KEY TRADING THEMES FOR 2020
General fundamental context: Expect global mini economic expansion in 2020. Yes, 2019 year, to the surprise of many, managed to avoid recession. Do you remember this extremely weird rally BOTH bonds and stocks? Investors were basically divided into two camps - doomsayers and smart and witty stock traders who almost blindly bet on Fed capitulation.
Because of that I have moderately bearish outlook on funding currencies (Yen, CHF, USD, Euro) and Bullish on “Commodity dollars” (AUD, CAD) and HY (RUB, PESO, ZAR, NZD). Medium term outlook for XAUUSD is also bearish because because zero-yield assets negatively correlate with positive economic growth.
MAJOR FUNDAMENTAL CATALYSTS
Implementation of trade agreement (aka "Phase one" Deal)
What to watch:
- China trade data;
- Brazil and Argentina Soybean export data;
- US agro exports, producer price index etc;
- European trade data, PPI (because to increase imports from US, China has to cut imports from other trade partners. It is a zero sum game, you know).
No favourable shifts in Trade - Tariffs are back on the table - second tough test for the US stock market.
"Phase Two" Deal Rhetorics.
Remember that many contentious issues remained unresolved after Phase one Deal. Next stage is Phase Two deal discussion which Trump touted would start right after the signing "Phase one" Deal.
What to watch:
- Trump twitter;
US 2020 Presidential Elections
What to watch:
- Trump leads, so focus on his new campaign promises. It is important because Trump looks a man of his word and delivered on his main campaign pledges (Mexico Wall, tax reform, revision of World Trade Order).
- Watch closely US polls. Markets will be extremely sensitive to this data and with the approach of the date of elections Dollar may start to resemble Pound reacting to Brexit news (really).
Federal Reserve Policy.
The policymakers signalled no more interest rate cuts till the end of 2020. Any tweaks in policy or change in communications can move stocks and Dollar either way.
I want to wish you a happy new year. All the best to you, your family and friends. 2019 will definitely be missed, but let’s make it even bigger in 2020!
Because of that I have moderately bearish outlook on funding currencies (Yen, CHF, USD, Euro) and Bullish on “Commodity dollars” (AUD, CAD) and HY (RUB, PESO, ZAR, NZD). Medium term outlook for XAUUSD is also bearish because because zero-yield assets negatively correlate with positive economic growth.
MAJOR FUNDAMENTAL CATALYSTS
Implementation of trade agreement (aka "Phase one" Deal)
What to watch:
- China trade data;
- Brazil and Argentina Soybean export data;
- US agro exports, producer price index etc;
- European trade data, PPI (because to increase imports from US, China has to cut imports from other trade partners. It is a zero sum game, you know).
No favourable shifts in Trade - Tariffs are back on the table - second tough test for the US stock market.
"Phase Two" Deal Rhetorics.
Remember that many contentious issues remained unresolved after Phase one Deal. Next stage is Phase Two deal discussion which Trump touted would start right after the signing "Phase one" Deal.
What to watch:
- Trump twitter;
US 2020 Presidential Elections
What to watch:
- Trump leads, so focus on his new campaign promises. It is important because Trump looks a man of his word and delivered on his main campaign pledges (Mexico Wall, tax reform, revision of World Trade Order).
- Watch closely US polls. Markets will be extremely sensitive to this data and with the approach of the date of elections Dollar may start to resemble Pound reacting to Brexit news (really).
Federal Reserve Policy.
The policymakers signalled no more interest rate cuts till the end of 2020. Any tweaks in policy or change in communications can move stocks and Dollar either way.
I want to wish you a happy new year. All the best to you, your family and friends. 2019 will definitely be missed, but let’s make it even bigger in 2020!
כתב ויתור
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