, has refused to cut rates.
However, for the first time since the 1990s, we had dissidents yesterday with two Governors (Waller and Bowman) voting for a cut against the majority.
Are we witnessing a new era at the Fed?

As US equity indices touch ATHs, once again, there is chatter among market participants about the valuation multiples and equity risk premium. While equity risk premium is the lowest in more than two decades, valuations are at the highest ever.
However, the equal-weight, small caps, and mid caps are fairly valued as they have been stark underperformers.

The Non-Stop rally in the US equity markets is led by the semiconductors (primarily NVDA and AVGO).
As a result, the US Semiconductors are now at a whooping 11% of the US market cap, the highest in history and even surpassing the 2001 dot-com bubble.

An eye-opening macro chart: A larger share of total income is now flowing to corporations and landlords, away from employees and small business profits.
The trend has been particularly stunning since 1990, and has accelerated since the GFC, further demonstrating the rise of the top 1% and growing income inequality.
Until the middle of the month (July), DXY was having one of its worst years since the 1970s, and the positioning was skewed with Short US dollar, the most crowded trade. For the first time in the BofA Fund Manager’s survey's history, “Short US Dollar” was the most crowded trade.

Guess what happens when everybody is on the same side?
We got a face-ripping rally as the dollar bulls took the opportunity post the US-EU deal. Unsurprisingly, the DXY is up by more than 3.5% this month.
We are now witnessing dollar bears capitulating.

While there are signs that inflation is bottoming out in the US, as the tariff impact will be visible in the next few months, Europe has been able to bring down inflation closer to the 2% target.
In fact, some countries in the EU are below the 2% target, giving much relief to the consumers and making the job easier for the ECB.

There has been considerable deterioration in the UK’s macro data, especially the labour market.
There has been an alarming rise in the Unemployment Rate, while wage growth has eased significantly from the peak.
Will the BOE be a surprise dove in the coming months?

The Chinese government bond yields have been in a free fall.
In the opposite scenario of the US, the equity risk premium is relatively attractive in China.
Furthermore, loose monetary policy and actions taken by the Chinese government in the housing sector might finally yield results in the coming months.

This month, we again saw super long-term yields surge in the land of the rising sun.
The move led to similar moves in global bond markets. While the nominal yields have surged dramatically in Japan, the 10Y real yields (adjusted for inflation) are below the levels last seen in 2020.

BONUS CHART: Rumours are swirling around that the big tech companies (hyperscalers) will have to curtail their capex due to energy constraints.
The nuclear renaissance is upon us, especially after POTUS signed the executive order to expedite and promote the production and operation of nuclear energy.
However, the critical metal required, Uranium, will be in short supply if necessary investments are not made to increase production.

Disclaimer

This publication and its author are not licensed investment professionals. The author & any other individuals associated with this newsletter are NOT registered as Securities broker-dealers or financial investment advisors with the U.S. Securities and Exchange Commission, Commodity Futures Trading Commission, or any other securities/regulatory authority. Nothing produced under Marquee Finance by Sagar should be construed as investment advice. Do your research and contact your certified financial planner or other dedicated professional before making investment decisions. Investments carry risk and may lose value; Marquee Finance By Sagar LLC, Marqueefinancebysagar.substack.com or Sagar Singh Setia is not responsible for loss of value; all investment decisions you make are yours alone.

Month In Charts: June 2025!

Sagar Singh Setia — Tue, 01 Jul 2025 14:30:58 GMT

The first half of 2025 was a rollercoaster ride marked by heart-wrenching volatility, as trade policy-related uncertainty reached unprecedented heights.

Source: MacroMicro (Trade Policy Uncertainty Index- TPU)

Furthermore, geopolitical tensions soared as the world reached the brink of a potential “World War 3” with two of the world's most powerful countries in the Middle East fighting for 12 days.

Let’s comprehend what transpired in global financial markets and the macroeconomic universe in H12025.

As fiscal policy apprehensions rose and uncertainty skyrocketed, Gold was one of the best-performing assets, with a remarkable 26% return in H1.
On the equity front, as the DXY plummeted, the unhedged ETFs delivered a stellar return, led by the flagship Latin American ETF, ILF, which was up nearly 28% in H1.
While Europe, China and other EMs had one of the best H1s with more than 18-24% returns, the US benchmark indices underperformed with SPY up by a meagre 6%.
Bonds remained laggards, with the long-duration ETF TLT up by just 2.85%.

As we approach the 90-day deadline set by POTUS, even without the April 2 reciprocal tariffs proposal, the US effective tariff rate has risen to its highest levels since the 1920s.

As a result of the higher tariff rate, the US is generating billions of dollars in tariff revenues every month. The tariff collections of the past three months were as follows:

March: $9.62bn
April: $17.43bn
May: $23.97bn
Thus, we won’t be surprised if the US Government garners more than $300 billion of annual tariffs due to the highest tariff rate since the 1920s.
Returning to the markets, H1 was exceptional, as the MSCI World ex-US outperformed the S&P 500 by a substantial margin.
You will be surprised to know that the outperformance margin was the highest since 1999.

Nevertheless, despite the underperformance, the tech index (NDX) and the S&P 500 remain among the most expensive ever.
On the contrary, small and mid-caps give valuation comfort (though earnings can be a different story).
It was not only the equity markets which underperformed; the initial euphoria in the FX universe died, and the Dollar faced its worst H1 rout since 1973!
The 10.8% fall in DXY was due to multiple factors:
a) The credibility of the US was hurt after the policy flip-flops, and as the Fed's independence was called into question.
b) The US administration wants a lower greenback to reduce the trade deficit. Thus, it is being used as a policy tool.

While the Fed didn’t budge on rates despite extreme political pressure, the US Bloomberg Economic Surprise Index plunged to levels last seen in September 2024, indicating that the weakness in macroeconomic data is alarming.
The majority of the deterioration in data stems from the housing market, which has seen a worsening of sentiment due to affordability issues as builders have failed to offload inventory despite hefty discounts.

The Kansas City Fed’s Labour Market Conditions Index (LMCI) is a broad-based measure of U.S. labour market health composed of two indicators: the Level of Activity and Momentum.
As of May 2025, the LMCI Level of Activity stood at +0.26, signalling conditions that are slightly stronger than average. However, the Momentum indicator remained negative (−0.24), indicating that the labour market's rate of improvement has stalled.
Thus, it’s highly likely the weakness in the labour market will emerge sooner rather than later.

In what could be termed a surreal development, the SNB became the first Central Bank to cut rates to 0% this month.
Who would have thought two years ago that we would see negative rates so soon?

Bankruptcies in the UK are rising at an alarming rate, according to government data.
The UK company liquidation rate rose to its highest level since 2014, primarily driven by companies involved in financial and insurance activities.
Furthermore, the macro data is deteriorating at a rapid pace, led by the labour market.

While macroeconomic data in China remains sluggish, there have been some signs of stabilisation in the housing sector.
Nonetheless, PBOC continues to pursue loose monetary policy as rates remain at rock-bottom levels.

In the land of the rising sun, inflation is getting out of control due to the incessant rise in rice prices.
Rice prices have almost doubled in the last year, and as a result, food inflation now constitutes more than half of the headline inflation rate.
In fact, you may be surprised to learn that a country that experienced deflation for more than three decades is now facing food inflation of 7.7% and headline inflation of 3.5%, which is higher than in the US and most of Europe.

BONUS CHART 1: The third wave is in progress. Yes, folks, income inequality has reached unprecedented heights, as wealth appears to be accumulating in the hands of a few. Over 100 years ago, it went to Rockefeller and Vanderbilt, who played a significant role in the Industrial Revolution. Now it goes to Bezos & Huang, who are winning the AI revolution.

The top 10% income share in the US reached 45% in 1900 and has just surpassed 50%. It took the Great Depression & two World Wars to bring it lower by 1960. What happens this time???

Source: Rich Excell

BONUS CHART 2: The real breakout in June took place not in Silver, but in Platinum. The metal had the best monthly gains of 29% since September 1979.
Let that sink in!

Disclaimer

This publication and its author are not licensed investment professionals. The author & any other individuals associated with this newsletter are NOT registered as Securities broker-dealers or financial investment advisors with the U.S. Securities and Exchange Commission, Commodity Futures Trading Commission, or any other securities/regulatory authority. Nothing produced under Marquee Finance by Sagar should be construed as investment advice. Do your research and contact your certified financial planner or other dedicated professional before making investment decisions. Investments carry risk and may lose value; Marquee Finance By Sagar LLC, Marqueefinancebysagar.substack.com or Sagar Singh Setia is not responsible for loss of value; all investment decisions you make are yours alone.

