Antipodean Capital Macro Strategy Daily Nov 8 - Equities rebound tussling with technical moving average resistances. Fundamentals around EPS/margins still ok. Year 3 of the Presidential Cycle is typically very strong, implying 15% returns.

Today’s themes: Presidential Yr cycles imply very strong gains for US stocks after what has been a rough and tumble 2nd year. We also look at yesterday’s NZ jobs data and while probably an outlier, the impact on NZD is undeniable.

Macro: US Equity cycles: Stocks are greeting the mid-term outcomes favourably. The 3rd Yr cycle validates that view. (Theme: The US equity cycle has had a year of flux, down, up and then down again, but is closing out Q4 with the rally we expected. Data cycles are probably peaking but EPS/margin trends are still up. This is added to by Presidential cycles which tend to be favourable, exceptionally so, in Yr 3).

Macro: NZ: All the recent data out of the household and business sectors in NZ suggests a decelerating economy. Yesterday’s jobs data didn’t agree though. (Theme: The NZ economy peaked in mid ‘17, and has since been decelerating via housing, migration and dairy price peaks. However, the economy isn’t dead and buried yet. Yesterday’s jobs data reinforces that).

Summary: US stock markets soared after an expected outcome of the US mid term elections, with the Democrats controlling the House and the Republicans still in charge in the Senate. The USD fell presumably due to prospects of less stimulus and further pressure on China re tariffs. Yields stayed firm but the US 2-10 curve flattened 5bps due to perhaps fears of reduced growth and inflation pressures.

New trades: None.
FX: Short EURSTG at .9010 risk .9150 target .84. Long AUDNZD 1.0750 target 1.12 stop 1.05. Short USD Index at 96.17 risk 97 target 94. Buy JPYKRW at 10.17/9.90 risk 9.60 target 13. Long GBP 1.2770 risk 1.27 target 1.33.
BONDS: Long 2 units ASX Banks 5yr CDS at 54bps, target 140. Long NZ 10s sell NZ 2s at 104bps risk 130bps target 50bps. Sold Portugal 10yr bought German Bund at 158bps, risk 110bps target 350bps.
EQUITIES: Long ASX All Ordinaries Top 100, Short ASX Small Ordinaries at 0.81x ratio. Long Dow Transports 10175 risk 9950 target 10750. Long Ashares at 2602 risk 2520 target 2800. Sell Homebuilders 755/800 risk 850 target 650.
COMMODITIES. Long Silver short Gold at 83.9x risk 87 target 65.