Market commentary “Wrapping the Week”

Alion Partners Capital LLP

Brokerage advisory and consulting

Welcome to another edition of Alion Partners Capital LLP’s “Wrapping the Week”, the place where we (a bunch of serious market guys) write our views about what has been going in the markets during the past week. Our commentaries and analysis are like no others’ – we take a humorous approach whilst trying to make you think about serious matters- Our aim is to be informative, analytic, precise, thoughtful, yet light and entertaining for a Friday afternoon.

… And hello again.

As expected, the G20 was a total farce but it did nothing, at least for 24 hours, to temper the triumphant calls for the Christmas Rally to finally begin:

Whoops! In one of the most volatile days in recent memory markets around the world descended dramatically. Various reasons were cited: the reality of the G20 meeting between XI & Trump not being as rosy as the Sunday headlines suggested, the worries about the yield curve inverting and finally, the arrest of the Huawei CFO in Canada at the request of the US.

Whatever, the reason -and in these cases, reason matters far less than the price action itself – the markets freaked out. The early week reversal caught so many off-side and predictably they blamed the Fed & the Algos.  Sometimes, one wonders if people think markets should never go down.

Has something really changed?  In the end, the market recovered a touch thanks to a timely story suggesting that the Fed was considering going a little softer on the rate path.  It’s a trading market, not an investing market.  I follow all this with a bunch of charts which, I hope, will provide you with a touch of context.  Ultimately, as long as inflation is benign, I cannot see the central banks not stepping in again.  After all, in Japan, the BOJ owns 40% of the Nikkei and other central banks have not been shy either.  If faced with a cataclysmic down move… will they blink? My money is on that they will.  Bear in mind the Fed leaked that story yesterday when the market was off 10% an ALL-TIME high in the US Markets.

And yet…this happened:

And the classic balanced portfolio is not holding up that well either:

And on an S&P500 Index price action basis – things are not looking too rosy either:

New 52-week Lows (with some big names in there…):

And Small caps ain’t looking great:

M&A Volumes… urgh:

Even if one was market neutral and doing a mean reversion strategy this year (the popular trade being: Long Europe/ Short US) you would have got killed. Decimated.  The US outperformance was stunning.

And yet people are struggling to make money:  It’s the Worst Time to Make Money in Markets Since 1972

And then there is Deutsche Bank which made another all-time low this week.  I won’t go on about this again. I’ve said enough and I am going to give you all a short break.

So, lots to be bearish about.  But it’s important to assess another view at times like these.  Especially as sentiment and news flow are extremely negative (60.7 – really impressive):

And then this: huge news that is lost in the market carnage but that have important ramifications for this century and beyond:

Stunning really, especially given the current oil price.  I give you a prediction:  Saudi Aramco will never float.  It’s too late.

Back to the Yield Curve.  Are markets getting ahead of themselves with all this recession talk?

And then, there is this… if you are a long-term investor, I mean, it is ok and useful for context, but I wouldn’t stick it in a risk-management slide for any Investment Strategy if I was pitching:

In the end, 2008 wiped out a lot of wealth. Even a bear market of half the magnitude would cause severe pain.

Right, time to move on. With Tech getting a lot of abuse in the press (and rightly so), I read this fascinating article on the ubiquitous Uber.  Definitely worth a read, especially when one considers it a taxi company, not a tech company. Great timing by the journalist also as Lyft announced their IPO intention this week: Uber Is Headed for a Crash

And with Tech in the picture, let’s see how Robo-advisors have performed in this sell-off market (or haven’t, should I say?).  This is a great article on AI by the guys at Epsilon Theory:  We’re Doing It Wrong

In Paris, the worst riots in decades forced Macron to climb-down on his fuel-tax.  But with nearly 80k security personnel on the streets this week, there is no letup.  Riots do work, you see?  The featured image in this comment’s headline (from Russian journalist and photographer Ilya Varlamov) captures the Zeitgeist nicely… and the true spirit of the times we live in 🙂

And now to finish off, something a little different…

Finally, I hear you cry!  We have been waiting for too long!!  First this absurd article on hiring women in the workplace with a number of men saying that they won’t hire women because of … (wait)…#metoo.  Beyond idiotic.  As one comment suggests (I’m paraphrasing) “soon they won’t need to worry about sexual harassment lawsuits as they will have plenty of sexual discrimination lawsuits” – my sentiments exactly.  Again paraphrasing:  “Just don’t be an a***hole” as another suggests.  Sadly, for some guys, that’s a bit of an issue.  Wall Street Rule for the #MeToo Era: Avoid Women at All Cost

Secondly, from a world gone by here is the doctor of Winston Churchill ensuring he had an adequate supply of booze doing a visit to the United States in the prohibition era. I love the written comment “keep on hand” and the “naturally indefinite” quantity.

Says it all (unfortunately they really don’t make them like him anymore…)

Wishing you all a good weekend!

The Alion team.


Important noticeCopyright Alion Partners Capital LLP 2018. Not for reproduction or retransmissions without written consent from Alion Partners Capital LLP. This is a Market Analysis and Commentary and not an official research report and the views expressed in this document are those of the author(s). The author(s) are not registered research analysts and there is no assurance the trends mentioned will continue or that the forecasts discussed will be realised. Past performance may not be indicative of future results. Alion Partners Capital LLP is authorised and regulated by the Financial Conduct Authority with number 540688.