The US stock market seems distracted from bonds, FX, the yield curve, macro data, and geopolitics… so here is a distraction for the distraction watchers…
It seems August was “buy all the things” month as bonds and stocks both rallied notably… and once again it was all about China…
Especially buy US stocks – because US data has been so awesome!! (US Macro Surprize index is down 6 of the 8 months of this year)
Chinese Stocks did not have a great August…
European Stocks were lower but only Italy was really ugly…
US Stocks just went upper-er and upper-er…
This was the Nasdaq’s best August since the peak of the DotCom bubble… (Dow/S&P best August since 2014)
Tech stocks led the way, massively outperforming financials…
FANG Stocks soared in August – second best month since January’s meltup…
Some context here from CLSA – FANG stocks have doubled on average in 23 months and tripled in 43 months
It’s even more concentrated than that. AAPL (the biggest market cap company in the world) is up a shocking 20% in August, and AMZN is up 13% – Combined they account for 25% of the entire Nasdaq gain in August.
Treasury yields tumbled across the entire curve in August, with the long-end outperforming…
Biggest drop in 10Y yields this month since March 2018 (and dropped to the lowest monthly close since March 2018)…
The yield curve tumbled in August – flattening for the 6th month in a row (with a small rebound today)…
The Dollar managed modest gains on the month – but was only bid early and late in August (highest monthly close since June 2017) with a big roundtrip in the middle triggered by China…
Despite China’s intervention, the Yuan ended lower on the month… the 5th month of Yuan devaluation in a row
The biggest headlines were from the emerging market space where currencies collapsed…
While The Rand, Real, and Ruble were rough; Argentina and Turkey Collapsed…
Emerging Market FX is now at its weakest on record…
In fact, EM FX volatility is now at a record high relative to G7 volatility…
Cryptos had another ugly month with Ethereum down almost 35%. Bitcoin was best… only down 8.5%!
WTI Crude managed modest gains on the month but across the board commodities were weaker – from PMs to Softs…
Gold managed to stay above $1200 but completed August with its fifth straight month of declines as the record run in U.S. stocks and rising rates boost demand for the dollar.
As Bloomberg note, throw in trade-war fears and the greenback’s quasi-haven status, and it just doesn’t look good for the yellow metal. In fact, it’s looking like a fool’s errand to try to call a bottom in gold. It basically boils down to the Fed and rates. Advocates of rate hikes cite preventing asset bubbles and controlling the money flow into the financial. For the doves, wages may be stagnant, but that does nothing to overshadow the more important number, the unemployment rate, which says keep hiking. The Fed is going to keep chasing its vision of what the economy should be, and gold’s going to keep getting crushed under the wheels.
Finally, we note that VIX was unchanged on the month despite stocks soaring…
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