Investors positioning for softer growth

Limited interest in cyclical trades

Chart of the Day

If we pull together the positioning data for some assets that might typically be thought of as cyclical bets, such as long oil or short bonds, then aggregate investor positioning does not look especially bullish. This appears to add to the reasons to think global GDP growth to weaken further in the near future, and is concerning some people because this apparent slowdown is underway just as many central banks are starting to tighten monetary policy, which could put even further pressure on growth.

Macro

US retail sales rose by a stronger-than-expected 0.9% MoM in September, while control group retail sales - which feed into the GDP data for consumption - rose by 0.9%. On a YoY basis, retail sales were up by 13.9%.

The US business inventories-to-sales ratio is still very low, but has started to rise in what may be a sign of supply pressures letting up.

China reported that GDP growth was weaker than economists expected in Q3, falling to 4.9% YoY.

In September, retail sales growth was better than economists expected, but industrial production growth was weaker - China experienced some power rationing in September was which is probably to blame.

Markets

Non-commercial traders increased their net long position in the USD again last week. We are getting close to the extremes in positioning that eventually coincided with a reversal in the US, e.g. in early 2017, late 2018 and mid-2019.

Traders are now short most other currencies against the USD.

The USD had a relatively poor week last week though, apart from notching up further rises against the Yen and Turkish lira.

Many traders track AUDJPY as a sign of overall investor optimism in the global outlook - the AUD has soared lately, which seems to be a more positive signal than the broader weakness of positioning on cyclical trades shown above.

US 5-yr/5-yr real rates have dropped back again, which may help the drop in the USD last week.

Like what you see? Please forward this email to your friends and colleagues, or use the button below to share it on social media. They can also follow us https://twitter.com/macro_daily