So, why is the stock market is still resisting from going south? This question seems poingnant as one of the most bearish hedge-funds, Horsman Capital, is down as much as 22% for the year to date, with a net stock position of -95%. If we bear in mind that the fund closed the year in 2018 up circa 8%, thanks to the 14% rebound during the December global sell-off. If we go back to the original question, we currently live in a world of chaos between Hong Kong turmoil, US-China trade negotiations, German recession , European potential collapse, no-deal Brexit, global PMI contraction, renewed Italian political instability, record amount of negative yielding debt (see chart of the week) and last but not least central banks facing historically challenging horizon. Yet, some investors apparently have bullish views on risk assets. According to a recent macro research paper published from Nomura, the risk-off mood might fail to gain traction because of two main factors:

• Surprisingly healthy incoming macro data
• Contained credit crunch risk

What looks very interesting is the general positioning amongst the various active strategies, where some patterns might stand-out:

• Herd behaviour raising from long positions on US Treasuries and short positions on Hong Kong equities gains momentum
• Factor-oriented investors are staying out from high-beta (ultra-sensitive) stocks
• Global Macro hedge funds remain bullish on fundamentals, rejecting the idea of an approaching recession

Last week’s stocks rally has erased all Trump vs China trade war escalation losses. Although the bond market does not seem to buy it.

Consumer spending currently accounts for about 70% of US GDP, as a crucial pillar of the domestic economy. Consumer confidence is deteriorating, and it seems like US consumers are propping up the economy with money they do not own. The total outstanding consumer debt boosted above $4tn in Q2 2019 (up $208bn over the last 12 months). Revolving credit, primarily in credit cards, increased at an annual rate of 5.3% in Q2, consisting in a total $1.07tn owed. Americans have been spending money they have borrowed and not only that, they have been doing it in a very “unsustainable” way that have some similarities to what happened pre-great financial crisis. According to a CNBC report, the rich have cut their spending on everything from jewellery to homes as recession fears is are intensifying. It may soon arise that GDP the once driving force could halt in the coming months, as it ceases to remain as the primary recession deterrent.

Next week our macro spotlight will be on?

Monday:

• Manufacturing PMI – Canada
• Manufacturing IHS PMI – Italy
• Manufacturing Markit & BME PMI – Germany
• Business CAPEX – Japan
• Manufacturing PMI – France
• Manufacturing final PMI - Eurozone

Tuesday:

• ISM Manufacturing PMI - USA
• All car sales – USA
• Consumer PMI - UK

Wednesday:

• Real GDP - Australia
• Service PMI – UK
• International Trade – USA
• Trade Balance - Canada

Thursday:

• Trade Balance – Australia
• ADP National Employment – USA
• ISM Non-Manufacturing PMI - USA

Friday:

• Non-Farm Payrolls – USA
• Unemployment Rate – USA
• Unemployment Rate – Canada
• Ivey PMI - Canada

Chart of the week

Fact of the week

For the first time in history, the fed funds rate is at the highest rate amongst other developed economies.

Quote of the week

"We must immediately get to work and draw up a budget to avert the VAT hike, protects savers and offers solid prospects for economic growth and social development"

Conte, Italy PM, on the newly forming government priorities