week #38 - 2024

Market Signals, Fiscal Flows, and Trade Insights: portfolio recap

Good morning folks,

We finally had the cut, and everyone seems to be happy by looking at market moves. We will update systematic signals across the board and give some hints on fiscal flows.

This is a late-in-the-week report, and we are starting to look forward to next week, which is quite intense in macro terms, with lots of data coming out. It will be fun.

Fixed Income

In fixed income, signals remain bullish across the board. Trend has been the big winner in recent weeks.

The strongest signals come from the US short-end, Canada short-end, Gilts, and BTPs. Signals were pretty clear, and the market bias was too. I'm holding the US curve steepening, 2s10s. It's a core position, and I like it. On a relative basis, I'm holding BTP/Bund, but I locked in some profits in recent days as the spread got quite stretched. Just waiting for a pullback to get in again. (I was writing this on Fed day—the spread widened a bit, and I got back into it with more size the next morning.)

Implied positioning is not that extreme across the board. The only ones showing up are Canada short-end and 2s in the US. Everything else is in the middle of the range.

When looking at a simple calculation for 2s and 10s in the US, where I've been focused beyond BTP/Bund, we still prefer the front-end of the curve. Below I report a summary table on why: I follow the rules of Bassman, nothing more, nothing less.

Equities

Trend signals are bullish across the board, with the best picks being TSX, Ibex, SPX, and RTY. When factoring in acceleration and convergence signals, EU banks also show up as one of the best longs, and we are holding them strongly.

The trend there, from a fundamental perspective, has changed, and the ECB revisions support the case. We are overweight on Italian banks in our equity baskets. We need to be mindful of how stretched the implied positioning is—+8.48, according to our measure. We can lock in some profits and wait for a deceleration of the fast-trend measure to add again. Watch out also for IBEX, as we have an implied positioning of 9.99.