Chart of the Day

The CFTC Commitment of Traders report shows a big drop in net long USD positioning the last week, in keeping with the USD’s depreciation on a trade-weighted basis. That move seems a little odd in light of the sharp rise in US real yields versus many other countries in the past few weeks, but the theory is that the USD is suffering from the sell-off in US markets, with foreign fund managers sharply reducing their exposure to US tech stocks and therefore reducing their USD positions as well. That means the USD could continue to suffer if tech stocks keep performing poorly, even though relative interest rate differentials imply the greenback should be doing well.

Macro

The US conference board leading indicator settled at a relatively high level in December, a good sign for the outlook heading into 2022.

Markets

Speculative positioning is still relatively muted, perhaps a sign the US business surveys will fall further.

Platinum had a great week and there is still scope for positioning to turn in favor of the metal.

The flipside of the drop in USD positioning is a big move in favor of other currencies. Traders are once again net long the GBP.

In the eurozone, the 6-month credit impulse is has turned positive again, normally also a good sign for the coming months.

US markets have performed much worse than those elsewhere, due to the much larger weight of the tech sectors in the US indices.

The only two sectors to rise in the past month are energy and to a lesser extent consumer staples - a mixed picture because the former is a clear cyclical sector whereas consumer staples are a defensive sector.

The relative performance between consumer discretionary and consumer staples has been striking.

That is partially because some tech stocks like Amazon are in the consumer discretionary group, and those have sold off alongside growth stocks more generally. On the whole, value stocks have still done badly lately, just not as badly.

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