Welcome back to the column with all the most interesting charts of the moment!
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1. Treasury: Are you coming back?
In the last month, after weak economic data (Unemployment rate, ISM Services) the 10 Yr yield went down by more than 20 bps (and the 30 Yr Yield by more than 30 bps). As long as data will come worse than expected, we will likely see more falling rates.
The Citi Economic Surprise confirms that economic data are becoming less surprising.
Moreover, positioning can have a very big role in the current move on Treasury: for example, JP Morgan in his client survey told us that bank clients were very short on Treasury. It is possible that a short squeeze is happening here (investors closing their short positions).
Few weeks ago I bought a short Treasury ETF (TBF). I decided to cut half position when Treasury yield went below 1.40%.
2. Equity indices: some good and some not
The bullish movement on Nasdaq is keep going after the breakout of the big resistance above 14k. Low rates can push the index even higher.
The breakout didn’t happened on Dow Jones, where tech stocks have a lower weight. The pause on reflation trade didn’t help the index to reach new highs.
3. Forward P/E suggests that anemic returns are coming
When Forward P/E is at 21.5x, on average the 5 Yr annualized return for S&P 500 is zero. Will this time be different?
4. Stocks with a good setup
Amazon: the stock finally broke the resistance and reached new highs. The move of the Pentagon to split the Jedi cloud contract between Amazon and Microsoft was a positive catalist for AMZN. The beginning of a new bull movement?
SAP: the German tech company suffered heavily after a profit warning launched in October 2020, but the stock just passed 120€, where stood a big resistance. The upward revised guidance and the recent double upgrade by BofA (from underperform to buy) are both positive catalysts for the stock. Risk/reward very appealing.
Ball Corp: the company that produces metal packaging for beverages, foods and household products is having a very tough year (-11% YTD), but the stock just approached a very big support. Multiples are low (compared to the past). Technicals and fundamentals suggest that a purchase on the support could be considered (but this is not a financial advice).
Have a great week!
See you soon!
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