Month In Charts: May 2025!

Sagar Singh Setia — Wed, 04 Jun 2025 16:31:06 GMT

After a nerve-wrecking April, investors cheered the month of May as risk assets rallied, while concerns persisted about the bond markets, which underwent a rollercoaster ride.

The equity markets rallied by a record 6%, marking the best monthly performance for the S&P 500 in the last 25 years.

On the contrary, the 30Y bond yield once again approached the 5%, which last triggered the “Bessent Put”.

Let’s comprehend what transpired in global financial markets and the macroeconomic universe in May 2025.

Despite the US equity markets’ outperformance in May, they are still massively underperforming the global markets YTD. While some of the global unhedged ETFs have significantly outperformed due to the enormous currency appreciation (Dollar depreciation), the US assets underperforming the global markets is a trend which has persisted this year.
The shiny yellow metals remain the best-performing global asset with a return of 27.5% YTD. On the contrary, the bear market in the bond market continued, with TLT in negative territory.
Commodities Ex-Gold, Silver and Copper have also been underperformers, with DBC barely positive.

We will discuss the bond markets extensively today. It was no brainer six months ago that the yield curve would steepen.
However, only a few of the market participants got it right as the yield curve underwent a “Bear steepening”, which is when the long-term yields rise more than the short-term yields.

One of the reasons for the bear steepening has been the market discounting higher growth and inflation in the future and pricing out rate cuts far into 2026.
The reason the Fed has been cautious in cutting rates, despite pressure from POTUS, is the uncertainty surrounding the tariffs.
Although the Fed believes that the inflation resulting from the tariffs will be “transitory,” it’s not taking any chances.
Source: BBG

Historically, treasury yields have been one of the most reliable indicators for equity investors, as they help determine the equity risk premium.
Nevertheless, equity markets tend to remain irrational for long periods, driven by the hopes of a new era.
We observed a negative equity risk premium for many months in 2001, and we saw the same trend last year as well.
Source: Kantro
The soft data has been shaky in the last two months. However, the hard data has been resilient thanks to the buoyant consumers propelled by the positive wealth effect, as all the assets (equities, BTC, housing, and Gold) have been hovering around ATHs.
However, the recovery has been K-shaped, with the bottom end of the consumer reeling under the pressure of high cost of living and higher rates.

The inflation pain is also visible in real disposable incomes (real = adjusted for inflation).
Looking at the long-term trend, we can confirm that despite trillions of dollars of stimulus post-COVID, which led to enormous accumulated savings, the real personal disposable incomes have failed to recover.

Coming back to equity markets, the S&P 500 saw a 6% increase in Operating EPS this quarter (98% of the companies).
Thanks to Mag 7 (ex-TSLA and AAPL), the S&P 500 have been shy of negative EPS growth. However, one must be cautious as the growth of companies focused on AI is slowing.
Source: Charlie Bilello

With the equity market recovery, the odds of a recession in the US have plummeted.
The recession odds, as per “Polymarket”, peaked on May 1st (when they reached 65%) and are now down to 31%.
Will the betting markets be right again?
Source: Jim Bianco

We can’t end the US section without talking about tariffs.
Companies have already passed on the tariffs to consumers in the US as the retail prices of Chinese products have risen.
Nevertheless, one must carefully gauge the impact of the tariffs on inflation, as the weight of the goods basket is smaller compared to the services basket.
Source: FT

The German economy appears to have bottomed out, according to the soft data.
The ZEW Current Economic Situation index has been on an upward path, despite uncertainty about the tariff situation.
Nonetheless, one must be watchful of the trend in the coming months.

Inflation in the UK came as a surprise, as it exceeded the estimates.
It’s important because this could be the turning point in the inflation trajectory, which has been behaving lately.
Note that the rise in the UK could partly be attributed to the increase in electricity and gas bills.
China has reported deteriorating macro data (sluggish manufacturing activity) in the past few days due to the trade embargo.
However, there were signs last month that China’s real estate market has finally bottomed out.
In the land of the rising sun, the bond markets sent global shockwaves after a failed auction led to a massive 20 bps rise in the 30Y Japanese Government Bond Yield (JGB).
Furthermore, the data released by the Japanese Ministry of Finance (MOF) demonstrates that Japanese insurers sold long-term JGBs as market participants raised concerns about the asset-liability management (ALM) of insurance and pension companies in Japan.

While everyone has been talking about European equities, the EM equities (excluding China) have been slowly breaking out.
It’s partially due to the currency appreciation, but also the valuations, which have been depressed for a very long time.
Some countries in LATAM, Poland, and South Korea have experienced a raging bull market due to political developments.

BONUS CHART: After a lull of more than 15 years, we are now witnessing a capex boom across manufacturing. Whether it’s the enormous defence spending in Europe, the chip manufacturing in the US (CHIPS Act), or the clean energy spending globally, the world is unprepared, as only one country holds access to the rare earth metals.
Two years ago, we briefly covered the “Chinese Masterplan.”

PS: We are invested in a few stocks (Thematic Investing bets).

Disclaimer

This publication and its author are not licensed investment professionals. The author & any other individuals associated with this newsletter are NOT registered as Securities broker-dealers or financial investment advisors with the U.S. Securities and Exchange Commission, Commodity Futures Trading Commission, or any other securities/regulatory authority. Nothing produced under Marquee Finance by Sagar should be construed as investment advice. Do your research and contact your certified financial planner or other dedicated professional before making investment decisions. Investments carry risk and may lose value; Marquee Finance By Sagar LLC, Marqueefinancebysagar.substack.com or Sagar Singh Setia is not responsible for loss of value; all investment decisions you make are yours alone.

Month In Charts: April 2025!

Sagar Singh Setia — Fri, 02 May 2025 13:02:38 GMT

April 2025 was one of the wildest months ever in the history of equity markets in the US.

Why?

“The S&P 500 finished the month down 0.76% after seeing an 11.2% MTD drop on 4/8 and an 11.8% rally from that point through today's close. This was the closest we've gotten to getting back to even in a month that saw a 10%+ drop since 1952 when the 5-day trading week began.”

Not only in the equity markets, but the cross-asset moves were extremely volatile as records were shattered in the FX, bond and Precious Metals.

Let’s understand what transpired in global financial markets in “Wild Wild” April with the help of 13 charts!

The “manic” April saw an enormous sell-off in US assets (dollar, stocks and bonds) as Liberation Day shocked the whole world. Furthermore, the ensuing trade war with China meant the markets remained jittery. However, as we ended the month, there was a swift recovery across bonds and equities.
Nonetheless, YTD, US equity markets remain the worst performers. Due to the chaotic environment, Gold remains the top performer, with Latam equities (represented by Brazil—EWZ here) and Europe stark outperformers in the equity universe.
Commodities have begun to underperform as we ended the month on rising “global” recession fears.

Let's understand the global trade dynamics since it was all about trade and deficits in April.
While the US has an annual trade deficit of $1.2 trillion, China has a trade surplus of around $1 trillion. Trump/the US cannot reduce the deficits overnight, and the US needs a long-term “sustainable” plan to normalise the deficits (as a percentage of GDP) if it wants to solve the problem of twin deficits.

Due to the US embargo on China (imposing 145% tariffs), the number of container ships sailing from China to the US has plunged, and if the status quo is maintained, we will experience a repeat of COVID-19.
The US will be facing shortages of unprecedented magnitude earliest by June.
Thus, a trade deal is the need of the hour to avoid bankruptcies and shortages in the US.

Well, the world's largest equity market underperformed the MSCI All Country World Ex-US Index by the most in 32 years.

Yes, you read it right. 32 years it is!
After sheer outperformance due to the narrative of "US Exceptionalism" in late Q4 last year, the US equity markets got a reality check as sky-high valuations and risks of a slowing economy due to The Great Tariff Shock,™ result in a drawdown greater than other equity markets.

If you thought only the US equity markets underperformed, then the FX enthusiasts/ traders got the shock of their lifetime this month.
Dollar Index (DXY) witnessed the second-worst start of the year since 1967!!!

DXY crashed by more than 10% YTD as the Trump tariff announcement led to the outflow of billions of dollars from US markets.

Furthermore, the massive deleveraging across the FX, bond, and equity markets caused the greenback to witness such a ferocious selloff.

