Peter Boockvar

Off the highest level since December 2021, Investors Intelligence said Bulls fell back to 45.1 from 48.6. Bears were up 1.1 pts w/o/w to 26.8. Typically Bulls above 50 would be extended and anything above 55 extreme. With Bears, something below 20 would be extreme. We also saw some moderation on the Bull side, also off the highest since December 2021, in the AAII survey. Bulls fell 3.4 pts w/o/w to 34.1 while Bears were up by 3.8 pts to 28.8. Bears got as high as 52.3 in December 2022 and the Bulls were as low as 15.8 last April. The CNN Fear/Greed index closed yesterday at 74, just 1 pt off the ‘Extreme Greed’ category. It was 70 one week ago and 32 one year ago. Bottom line, last week’s sentiment readings were pretty bullish, building through January as markets rallied after a long period during 2022 of dour sentiment, also following price. Following this new data the bullishness is still obvious but nothing that is too giddy. 

Last night the December Treasury International Capital flows data was reported and there were net foreign buyers of US notes and bonds totaling $20b which is the smallest amount since last April. In 2022, we saw a huge pickup in Treasury buying of $750b, the most on record. Higher interest rates and the equity bear market attracted a lot of buyers, particularly many that traded through the Cayman Islands. This as bonds sold off sharply as we know in the face of that. On the other hand, foreign central banks were net sellers and that has been a big picture, multi year trend. Japan again was a net seller in December as was China. 

China now holds their smallest amount of US Treasuries in 13 years and that decline picked up pace after the US and EU sanctioned and froze the Russian central bank and I guess you can’t blame them for lightening up. Japan’s holdings are just off the lowest in 4 years. As Treasury supply starts to amp up again as the US budget deficit gets wider still this year, whenever the debt ceiling gets raised, it will be an interesting dynamic in the Treasury market as we continue to lose foreign central bank buying, US bank buying and Fed selling (essentially) via QT at the same time we finally have yields that attract buyers, particularly US pension funds, insurance companies and individuals. 

The Bank of Indonesia held interest rates unchanged at 5.75% as expected but the Philippines central bank hiked by 50 bps to 6%, also as forecasted. Tight money is a global thing as we know and will be for a while, but which I don’t think has yet been accepted. 

Australia reported a softer jobs figure with an unexpected drop in payrolls and a rise in its unemployment rate. The head of the RBA, governor Lowe, had to defend his job the other day as some called for his resignation based on how he’s conducted monetary policy over the past year with persistent rate increases. Australia’s mortgage market has a lot of floating rate paper out there. The criticism though should have been more focused on how low they were prior and the YCC Lowe put in place that then blew up on him. There was little change in Australian yields in response and the Aussie$ is higher as are most currencies today vs the US dollar. 

If you hadn’t noticed, quietly the CAC is joining the FTSE 100 in trading at record highs in euro and pound terms. We continue to like some stocks domiciled in the UK, particularly the energy ones.

CAC

FTSE 100