MAXIN GLOBAL FUND - USD is a Long / Short Directional hedge Fund incorporated in Luxembourg. It started trading on February,22 2022 and replaces MAXIN ADVISORS' MODEL PORTFOLIO which has been trading since January 1st 2014. At MAXIN ADVISORS, we manage FULLY TRANSPARENTLY and publish the transactions on a DAILY basis and the details of the portfolio on a WEEKLY basis.
Year-End Rally Peaking
Today’s release of the FED meeting confirmed our view that the pace of hiking of the FED would ease ahead, and equity markets took it positively as would be expected, with the SP500 closing at 4027, its highest level of the past three months. Tech stocks rallied but the Nasdaq failed to surpass its previous November high.
Bond markets rallied as well with the US 10 year government bond yields falling to 3.69 % and the market narrative is becoming more bullish overall. The US Dollar weakened somewhat and precious metals regained some strength.
However, we are shifting our Year-End rally roadmap to a November-end rally roadmap…
It has always been our strategic call that a bear market rally would unfold in the fourth quarter of 2022 and timed the reversal perfectly at the end of September and on October 13th.
Since then, European and US equity markets rallied strongly and emerging markets marked a significant turning point with the sharp reversal in Chinese equities. We also expected the rally to be propelled by a sharp rebound in the US technology mega caps.
However, we are witnessing a very significant loss of momentum on the upside in Western markets that have become clearly overbought and many sectors, sub-sectors and individual stocks are delivering SELL signals that cannot be ignored.
Moreover, mots strategists have our 4^150 traitée as the ultimate peak for this phase, and the markets are such that when too many commentators are expecting a turning point at the same level, markets tend to turn earlier and lower than the consensus targets.
We are getting very close to a major resistance level at 4070 / 4100 and the internal dynamics of the markets are telling us that the main indexes will find it extremely difficult to surpass that resistance and our timing tools point to a peak by the end of November, at the latest at the very beginning of December.
Investors should not chase this rally in bonds or in equities and the turning point will probably come from macro data. After a roller coaster year, institutional investors will be happy to sell into year-end strength, if any, to protect the rebound in their yearly performances and there is nothing on the macro side to justify any aggressive positioning.
In the US, we see the market narrative shift from inflation fears to economic deceleration.
The recent data points to an easing of the job market and the releases of the coming week may well see a significant deterioration in business and confidence expectations. real estate prices are falling sharply, and this is a global phenomenon, and we see more and more companies freezing hirings and laying off staff.
Oil and copper are falling sharply on lower demand and although China is turning the corner and easing monetary policy, it will take some time for the economy to roar again.
We are also worried about Europe where inflation is still roaring and the CentralBank extremely lagging behind … Nasty surprises could come from the old continent with a sharp pivot of the ECB from what has been an extremely gradual tightening to a far more aggressive pace of tightening in December.
The FED will continue to send its message of restrictive rates, and even if it shifts to rate increases of 50 basis points, Fed funds will ultimately have to rise to above the deflator. We are still way behind the curve there.
Finally, corporate news are not very good globally, and we have now entered the stage where US corporate earnings will start declining, not good news for equities in general, and very negative news when coupled with interest rates at 5 %.
At 19x current peak earnings, the SP500 is still way too expensive and clearly not at levels that would mark the bottom of any bear market.
In the next few days, we could well see the markets grinding higher towards our targets for the peak of this bear market rally, and we doubt that, contrary to our previous expectations, it will push into the new year.
We expect the turning point to be brought forward and the next leg of the bear market will take the indexes much lower as we have articulated many times before.
The next bear phase is about to start and we are positioning ourselves for what is to come,
China is in a completely different dynamic …
The secular bottom has been made, COIVD restrictions are becoming unbearable and causing the most acute social unrest seen in decades, the Government is shifting its COVID-strategy gradually and economic growth is the number one priority.
We see Chinese equities mounting another bull phase very soon as well.
Transaction Update 23 Nov 22
Today, we have been adding to our Chinese tech positions with BILIBILI, JD, BAIDU as Chinese tech stocks are reporting good earnings and sales and have added a new position in DAQO Solar to replace Xinyi Solar where we mad e good profits in November.
In Europe, we added two individual short positions in ENGIE of France and GENERALI of ITALY.
In the US, we have been taking profits on our long US Government bond ETF and have accumulated more long volatility positions. Finally, we have increased our short SP500 and Nasdaq positions into strength.
Our portfolio exposure is now neutral, strategically long China and short the US and Europe