Nothing got spared from the panic selling that gripped the financial markets.
Brent crude fell by over $10 a barrel in less than 48 hours.
It was the 8th largest 2-day absolute price movement ever. Only 2020 (COVID-19 and Saudi price war), 2022 (Russia-Ukraine), 2008 (financial crisis) and 1991 (Gulf War) have seen larger down moves.
Source: BBG

Several decades-old records were smashed in the US bond markets in April.
The 30Y UST saw its largest move since 1982.
The 10Y saw a monstrous move of 51 bps, the largest weekly move since 2001.
Source: Bianco Research
Talking about macro, the Great Tariff Shock ™ has led to extreme weakness in soft data (surveys) as consumer and business sentiment has nosedived.
According to the Philly Fed Survey, "New orders fell sharply, from 8.7 in March to -34.2, its lowest reading since April 2020.”
We can safely conclude that the data is comparable to a global shock akin to the GFC/ COVID-19.

ECB cut rates for the seventh time in a year due to the crumbling growth prospects resulting from the Great Tariff Disruption™.
Due to the dovish ECB, the market now expects further 65 bps of cuts before the end of 2025.
Furthermore, interestingly, the ECB expects tariffs are a negative demand shock.

As uncertainty climbed to unprecedented levels, where did the liquidity move to?
Well, yes, it was Gold and EU stocks/bonds.
Thus, as you read this newsletter, we are unsurprised that DAX is just 2-3% from its ATHs.
Surreal!!

The Great Tariff Shock came at an unfortunate time for the Chinese economy, which was indicating some signs of bottoming out.
There has been a profound recovery in residential house prices in the secondary market as the inventory of completed units reduces and sales activity climbs.

In the land of the rising sun, USDJPY fell by 4.5% in April (though it recovered from the lows).
There were rumours of a reversal of carry trades in the FX markets.
As BOJ remains dovish despite sticky inflation, citing tariff uncertainty, one must be cautious while trading the FX markets.

BONUS CHART: Gold market implied volatility (a common exhaustion indicator that suggests a period of consolidation) shot to the levels seen at the peak of the historical bull market.
Will this time be different, or will new highs be possible this year?
Source: Topdown charts

Disclaimer

This publication and its author is not a licensed investment professional. The author & any other individuals associated with this newsletter are NOT registered as Securities broker-dealers or financial investment advisors with the U.S. Securities and Exchange Commission, Commodity Futures Trading Commission, or any other securities/regulatory authority. Nothing produced under Marquee Finance by Sagar should be construed as investment advice. Do your research and contact your certified financial planner or other dedicated professional before making investment decisions. Investments carry risk and may lose value; Marquee Finance By Sagar LLC, Marqueefinancebysagar.substack.com or Sagar Singh Setia is not responsible for loss of value; all investment decisions you make are yours alone.

Month In Charts: March 2025!

Sagar Singh Setia — Wed, 02 Apr 2025 16:03:23 GMT

Q12025 shocked every trader and investor, as the new US President made life miserable by flip-flopping every hour on significant policy decisions.

Nevertheless, we navigated through the turbulent times and successfully generated alpha.

Let’s understand what transpired in global financial markets in March with the help of 13 charts!

Q1 ended with a scenario that nobody in their wildest dreams had envisioned. Gold decimated all other asset classes with a mind-boggling 19% return (the highest Q1 return since 1986). China was one of the best-performing equity markets, with a stellar return of 16%. The rotation from super expensive US stocks led to a rise in European stocks, which reported a double-digit gain of 11.8% (IEV). The “shocking” disappointment was the QQQ and BTC, which lost 7% and -13%, respectively.
Nevertheless, after a long time, US Long Duration Bonds outperformed the US equities (a trend change or a one-quarter anomaly?)

Despite the dismal performance of the benchmark indices, some of the sectors generated significant positive returns with respect to the benchmark.
The defensive/value stocks outperformed the growth stocks by a wide margin. Lower oil prices failed to dethrone the energy stocks as they were the biggest sectorial gainers in the US in Q1. While consumer discretionary and tech stocks plunged by more than 11%, the utilities, staples and health care outperformed, indicating rotation into defensives.
The bearish sentiment continues to climb as the S&P500 enters the correction territory with a drawdown of more than 10%.
The reading from the AAII survey has reached levels consistent with the 2022 bear market/ the GFC crash levels.
Traders focusing on short-term moves can’t ignore the sentiment along with positioning.

Moving on, Q1 was remarkable, and the equity universe's records were shattered.
The Stoxx 600 outperformed the S&P 500 by a record 14%, rewarding investors who were overweight European equities and underweight US stocks.
The reason the US stocks entered the “detox” period was the policies of the new administration.
As we head into Liberation Day, universal tariffs are expected to be implemented immediately. Furthermore, if some countries are given relaxation, the reciprocal tariffs route will be taken as intense negotiations are underway.
Nonetheless, Liberation Day will likely lead to a rise in average tariff on all imports to > 8%+, which will be the highest since 1947!!
Source: Bianco Research

The highly elevated US Economic and Trade Uncertainty is now creeping across the world as fears of a “global” trade war mount.
As a result, the Global Economic Policy Uncertainty Index has surpassed the COVID-19 highs.
In fact, Central Bankers across the world (BoJ, BOE, ECB and Fed) in their meetings highlighted the rising volatility in the global financial markets due to the new US administration policies.

The labour market is crumbling beneath the surface as uncertainty looms on the policy front and the economy enters the “detox” period due to likely reduction in fiscal deficits and large federal layoffs.
The sentiment is turning sour as non-existent hiring coupled with slowly rising layoffs leads to pessimism in the economy.
Source: Renmac
As the labour market crumbles and the negative wealth effect due to the decline in the equity markets grips consumers, the delinquency rates have begun to rise, with the lowest-quality borrowers (subprime) faring the worst on record in paying their car payments on time.

The macro data indicates a scenario that we have been discussing for months. Growth is slowing down, the unemployment rate is ready to shoot higher, and the impact of tariffs will undoubtedly be inflationary in the short term.
The Federal Reserve confirmed the stagflationary conditions when they presented their dot plots in the March FOMC.
Source: US FED

European bond yields had one of the biggest moves in March as Europe announced the upgrade of its shaky infrastructure and spend hundreds of billions of dollars on defence (arms)purchases as the US prepares to leave NATO.

German Bunds saw a move of more than 30 bps in a single day (a 4 SD move), a historic one as it's the largest move in over 3 decades.
Thanks to the announcements, massive amounts of money moved into European equities, and investors’ positioning rose by more than 30% as fund managers rushed to sell the US equities.
Nonetheless, the rally has cooled off over the last few days as valuations rose and the markets became extrmely overbought.

The Chinese equity markets have ripped since January 20th. However, everybody has been asking whether the Chinese economy has bottomed out.
Our first chart today indicates that the Chinese Consumer Confidence Index has bottomed out with a nascent recovery visible.

Nevertheless, the second chart demonstrates that despite the lowest rates on record, every institution and household is now deleveraging, indicating no respite in the balance sheet recession.
Even non-banking financial institutions deleveraged in Feb with a negative YoY print for the first time since 2022.

In the land of the rising sun, wage increases (measured by Shunto talks) are transpiring at the highest pace in decades as the cost of living witnesses an unprecedented rise.
The Feb CPI breakup suggests that inflation is broad-based and turning out to be sticky.
BONUS CHART: The 25% auto tariff imposition will immensely benefit the Chinese OEMs, gaining market share from their German, Korean, and Japanese peers.

Japanese, German, and Korean OEMs will raise prices, probably leading to a fierce price war with Chinese OEMs.

As the EV revolution storms the world, the Chinese have already overtaken the world's auto market thanks to unprecedented innovation and unmatched price advantage.

Disclaimer

Month In Charts: February 2025!

Sagar Singh Setia — Tue, 04 Mar 2025 23:30:40 GMT

2025 is turning out to be a year of “pain” for those chasing the winners of the past two years as the smart money rotates out of the overcrowded trades and piles into underowned asset classes.

Let’s understand what transpired in global financial markets in February with the help of 13 charts!

The world’s top-performing equity market for the last two years has seen enormous underperformance YTD as the overcrowded big tech trade unwinds. Furthermore, after Deepseek’s announcement, Chinese stocks have rebounded, with MCHI now the best-performing asset class YTD. Trump’s win has also been a big blessing for European stocks, with the benchmark ETF (IEV), the second best performer YTD, even beating Gold’s YTD returns.
Moreover, the most hated asset class of 2022,23 and 24 (long-duration bonds) is now outperforming stocks. Watch out for the negative correlation here.

