2017 First Half Key Takeaways

Bonds

  1.  Big outperformance by local emerging markets and Euro periphery in first half.
  2.  Last week was pivotal as some bonds gave back almost entire year due to ECB hawkishness.
  3.  Watch this space.  More big moves here will determine asset trading for summer and set up big correction in the fall, in our opinion.

.

FH_Bonds

Currencies

  1. Surprise weakness in dollar, mainly due to stalling of Trump agenda.
  2. We expect a big dollar rally in second half as we move closer  to tax reform.  All bets off if  Trump fails.

FH_Currency

Stocks

  1. Big outperforrmance in emerging markets.  We expect this to continue.  Especially like India.
  2. If bond markets stablize in Europe, which we expect moves to become more muted, but still expect higher interest rates,  Euro stocks should outperform U.S.
  3. Russia looking cheap as crude oil stablizes.  Watch Trump/Putin meeting next week.

FH_Stock Index

Selected Indicators

  1. High beta tech big outperformance.  Expecting a rotation into laggards, such as financials and energy.

FH_Selected Indicators

Commodities

  1. Crude oil collapse soured commodity index.  Natural gas gave back some of last year’s 50 percent gain.
  2. Lumber has been a leading indicator of economy over past history although some of move can be attributed to duties imposed on Canadian lumber.
  3. Copper had strong bookends.  Up over 10 percent in January, weak during intervenng months and finished strong with over 4 percent gain in June.
  4. Looks like Iron Ore has bottomed.
  5. Gold going to be a tough trade in a rising rate and QT world unless all hell breaks lose.

FH_Commodities

Conclusions

  1. We expect markets to grind around with a bit more volatility as central banks move away from QE and toward quantitative tightening (QT).
  2. Preparing for a choppy summer with lots of sector and stock rotation with a slight bias to upside in risk markets.
  3. Expecting  algos and trading ‘bots to continue to play their games, setting bull and bear traps, shaking the trees, and, you know, your basic market manipulaton.  Bastards!
  4. Looking for full blown correction in the fall.
  5. WE KNOW NOTHING ABOUT WHAT THE FUTURE HOLDS.  JUST OUR CALCULATED GUESS.     
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