Russell outperforming

Benefitting from shift in positioning

Charts of the Day

The Russell 2000 small-cap equity index outperformed last week, rising by 6%, or twice as much as the Nasdaq and three times as much as the S&P 500.

The CFTC data suggests the Russell has benefitted most from a shift in positioning - though with traders still holding a large net short, there could be further momentum ahead.

Macro

The October non-farm payrolls report showed a 531,000 increase. That was better than the 312,000 rise in the previous month, but left employment well below the early 2020 level.

With labor supply still short, wage growth continues to rise.

German industrial production growth decreased by 1.1% MoM in September, which took the YoY rate to -0.8%. The Ifo survey suggests growth will remain weak.

China's October trade data showed export growth was better than expected at 27.1% YoY, while import growth increased more than expected to 20.6% YoY., potentially good signs for global growth.

Markets

Traders have increased their positioning across cyclical trades in the past four weeks as the US economy has shown signs of gaining momentum again.

The CFTC data show traders no longer have a net long in 10-year Treasuries, and have cut their shorts in 30-years. In other words, fewer traders are betting on a steeping of the yield curve.

Being short 30-years and long 10-years has been a poor trade recently, as 10-year yields have risen while 30-year yields have fallen.

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