One of the contrary indicators defining a top in the US equity markets with an impeccable historical track record is overseas investors buying US stocks aggressively. Guess what happened in the last three months?
Foreigners bought $76.5 billion worth of U.S. Stocks from Nov 2024 - Jan 2025, the fastest 3-month pace in history. Historically, they have had poor timing, having bought right before the 1987 crash, the 2000 dot com bubble, and the 2008 global financial crisis
Source: Yardeini Research

The biggest losers in this unprecedented rotation out of the tech stocks or broadly US equities to RoW have been the fund managers who were significantly overweight the US stocks. Furthermore, the cash levels was at 15 year lows at just 3.5% (one more signal predicting a top).

As the tariffs finally kick in on Mexico, Canada and China, the US trade policy uncertainty Index has climbed to all-time highs, making investors nervous about a recession induced by a trade war.
One can’t ignore the disastrous consequences of a massive tariff rise amid an uncertain geopolitical landscape.

The biggest surprise in February was a higher inflation reading than street expectations. The YoY rise in Core inflation has been above 3% for more than 46 months in a row, a record last seen only during the period of draconian inflation/stagflation in the 1970s and 1980s.
Note that some market participants expect higher readings in the coming months due to higher tariffs.

Since the Trump administration took office on January 20th, Bessent’s (Treasury Secretary) focus has been lowering bond yields (and it looks like they don’t care about stocks in the short term).
As a result, despite stagflation concerns and persistent higher inflation, bonds have outperformed stocks as recession fear mounts and markets price in more than three rate cuts this year.

Ironically, the dollar has been in a free fall in the last two days despite the implementation of tariffs. The weakness can only be explained by the deterioration in the US macro data and the rising recession probability.
Nonetheless, it seems Trump gets what he wants (lower yields, lower Dollar, tariffs, etc).

Wages in Europe have plunged to pre-war levels as the disinflationary trend picks up, giving the ECB enough room to cut rates more than the market expects.
Furthermore, as the trade war intensifies, with the US and the EU footing the bill for Ukraine, it’s a no-brainer that the ECB is stuck between a rock and a hard place. It's not a smooth ride here.

On the other hand, while the BoE cut rates by 25 bps in February, the BOE mentioned that the inflation ride was “bumpy,” and it forecasted that inflation would rise to 3.7% and then fall to the 2% target, but risks remain to the upside.
Note that we expect tariffs to be inflationary and thus must watch the inflationary trend carefully.

Surprisingly, only three countries in Europe (NATO) spend more than 2% of their GDP towards defence. Ironically, most of the European countries that were part of NATO used to spend 5% of their GDP on defence in the 1960s/70s.
The fiscal explosion in Europe is imminent as Europe readies to create a gigantic fund for defence purchases and as the US likely exits NATO.

The Deepseek announcement is likely the “ChatGPT” moment for Chinese equities, as the US drawdown has failed to shake out the Chinese rally.
Though there has been no material improvement in the Chinese macro data, the AI innovation can lead to the re-rating of Chinese stocks.

It's surreal that the inflation data in the land of the rising sun has now surpassed the CPI in the US.

Due to market expectations of persistently higher inflation, Japanese 10-year bond yields have surged to unbelievable levels (1.4%+).

This warning signal must not be ignored, as the reversal of carry trade can move trillions of dollars from the West back to Japan in the next few months.

Furthermore, BOJ has finally turned hawkish, and a further hike is possible in the coming months.

BONUS CHART: While Gold has seen a mega rally in the last 18 months, the mining stocks have been laggards, with the flagship mining ETF, GDX, still far away from ATHs.

As a result of underperformance, the Gold Mining stocks’ Market Cap as % of total Global Stock Market Capitalisation is at 0.4%.

Ironically, in the last Gold bull market (2003-2011), the market cap of Gold mining stocks as a percentage of the Global Stock Market Cap reached 1%.

Furthermore, the most significant cost for the miners has been oil, which has been in a bear market, thus increasing the profitability and margins of the Gold mining companies.

Disclaimer

Month In Charts: January 2025!

Sagar Singh Setia — Thu, 06 Feb 2025 16:02:22 GMT

2025 has begun with a bang for those who love “volatility,” as we have been bogged down with insane cross-asset moves in the past month, especially since the Trump administration took office.

Let’s look at what transpired in the global financial markets in January!

While everyone piled onto Mag 7 post-Trump win in November, January was one of those months when the market bid up the under-owned and most hated stocks. You will be surprised to know that up to 5th February, Europe and China outperformed the US indices by massive margins.
Furthermore, the most hated asset class of the last two years saw an enormous rally, as long-duration bonds are now outperforming stocks YTD.
Commodities have also been rallying hard, with the shiny yellow metal shattering all records as it gained by more than 9% in just one month.

Since Gold is on everybody’s mind, let’s begin with it. One of the reasons for this super bull market in Gold has been the persistent buying by the Central Banks.
In fact, global reserve allocations to gold have doubled over the past 10 years, with Russia, China and India being the top buyers of the shiny yellow metal.

The rise in January in Gold prices was due to a mad scramble by the institutions to repatriate the Gold to New York due to fear of tariffs.
As a result, the COMEX warehouses saw a massive surge akin to COVID-19 and the price spread between COMEX and LBMA surged.
With a lot of flip-flops on tariffs amid last-minute deals and extensions, the uncertainty about the US Trade Policy has shot up dramatically.
The Economic Policy Uncertainty (Trade Policy) Index is now up to the levels last seen during the peak of the US-China Trade war in the last Trump administration.

Trump wants lower inflation and, hence, lower yields, but he has a cause for worry. There are initial signs of inflation bottoming out, especially across Goods, as the diffusion metrics indicate that the items running at >0.2 % MoM have bottomed out at 51%.

Last month, we wrote that European stocks are at an extreme discount to their US peers as the “US Exceptionalism” narrative took fund managers by storm.
Nonetheless, we saw a sea change in January as European stocks were on a tear. In fact, we saw the second largest-ever monthly rotation into EU stocks in the past 25 years.
A wild, wild move!
One asset class with a super roller coaster ride in January was the Dollar, as the tariff U-turns led to highly volatile moves.
MXN and CAD were the worst-performing currencies due to tariff fear, and many market participants predicted that both countries would enter into a recession if 25% tariffs were implemented.
Source: Hourly Chart DXY

Many market participants expected the Fed to announce some tapering in its QT program in January, but this didn’t transpire, as JayPo categorically mentioned that they would continue to reduce their balance sheet as planned.
Notably, the Fed’s balance sheet has already contracted more than 24% from the peak (which is, in fact, the highest-ever drawdown).

We had the UK bond scare in January when the yields on the 10Y in the UK jumped sharply after fears about the government's fiscal deterioration rose.
The bond sell-off deepened worldwide, with the US bond yields rising as well. Nonetheless, there has been a significant cooling off in the yields, and they have filled the gap of 16th December.

The European economy seems to have recovered from the cyclical slowdown. Furthermore, the ECB and BoE cut rates in January and today, respectively.
Traders are pricing in four more ECB cuts this year, which is supporting European stocks in their ride-up.

China has been under severe stress due to a balance sheet recession. Thus, CCP and XI are very well aware that they can’t afford a full-blown out trade war.
We are witnessing early signs of bottoming out in the Chinese housing market. However, we will look for further cues to ascertain whether the recovery is sustainable.

While China doesn’t want to enter a trade war, they are eager to win the AI race. After the launch of Deepseek, huge comparisons have been made between OpenAI’s ChatGPT and Deepseek models, which were built at a fraction of the cost.
We are entering into unchartered territory.
Chart: NBC

The last time the PPI Goods Index rose 25% was from 2003 to 2008 when oil prices spiked to $150 (and other commodities also rallied).
This time, the index is up 25% in only three years due to the decimation of JPY, and oil prices have been stagnant.
Is it safe to say Japan has exited deflation?
BONUS CHART: Options were introduced so that institutions could hedge their portfolios against extreme drawdowns and generate extra income for those with long-term portfolios. However, post-COVID, options have become a gambling’s den, especially with the launch of 0DTE options, as volumes have exploded.

Disclaimer

Month In Charts: December 2024!

Sagar Singh Setia — Sat, 04 Jan 2025 12:30:36 GMT

2024 was another year of superior equity returns, with the US markets outperforming the ROW (ex-Israel and Argentina).

Furthermore, there was no recession in the US thanks to the enormous fiscal spending by the US Government in an election year and the positive wealth effect of the exponential rise in the various asset classes ex-bonds.

Let’s look at what transpired in the global financial markets in December!

PS: From this week, the newsletter's timing has changed to Saturday: 7.30 a.m. EST/ 12.30 pm BST/ 6 pm IST.

