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.
US Headline Inflation has Peaked
As we expected, the US data for October released today showed a sharp decline in the rate of growth of inflation, with the CPI increasing by 0.4 % Month on Month, instead of 0.6 % expected by the consensus of economists and the Core CPI increasing by 0.3 % instead of 0.5 %
Year on Year the headline CPI is now at 7.7 %, a sizeable decline from the 8.2 % of the previous month and the Core CPI declined to 6.3 % against all expectations
We were right in our assessment that the combined forces of lower commodity prices in the previous months, sharply weaker ISM paid surveys, the sharp decline in real estate prices and easing tensions in the Labor market had to bring the headline figure down.
US Hourly and Weekly Earnings also came out on the weak side, declining by 2.8 and 3.7 % year on year, as we expected.
This is clearly good news for the US economy and for a FED that can now ease the pace of interest rates hiking ahead as we predicted.
These numbers were really make-or-break for the markets and they rallied strongly on the news.
Our Year-end bear market has clearly started in equities, US 10 year Government bind yields collapsed to 3.84 % and the US dollar fell sharply, sending Gold and precious metals higher.
What will be extremely interesting in the US equity market ahead is the fact that the rally will be mainly driven by the technology sector and the US large caps that are extremely oversold. The more mundane industrial and energy sectors are actually heavily overbought and will be holding back the advance of the indexes.
Strategically, we have therefore re-instated and increased sharply our exposure to the US mega cap technology stocks while increasing our short indexes as well in today’s sharp move. We shall have plenty of opportunities to trade the volatility and the long and short sides along the way, until we go back to strategically short globally
In Europe we follow the same strategy, being long extremely oversold stocks while keeping our short exposure to indexes that are overbought.
The following charts are extremely telling :
. SHORT THE XLE Energy Sector
. LONG the XLK Technology sector
These charts of the large technology stocks are also telling,
Today, we went long AAPL, MSFT, AMD, GOOGL, INTC and TESLA for our bear market rally ahead. All those sticks have 15 to 30 % upside in the coming phase while the SP500 index has a maximum of 6 to 7 % upside in our views.
We also added and Emerging market Internet sector ETF that is delivering a very strong BUY signal and has tremendous upside potential.
Conversely, and is the case in the US we have increased our short in TOTAL ENERGIES in Europe
The publication of good inflation numbers was key to the scenario we see ahead and marks a turning point in the way investors will look at monetary policies ahead. Central banks are bound go become more data dependant even if they are far from having ended there cycle of tightening, the European Central Bank will play catch-up with the US sending the EUR higher and US 10-year bond yields are likely to hit our 3.5 % target by year-end.
Equity sentiment should be more positive from now, and we re-iterate our target of 4’000 to 4’150 by January or February 2023.
However, a good number sunny day dos not mean that summer has come …
Global inflation will remain elevated and the resurgence of commodity prices may support the headline numbers inti 2023. On the other hand, the dynamics of economic downturns, lower real estate prices higher unemployment and lower asst prices are still very much in place and the next market narrative going into 2023 will be the unfolding of a recession and the decline in corporate earnings.
We see tensions with China easing and Chinese assets outperforming strongly ahead.
The crypto-world is imploding and investors should take the opportunity of any rebound to bail out of a complex that has no future in its current form. The collapse if the second largest crypto exchange is extremely bad news and shows how the lack of regulation and the reluctance of America to regulate the space is leading to trillions of US dollars of losses for investors who have gullibly followed some young folks in their fantasy of an un-regulated, independent financial system. Exchanges are not supposed to go bust .. They are supposed too be a place where investors and traders exchange freely and efficiently while the exchange itself makes a risk-less commission on the trades.
But the greed of their founders and of the entire crypto eco-system has imposed a model where making commissions is not enough, but where the wealth of the founders is based on the issuance of tokens that other dummies are supposed to be buying at higher prices, forgetting that at some point, there may no longer be dumb buyers but simply pure sellers.
This is exactly the stage the crypto currencies eco system has reached, a place where no one will be enticed to buy higher up because most people realise, including El Salvador, that there is NO intrinsic value in a piece of code, however rare it is….
America is very good at distributing sanctions left right and center, but not very good at containing its own excesses and protecting its investors…. A sad reality, ufortunately.
Enjoy the year end rally while it lasts…
New Asset Allocation
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