The hedged Japanese ETF (DXJ) was once again the star performer in 2024, with a total return of a whopping 29.76%, beating all the other asset classes (ex-BTC). Furthermore, the Chinese large-cap stocks ETF (FXI) outperformed the major US indices, bewildering most market participants.
The disappointment came from the bond markets, which had another year of negative returns and one of the longest bear markets in history. Nonetheless, if you owned Gold last year, you would have generated significant alpha as Gold was one of the top performers of 2024 with a 26.7% return.

The US “exceptionalism” in equity markets was concentrated in a few names, as the broader market performance measured by the equal weight index underperformed for the second consecutive year (this transpired only once in history: 1998, 1999).
Source: Charlie Bilello
Furthermore, the sheer outperformance (more than 120 bps) was mind-boggling.
The trend of few stocks dominating the index was further exacerbated in December when the US equity markets witnessed the worst breadth on record. We will not be surprised if the broader market outperforms from hereon and the heavyweights pull down the index as earning season arrives.
Despite the extremely poor breadth, the euphoria in US equities doesn’t seem to end, with the Leveraged Bull/Bear ratio at a fresh all-time high surpassing the 2021 GME mania.
The levered bull ETFs draw billions of dollars thanks to the speculative activity on NVDA, TSLA, and MSTR.

Not only has the retail public been in a frenzy, but the cash levels reported in BofA’s Global Fund Manager survey have also dropped to 11-year lows, indicating extreme bullishness.
Furthermore, the mutual fund cash levels reached a record low of around 1%!
While stocks are back to their pre-Trump levels, the bond markets have acted strangely in the past few weeks.
For the first time in history, yields rose 100 bps after the Fed cut rates by 100 bps, rattling bond investors.
It has been indeed different this time until now!

Source: ZH

Rising yields and bubbly stock markets (extreme valuations) mean the equity risk premium has turned negative for the first time since the dot-com bubble.
Remember, markets can remain irrational longer than you can stay solvent!

The BOE is the only Western CB (ECB, BOE, BOC and FED) which decided to maintain the status quo and not cut rates in December, as there is enough evidence that the UK’s inflation will rebound in the coming months.
Nonetheless, there are some concerns about the weak labour market and a slowdown in economic activity. Possible stagflation?

Sentiment in Germany continues to plummet to new lows every month as the European economy struggles to revive after the twin blows of the energy crisis and higher rates.
The ZEW Current Economic Situation is at 2002 lows and below the GFC and COVID levels.

Since 31st October, the Dollar has seen a massive rally, with DXY under breakout territory, mirroring the rise seen in 2016 when Trump won for the first time.
Nonetheless, we have other factors, as the Fed's turning ultra-hawkish in the December policy added fuel to the fire. The biggest gains from DXY have come from the fall in EURUSD, which is getting closer to parity.

Despite multiple rounds of massive stimulus, China has been facing headwinds on multiple fronts, leading to significant underperformance.
As a result, the ratio of the MSCI China Index relative to the MSCI All Country World Index (ACWI), the MSCI Emerging Markets (EM) Index, and the MSCI All Country Asia excluding Japan (AxJ), which represents EM Asia is now at decadal lows.

With Donald Trump’s inauguration coming closer, China is preparing for escalation.
Furthermore, the bond yields have completely collapsed in the last few weeks, with the Chinese 10Y below 1.60%.
As a result, the Chinese government seems more tolerant of officially letting their currency weaken, with the PBOC letting go of the crucial 7.30 levels on CNH.

After retreating from 155 to 149 in November on “hopes” of a BOJ hike in December, USDJPY moved higher to 158 levels in December as the BOJ was as dovish as it could get, with the January hike also not in the picture.
Nonetheless, the last few day'’ move suggests traders are pricing in a more hawkish BOJ in January.
Brazil, Japan, and Russia are the only countries where the central banks have hiked rates. All the other central banks have transitioned into an easing cycle, cutting rates to support growth!

BONUS CHART: Mighty China is flooding the world with cars as Western OMCs struggle to compete. China has cornered the global automotive car production market share, as more than 39% of the vehicles are now produced in China. Furthermore, the US market share has declined from more than 13% to just 3% in the last two decades. We expect this figure to cross 50% as the EV revolution takes the world by storm.

Disclaimer

Month In Charts: November 2024!

Sagar Singh Setia — Tue, 03 Dec 2024 13:31:26 GMT

The highlight of November was the red sweep in the US elections, which led to insane moves across assets globally.

US “exceptionalism” was visible in November as US equity markets sucked liquidity from all the other markets globally, resulting in a mega rally led by small caps.

Furthermore, a pro-crypto US government led to euphoric moves in BTC and other cryptocurrencies. As a result, the overall crypto market cap crossed $3.5 trillion for the first time, with BTC touching close to $100k.

Let’s look at what transpired in the global financial markets in November!

Despite a swift drawdown from the ATHs reached just before the US elections, Gold remains at the top (overall returns ex-BTC).
Nonetheless, the S&P 500 surpassed the crucial 6000 mark and has hit more than 57 ATHs this year as liquidity, and Trump's win cheered the equity markets.
On the other hand, Hedged Japan (DXJ) is up by 24.7%, which mirrors the US equity market returns.
Ex-Gold and Silver (PMs) commodities have disappointed as China’s macro data has failed to revive despite enormous stimulus. DBC has given a return of just 0.45% YTD, disappointing investors.
The most hated asset class: long-term bonds remain one of the biggest underperformers of YTD, hurting the performance of the 60:40 PF.

If we want to examine the US “Exceptionalism” closely, the charts by Michael Hartnett of BofA say it all.
More than $1.1 trillion has flowed into US equities in the last 5 years, resulting in exceptional performance compared to other global equity markets.
Unsurprisingly, Europe witnessed the biggest underperformance this year compared to the US since 1976!

It’s not only the last five years; since the GFC, the S&P500 has outperformed the European markets by an enormous margin.
While multiple reasons can be cited for this, in our opinion, tech supremacy and the trillions of dollars of buyback post-2016 were the two most significant reasons for US “exceptionalism.”

The “US Exceptionalism” comes at a significant cost as valuations are off the roof.
The US now accounts for more than 70% of the MSCI ACWI Index, and US equities trade at more than 25X, trailing PE with a P/B of more than 5X.
Always remember: “Markets can remain irrational for longer than you can remain solvent”!

Elon Musk and Vivek have been optimistic about the DOGE and have promised to reduce government expenditure significantly.
However, digging deeper, one can comprehend that it’s an eyewash:
Total Federal Expenditures are ~$7.3T.
75% of expenditures are social benefits, state & local aid, and interest.
Add in defence spending, and it's roughly 90%.
Cutting all other spending to zero is only ~$700B.
So, the only way to reduce fiscal deficits and cut spending is to bring peace to the world and significantly cut defence expenditures.
Source: EPB Macro

The market probability of a December rate cut by the Federal Reserve is 65%.
With euphoric sentiment everywhere and resilient macro data, has the Fed achieved the desired soft landing, or are there hidden time bombs in the global financial system?
2025 will be an interesting year!

The UK’s labour market data is deteriorating as the Claimant Count continues to rise, and the Vacancy/Claimant Ratio is in free fall, indicating a significant loosening of the labour market.
With the US macro data resilient, we expect the Sterling to be under pressure as the BOE turns dovish and the Fed gradually cuts rates.

Germany continues to surprise every month with the epic decimation of its industrial base.
The twin shocks of the energy crisis and Chinese faltering demand have led to Germany losing its crown as Europe's manufacturing powerhouse.
The structural decline of Europe is in place, and unfortunately, the regulatory landscape is further accelerating it.

While everyone is worried about the political crisis in France, Jeff Weniger came out with a very interesting piece of research:
“When France's bonds blew out relative to Germany like they have right now, it was a signal to buy stocks in France, buy stocks in Germany, buy stocks in Europe in general. The spread between 10-year French bonds and German bunds is currently 81bps. This exceeds 3/9/2009, 1/24/2014, 2/6/2017 and 3/16/2020. It is also equal to where spreads stood on 9/5/2011, a date I marked on the chart because it was equal to the current level (before it went on to blow out further that winter). French stocks went on to return double digits in the year after each of these start dates, as did Eurozone equities in general.”

One reason for sub-par growth in China has been the low appetite for credit among Households (HHs) and the leveraged private sector.
Despite easy financial conditions, led by the lowest sovereign bond yields and enormous fiscal and monetary stimulus, consumption has failed to take off as consumer sentiment remains extremely depressed.

The balance sheet recession, led by an epic burst of the world's largest property bubble, has caused significant economic problems for China.

As China likely enters its lost "decade/s," the repercussions on global commodity demand and its effects on global manufacturing (especially Europe) can't be dismissed.

On the other hand, Japanese Government Bond (JGB) yields have been on a tear, with the 10Y comfortably above 1% as speculation mounts about a rate hike by the BOJ on 19th December.

Is Asia witnessing a sea change with divergent fiscal and monetary policies?

As the dollar rampage post-Republican sweep creates ripples across the globe and in FX markets, one FX pair that has surprised market participants has been the USDJPY.
In the last few days, mounting speculation about the impending BOJ rate hike has led to USDJPY moving down from 155 to below 150 and the key moving averages.
Will we see a follow-through, or will the BOJ disappoint on the 19th?
Place your bets!

BONUS CHART: As Donald Trump threatens to impose draconian sanctions, the long-term data suggests that “slowbalization” (increased regionalization and slower growth) has been in process since 2009.
Trade growth has slowed significantly since 2018 as US-China trade tensions rise and we head towards a multipolar world.

Disclaimer

Month In Charts: October 2024!

Sagar Singh Setia — Tue, 05 Nov 2024 13:30:58 GMT

October saw chaos globally, led by geopolitical tensions in the Middle East, the UK’s surprise budget, Japan’s election shocker, and rising volatility across asset classes.

Nonetheless, the most significant events are lined up for November as the world awaits the fate of the US elections.

Let’s look at what transpired in the global financial markets in October!

Shiny Yellow Metal is the undisputed king of all asset classes (ex-BTC) this year. As concerns mount about US fiscal dominance and geopolitics tensions rise in ME, Gold has given a whopping 32% YTD (till 31st Oct) return.
China and Hedged Japan (DXJ) have outperformed the US indices and the broader Emerging Markets Indices.
Ex-Gold and Silver (PMs) commodities have disappointed as China’s macro data has failed to revive despite enormous stimulus.
Furthermore, long-term bonds remain one of the biggest underperformers of YTD, hurting the performance of the 60:40 PF.

When we look at the internals of the US markets, one sector that has been on a tear is semiconductors, led by the world’s largest company, NVDA.
Nonetheless, one needs to revisit and ask the question whether we are in a bubble and mean reversion will happen sooner rather than later or whether the party will go on forever.

Euphoria is present not only in the equity markets but also in the credit markets, where High-Yield (HY) and Investment-Grade (IG) spreads are shattering records.
The IG spreads are now at the tightest levels since 2005!

The face-ripping rise in 10Y yields after the Fed’s September rate cut, which caught the street by “surprise,” has led to real yields bouncing off sharply.
Real yields (adjusted for inflation) has now crossed 2%, which will likely put intense pressure on risk assets and lead to tightening of financial conditions.
Source: BBG

One reason the 10Y is on an unimaginable rise is that bond vigilantes are taking note of the US government's unsustainable spending.
Furthermore, none of the Presidential candidates has addressed the issue of ballooning fiscal deficits and spending.
Will we witness a repeat of Liz Truss's episode in the US?
All In?
Yes, folks, about 51.4% of consumers expected stock prices to increase over in the year ahead, the highest reading since the question was first asked in 1987 in the Conference Board Consumer Confidence Survey.
Furthermore, this indicates that American consumers are heavily invested in equities, as household allocation is also at all-time highs (risk of negative wealth effect in case of a black swan event?).
What can go wrong?
Source: BBG

In the last week, the UK faced a moment of truth as the first Labour budget in 15 years led to dramatic tax increases and elevated spending, raising concerns about higher borrowings in the coming years.
As a result, GILTs saw a massive sell-off, and Sterling witnessed a knee-jerk reaction, moving lower to 1.28.

Germany was again in the news in October for all the wrong reasons. Volkswagen has begun shutting its car factories in Germany as demand slumps, laying off thousands of employees.
As a result, Germany’s Industrial Confidence Indicator plunged to the levels last seen only during the GFC, COVID-19, and the 1992 recession.

Last time, when Germany was undergoing such devastation in cyclical activity, the ECB was panicking and resorted to jumbo cuts.
Germany’s IFO Business Survey, one of the oldest and most reliable, fell to 78.3 (the lowest since COVID and GFC), exhibiting that the energy crisis and subdued Chinese demand have led to the deindustrialisation of the manufacturing powerhouse of Europe.
Sentiment in China’s leading economic sectors—consumer, manufacturing and real estate—remains pessimistic and at historic lows.
Although consumer spending and manufacturing activity are expected to be primary growth drivers, sentiment indices suggest that confidence has yet to recover as the property market debacle weighs heavily on consumer sentiment.

Though China’s recent monetary easing led to a stock market rally, it has reduced the earnings yield gaps.
Despite this, the equity risk premia remains above long-term averages. Note that the risk premia is up to +2 SD, yet Chinese stocks look attractive compared to bonds.

The Land of the Rising Sun surprised the world in October when the ruling LDP coalition lost elections, leading to a fractured mandate.
A non-LDP multi-party government is now running Japan, which will prove costly as policy paralysis will marr Japan in the coming months and years.
Markets took note, and USDJPY witnessed a sell-off before reversing the turn as Ueda was “surprisingly” hawkish in the BOJ policy.

If you are an Emerging Markets (EM) bond investor, you lost big money this year by not betting on the fabulous turnaround story of the year: Argentina.
Argentina's bonds have recently surged to the top, reaching a critical psychological threshold for international investors with a remarkable 72% YTD. President Javier Milei has implemented several reforms to curb government spending, narrow the fiscal deficit, and foster a more investor-friendly environment.

BONUS CHART: One of the most famous narratives on social media has been that the bull rally in Gold is sustained due to unprecedented demand by Central Banks. However, the data indicates that the Q3 consumption by the CBs was the lowest since Q323.
In fact, we are now at pre covid levels!

Disclaimer

Month In Charts: September 2024!

Sagar Singh Setia — Tue, 01 Oct 2024 16:02:19 GMT

September is known as one of the worst months for equity markets; however, defying gravity, September yielded positive returns for most asset classes.

As the Fed surprised the markets with 50 bps markets and China embarked on an enormous stimulus, commodities ex-oil and Gold rejoiced with superior returns.

Let’s examine the cross-asset returns and decipher the macro via intriguing charts!

Let’s Go!

Surprisingly, Chinese equities are now the best-performing asset class YTD (ex-BTC), as the epic short squeeze led to a lightning rally in the last week of September.
Fiscal dominance, geopolitical tensions and the monetary easing cycle have been significant tailwinds for the shiny yellow metal, which is up a whopping 27% YTD and is the second-best performer.
The lower Dollar also led to a breakout in some of the EMs, and as a result, EEM is now outperforming EAFE and Europe.
Furthermore, bonds remain one of the biggest underperformers YTD, hurting the performance of the 60:40 PF.

When we look at the internals of the US markets, utilities and financials are the best-performing sectors YTD, a defensive tilt.
Ironically, as the world piled into Tech/ Mag 7 at the beginning of the year, the markets underwent a smart rotation after the 12th July fiasco when the carry trade reversal began.
Nonetheless, XLU is now becoming a crowded trade, and thus, readers who are long/overweight Utilities should be cautious.

One of the reasons that market participants have gone overweight defensives was the increasing odds of a recession.
While a soft landing is still a consensus, one can’t rule out a hard landing. The stark downward revisions have been portraying a weakening economy beneath the surface.
Source: BBG, Macrobond

The US Yield curve has now steepened from one of the longest inversions ever.
If you believe in history, you can’t ignore the fact that a recession accompanies the steepening of the curve.
Nevertheless, this also signifies the normalization of the policy and the much-awaited return to the neutral rate.

The reason the world’s largest central bank cut rates was the likely weakening in the labour market (dual mandate: stable prices and maximum employment) as the Fed’s focus shifted from inflation to the labour market.
Furthermore, as quit rates plunge and hiring freezes, the % of US employees fearing the prospect of unemployment has risen dramatically.

Despite the weakness in the labour market, the BoE maintained a status quo. We presume this move was a potential policy mistake.
The biggest surprise was the sharp rise in the claimant count(consider this the UK’s claim data), which saw the highest increase since the 2008 GFC.
The Claimant Ratio (comparable to the US claims data) climbed further to 1.79 million, and the Vacancies/ Claimant ratio fell to 0.485, now the lowest since 2015 (ex-COVID era)

The recent inflation readings in Germany and Italy (below market expectations) and dovish talks by ECB officials confirm an October rate cut by the ECB.
Evidently, Europe’s cyclical economy failed to recover after the Russia-Ukraine war, as demand for China has remained fragile. Thus, we can expect a dovish ECB from here on.

One reason China implemented a string of stimulus measures was the deflationary loop the second-largest economy had entered due to the balance sheet recession after the property market debacle.
The persistent negative M1-M2 growth gap since H2 2018 suggests a prolonged corporate reluctance to invest. This monetary dynamic puts downward pressure on inflation, as depicted by its positive relationship ahead of the PPI.

The deflationary spiral China is facing has led to a consistent fall in long-term bond yields as the market adjusts to a “new reality.”
As a result, Chinese bonds have given the best returns in the bond universe, with the 10Y CGB now trading at 2%. On the contrary, the land of the rising sun has seen JGBs trend higher!

Buying government bonds began as an extreme measure to the GFC by the US Fed. As a result, the Fed held the largest share of government debt outstanding, but that flipped in July 2014 when the BOJ under Abenomics went on a mad buying spree of the JGBs.
The result of the NIRP and QQE has been astounding. Since peaking in 2011, the JPY has depreciated over 50% vs. the USD. In gold terms, the value of the JPY is down 68% over the same period.

In what could be termed as unbelievable, the weight of Indian equity markets earlier this month surpassed China in the MSCI EM Index.
However, this might change after the monstrous 25% rally in the Chinese markets.
BONUS CHART: Make your own conclusions!!

Disclaimer

Month In Charts: August 2024!

Sagar Singh Setia — Mon, 02 Sep 2024 13:30:16 GMT

Welcome back to the Month In Charts edition after a hiatus of one month as we were travelling in July on a vacation.

August was a roller coaster ride. The initial scare in the first week caused by the flash crash in Japanese equities was quickly forgotten by the markets as buy-on dips magically worked again across assets.

Nonetheless, the macro signals are flashing red, which we will decipher in detail today.

Let’s Go!

Month In Charts: June 2024!

Sagar Singh Setia — Tue, 02 Jul 2024 12:30:52 GMT

For those invested in AI names and semiconductors, H1 was among the best in their investing journey. So, congratulations to all those who made money.

All those who were long precious metals had a stroke of luck in H1 as these were among the best-performing asset classes.

Nonetheless, long-term bonds remain in a bear market and gave negative returns in H1, thus hurting the returns of the coveted 60:40 portfolio and millions of pensioners.

Thanks to investors' underweight positioning at the beginning of the year, Silver, Gold, and other commodities such as Copper and Oil are the top-performing assets YTD, beating equities and bonds.
US equities have outperformed RoW (ex-Japan), led by the Mag3/4, as the AI mania generated superior returns for investors.
On the contrary, bonds continued their worst rout, with long-duration bonds being the worst performers.

Before we jump to Macro, the equity chart of the month was the parabolic rise in the QQQ/IWM Ratio.
The AI Euphoria and the zombie nature of small caps have led to QQQs outperforming IWM by a gigantic margin. As a result, the QQQ/IWM ratio has crossed the dot-com bubble levels.
When Mean Reversion?

It’s not only the QQQ/IWM ratio but also the remarkable performance of the Mag5/6 that has led to the stark underperformance of RSP (Equal Weight S&P500).
The RSP/SPY ratio has fallen to the GFC levels due to the mega tech rally of the last 18 months.
Beginning in May, we saw a deterioration in US growth. While some market participants termed it transitory, the streak of “negative” growth surprises continued in June.
In fact, the Bloomberg Economic Surprise Index plunged to decadal low levels. As macro traders/ investors/ enthusiasts, we need to watch this space closely.

It’s not only growth that has been surprising on the downside; ironically, inflation, which exhibited signs of resurgence in the first few months of 2024, has cooled off.
In fact, the fall in headline CPI is led by none other than the core goods inflation. The May reading of -1.7% was last observed two decades ago in 2003/04.
Is the inflation story over, or do we get another move higher in H2?
Undoubtedly, trouble is brewing in the US Commercial Real Estate Market.
As the maturity wall hits in the next 18 months, most loans will end up non-performing, as the asset value (CRE office space) has collapsed.
The nationwide price per sqft for the US office is now down 43% from the peak, with vacancy rates at multi-decadal highs.
The pain is not yet over here.
Source: Apollo

One of the bubbles that formed after the launch of unprecedented monetary and fiscal stimulus in response to the COVID pandemic by the world’s largest economy was the surge in used car prices.
Guess what?
Manheim Used Vehicle Index is now down a whopping 23.4% from the peak!

Retail investors have piled into Mega Tech stocks like never before.
Furthermore, the casino is “house” full as options gambling has taken over.
Net call volumes in mega-cap growth and Tech surged to record highs, surpassing even pandemic boom levels and completely disconnecting from those in the rest of the market.
Let that sink in!
Source: DB

Though the ECB cut was baked in the markets, the surprise came from SNB, which cut rates by another 25 bps after the political crisis in France.
As a result, ECB has now cut by 25 bps and SNB by 50 bps. However, all eyes will be on the further trajectory of monetary policy by the G7 CBs.
UK has become the first developed country to report a 2% headline CPI reading thanks to the base effects and sharp cuts in electricity prices.

Markets now believe the BOE will cut the rates in its next policy in the first week of August.

China’s property debacle will take years, if not decades, to correct.
The RE clearance time in Tier 1 cities has reached the highest levels as demand remains subdued and prices are in free fall.
Furthermore, Tier 2 cities face extreme challenges, with clearance time now crossing 50 months or more than four years!

Xi Jinping has aimed to transform the Chinese economy and control the blatant speculation in the RE sector.

The good news is that the Chinese RE-to-GDP ratio has moved sharply lower as prices fall and speculative demand crashes.
In the long term, this is a healthy sign for the Chinese economy.

In what could be termed the “biggest” surprise of the year, the Japanese Yen (JPY) has underperformed the Argentine Peso and Turkish Lira.
The unusual weakness in the JPY indicates that the FX markets do not believe in a hawkish BOJ and fear Japan's enormous debt pile.
It will be super interesting to witness how this ends.

With imported inflation creating havoc for the Japanese problem, the Japan Cabinet Approval rating is at its lowest level.
We know that June saw a political Tsunami with shocking results in Mexico, India, and South Africa.
One can’t ignore the implications of higher inflation on the consumers.

BONUS CHART: The world is on the verge of “Japanification” as many countries now have a total fertility rate (TFR) of less than 2.1, the replacement level for maintaining a stable population in most developed countries.
Furthermore, according to the UN, more than half of the projected increase between 2022 and 2050 is expected to come from just eight countries: the Democratic Republic of the Congo [DRC], Egypt, Ethiopia, India, Nigeria, Pakistan, the Philippines, and the United Republic of Tanzania.

Disclaimer

This publication and its author is not a licensed investment professional. The author & any other individuals associated with this newsletter are NOT registered as Securities broker-dealers or financial investment advisors either with the U.S. Securities and Exchange Commission, Commodity Futures Trading Commission, or any other securities/regulatory authority. Nothing produced under Marquee Finance by Sagar should be construed as investment advice. Do your own research and contact your certified financial planner or other dedicated professional before making investment decisions. Investments carry risk and may lose value; Marquee Finance By Sagar LLC, Marqueefinancebysagar.substack.com or Sagar Singh Setia is not responsible for loss of value; all investment decisions you make are yours alone.

Month In Charts: May 2024!

Sagar Singh Setia — Mon, 03 Jun 2024 13:30:38 GMT

The famous adage, “Sell In May and Go Away,” didn’t work this year as all the asset classes gave positive returns in the last month.

In fact, Silver was the best-performing asset, outperforming Gold by one of the most considerable margins, leading to a collapse in the Gold/Silver ratio.

Furthermore, after a very long time, Long-Term US Bonds outperformed Gold last month, and as a result, the GLD/TLT ratio also fell.

Let us look at the macro events that transpired last month and decipher the cross-asset performance.

Thanks to inflation reaccelerating and investors' underweight positioning at the beginning of the year, Silver, Gold, and other commodities such as Copper and Oil are the top-performing assets YTD, beating equities and bonds.
Coming to equities, the US has outperformed RoW (ex-Japan), led by NVDA, responsible for one-third of the total S&P 500 returns YTD.
On the contrary, bonds continued their worst rout, with long-duration bonds being the worst performers.

While the first few months were marked by a resurgence in inflation, the data in the latest CPI reading has been encouraging.
The underlying inflation pressures are subsiding as the share of CPI categories with more than a 3% gain has been rolling over rather swiftly. On the other hand, shares with less than a 0% gain have been picking up.
Source: BBG Economics

Though the inflation internals are slowly mean-reverting, the inflation surprises are trending higher as the data beat the estimates.
On the other hand, growth has been disappointing, raising stagflation concerns in the world’s largest economy.

Higher liquidity and a demand-supply mismatch have led to an All-Time High (ATH) in home prices as measured by the CASE Shiller Index.
High prices coupled with multi-decadal high mortgage rates have led to a massive plunge in affordability, which has frozen the housing markets for new buyers.

Market participants have been citing loose financial conditions as one reason to justify the “higher for longer” narrative.
Nonetheless, market internals are broken as higher interest rates have led to the earnings decline of the SPX 497. The resilient Mag 7 has led to one of the most precarious instances in the history of SPX V/S Equal Weighted SPX.

We have been mentioning the concentration risk of Mag 7 as the largest tech companies in the world are becoming too large, leading to distortion in the index.
In fact, the market's breadth has been in free fall since the enormous rally began in October 2022.

Nothing can stop retail investors from gambling as the loose financial conditions lead to insane moves in meme stocks.
The last eight months' rally has been driven by the retail flows, which have now touched the highest level on record. Note that the leveraged ETFs now garner a lot of the flows.
European equities continue to catch up with their US peers as the economic recovery unfolds swiftly in Europe. We can safely conclude that the cyclical sectors have bottomed in Europe.

The UK was the worst hit post the Russian invasion of Ukraine as energy costs spiralled out of control and inflation reached double digits.
Though the headline inflation has plunged to 2.4% in the UK, it is proving stickier than most market participants anticipated.

As rates turn restrictive, markets now price the first cut by the BOE in September.

China was again in the news for the wrong reasons on the macro front.
The Total Social Financing (TSF), one of the most tracked macro gauges, turned negative YoY for the first time ever. The horrendous data release led to the Chinese Government resorting to massive stimulus.

As extreme pessimism flowed from the Chinese macro data, the equity markets witnessed mammoth short covering.
As a result, Chinese equity markets were an outlier in May and recovered sharply from the bottom.
Source: Macrocharts

The Japanese 30Y Yield just crossed 2% (the 10Y is comfortably above 1%) and is now at the highest level since 2011.

On the other hand, USDJPY, even after softer CPI, weaker NFP data, and a $62 billion intervention, is still hovering around 156.5.

As a result, the BOJ has no choice but to hike rates aggressively, which will have grave consequences for the global financial system.

Japanese bond markets are already pricing in a July rate hike, with the 2Y swap rate jumping sharply.
The reversal of carry trades will be on everybody’s radar if the other CBs cut rates while the BOJ hikes.

A once-in-a-lifetime event occurred in the commodities market last month as Copper underwent a massive short squeeze.
A massive dislocation between the copper prices traded in New York (Comex) and the London Metal Exchange (LME) rocked the global market for the metal and prompted a frantic dash for supplies to ship to the US.
Source: BBG

Not only Copper but commodity prices all across the board have given double-digit returns this year as geopolitical concerns, sanctions, trade war, Chinese mysterious buying, and AI Capex have been fueling speculation about shortages.
BONUS CHART: One should not be surprised that computers manage more US Stocks than humans do!

Disclaimer

This publication and its author is not a licensed investment professional. The author & any other individuals associated with this newsletter are NOT registered as Securities broker-dealers or financial investment advisors either with the U.S. Securities and Exchange Commission, Commodity Futures Trading Commission, or any other securities/regulatory authority. Nothing produced under Marquee Finance by Sagar should be construed as investment advice. Do your own research and contact your certified financial planner or other dedicated professional before making investment decisions. Investments carry risk and may lose value; Marquee Finance By Sagar LLC, Marqueefinancebysagar.substack.com or Sagar Singh Setia is not responsible for loss of value; all investment decisions you make are yours alone.

Month In Charts: April 2024!

Sagar Singh Setia — Tue, 30 Apr 2024 15:31:10 GMT

April saw a cool-off in the risk assets as the world’s largest central banker pivoted and turned into a hawk after the resilient economic data and higher-than-expected inflation readings led Mr Market to reduce the number of cuts from 7 at the beginning of the year to just 1/1.5 cuts today.

Heightened geopolitical tensions also marked April as events in the Middle East heated up fairly rapidly before diffusing “suddenly”.

Let us understand the cross-asset performance and the macro updates via intriguing charts.

Commodities led by oil and copper remain the biggest outperformers YTD.

Conversely, Gold has seen a blistering rally due to several tailwinds, including massive global buying by central banks.
While the US outperformed RoW (ex-Japan), Europe has been doing a catch-up lately.
Nonetheless, bonds continued their worst rout, with long-duration bonds being the worst performers as the epic bond bear market enters its third year.

While inflation readings have been hotter than expected, one thing that stands out is the explosion in inflation expectations.
Since the Fed's premature pivot in December and the recovery in the Chinese economy, which led to an enormous rally in commodities, inflation expectations have risen significantly.
Source: BBG

As inflation overshoots expectations, Mr Market has given their verdict and expects only 1.5 rate cuts this year.
Note that seven cuts were expected at the beginning of the year, and long “duration” was the consensus trade among the fund managers.
The macro fundamentals of the US economy have been robust thanks to “fiscal dominance,” as the US Government continues to spend like a drunken sailor.
Nevertheless, the equities are overvalued despite a solid macro backdrop, as per Goldman Sachs Investment Research.

No one other than insiders better know that the stock markets are overvalued.
Just 10% of insiders (corporate officers and directors) were optimistic and buying their stocks, indicating extreme bearishness.

While macro fundamentals have been robust, some parts of the economy are flashing red signals.
Before we conclude, more data is required to confirm whether the “R” word that the market has completely forgotten will return with a vengeance before elections.

In Europe, the financial conditions have been extremely loose as stocks remain near ATHs and the credit spread remains unusually tight. Furthermore, a dovish ECB has helped.
As a result, the ECB’s indicator of Systemic Stress is near pre-pandemic lows.

If you are wondering the reason for the recent outperformance of the European stocks against the US equities, then look no further than the revival/bottoming out in the cyclical sectors in Europe.

Early green shoots are visible in Germany, and if the trend persists, we can see buoyant returns from European equities this year.

As Europe’s macro recovers, the UK's equity markets have been on our radar and have hit fresh all-time highs.
If you believe in mean reversion, then this chart is an eye-opener.

There is no end to the downfall in the Chinese Property Prices as the meltdown accelerates across the country.
Furthermore, the CCP is not interested in reviving the sector. It wants the economy to transform into a consumption-based one and encourage investments in new-age technologies (EV, Nuclear, Renewables, AI, etc.).
While the property sector has been in meltdown for the last few years, and the Chinese equity markets remain in a bear market, the love for bullion in the mainland has led to constant buying by households.

Over the last two years, overseas purchases totalled over 2,800 tons—more than all the metal-backing exchange-traded funds worldwide.

So, not only are the central banks buying the shiny yellow metal, but also the cash-rich Chinese HHs.

Late April saw a breakout of USDJPY from 152 levels as it plummeted to levels last seen 36 years ago (160).
The real effective exchange rates paint a grim picture, with JPY being the worst performer. Surprisingly, the Egyptian Pound, Turkish Lira and Argentina Peso outperformed the JPY.

To stop the free fall of JPY, the Ministry Of Finance (MOF) intervened and likely ploughed $50 billion to stem the rise in the USDJPY.
The million-dollar question is: Will it be enough to drive away the speculators who have built the biggest short position in JPY ever?

BONUS CHART: March saw a crazy rally in Cocoa as prices skyrocketed and tripled in just a few weeks.
Well, folks, yesterday, Cocoa witnessed its biggest fall in history, with prices crashing by 15% in 24 hours (think liquidity).
Has the cocoa bubble burst?

We can’t end the April Month In Charts edition without mentioning the shiny yellow metal.
Last month, we demonstrated that the two-decade-long negative correlation between Gold and real yields has broken. As we mentioned earlier, one of the reasons has been the unprecedented demand from Chinese households.
Let that sink in!

Disclaimer

This publication and its author is not a licensed investment professional. The author & any other individuals associated with this newsletter are NOT registered as Securities broker-dealers or financial investment advisors either with the U.S. Securities and Exchange Commission, Commodity Futures Trading Commission, or any other securities/regulatory authority. Nothing produced under Marquee Finance by Sagar should be construed as investment advice. Do your own research and contact your certified financial planner or other dedicated professional before making investment decisions. Investments carry risk and may lose value; Marquee Finance By Sagar LLC, Marqueefinancebysagar.substack.com or Sagar Singh Setia is not responsible for loss of value; all investment decisions you make are yours alone.