Head of Research and Global Chief Strategist, Steno Research

Andreas Steno

Head of Research and Global Chief Strategist

Macro and Geopolitical Research House

Steno Research

Steno Research is a new macro and geopolitical research house. We are based out of Copenhagen, Denmark, but have an international team and a strong network of sources and partners around the world. The team is lead by Andreas Steno, previous global head of strategy at Nordea Bank, and Mikkel Rosenvold, former chief consultant in the Danish Ministry of Finance.

Cross Asset Strategy

<ul><li>Happy Sunday and welcome to our flagship editorial! What a week.</li><li>The BoJ no longer has a firm guidance towards higher 10yr bond yields, the Fed accepted higher long bond yields as an excuse to pause and economic data has been abysmal.</li><li>That cocktail has so far allowed the everything rally to thrive in a way we haven’t seen in quarters, but the feedback loop introduced by the big central banks may limit the scope of the bear market rally.</li></ul>

Happy Sunday and welcome to our flagship editorial! What a week.The BoJ no longer has a firm guidance towards higher 10yr bond yields, the Fed accepted higher long bond yields as an excuse to pause and economic data has been abysmal.That cocktail has so far allowed the everything rally to thrive in a way we haven’t seen in quarters, but the feedback loop introduced by the big central banks may limit the scope of the bear market rally.

Steno Signals #72 – When a Recession Meets a Melt-Up in Equities and Bonds

Head of Research, Steno Research

Emil Moller

Head of Research

<ul><li>Hello Everybody and welcome back for our weekly Portfolio Watch! As I am sure you are aware we have been awaiting the exact market move we have seen this week: The long end of the UST curve catching a breather fueling an inevitable risk-on rally.</li><li>That fear is essentially why we have abstained from going full-on short beta these past weeks.</li><li>A decision we are content with this week.</li></ul>

Hello Everybody and welcome back for our weekly Portfolio Watch! As I am sure you are aware we have been awaiting the exact market move we have seen this week: The long end of the UST curve catching a breather fueling an inevitable risk-on rally.That fear is essentially why we have abstained from going full-on short beta these past weeks.A decision we are content with this week.

Portfolio Watch: November Bear Market Rally?

Macroeconomic and Investing, The Macro Compass

Alfonso Peccatiello (Alf)

Macroeconomic and Investing

The Macro Compass

Actionable investment ideas and unique global macro insights. From the desk of a former Head of $20 bn Investment Portfolio straight to your inbox.

Actionable Investment Ideas

Macroeconomics

<ul><li>Investing is all about probabilities: all you need to do is assess the chances markets are assigning to different scenarios today and anticipate how this probability distribution will move over time.</li><li>In other words, you don’t need to be necessarily right on what happens next but just be able to grasp how market consensus will move from here.</li><li>Ignoring this simple principle has been a very expensive exercise for European fixed income investors over the last few weeks: the-ECB-will-never-really-hike mantra is melting under the eyes of bond investors married to a dovish narrative which has been successful for a decade but offers a very bad risk-reward today.</li></ul>

Investing is all about probabilities: all you need to do is assess the chances markets are assigning to different scenarios today and anticipate how this probability distribution will move over time.In other words, you don’t need to be necessarily right on what happens next but just be able to grasp how market consensus will move from here.Ignoring this simple principle has been a very expensive exercise for European fixed income investors over the last few weeks: the-ECB-will-never-really-hike mantra is melting under the eyes of bond investors married to a dovish narrative which has been successful for a decade but offers a very bad risk-reward today.

The Biggest Macro Risk You Might Be Ignoring

Managing Director

Elan Gore

TMI Data Science

TMI Data Science utilizes Natural Language Processing to build custom leading indicators using unstructured data sourced from the global financial, trade & traditional media.  Our proprietary software, TMI Machine, is a text-mining platform designed with the buy-side & capital markets professional in mind, text-mining the global media to discern and quantify nuanced qualitative shifts in press coverage as they apply to macroeconomics, equity indexes/ETFs, commodities, currencies, fixed income & individual equities.  TMI provides custom leading indicators and systematic trading strategies, operating at the nexus of linguistics & statistics drawing on vast experience in investment banking and hedge fund settings in senior quantitative and fundamental roles.  

TMI Data Science was founded by Elan Gore, an award-winning Senior Global Basic Materials Equity Analyst & China Economist with 15 years of experience in North American hedge funds & institutional managers; and Alessandro Porrino, Ph.D., an Algorithmic Trading Analyst and Programmer with 10 years of front-office experience ranging from complex FX option pricing to auto-hedging strategies at Bank of America Merrill Lynch and Standard Chartered.  Mr. Gore holds an MBA in Finance from New York University Stern School of Business, and Mr. Porrino holds a Ph.D. in Systems Engineering from Brunel University London.

<ul>
<li>Our text-mined inflation indicators have seen greater volatility over the summer months, with media reporting of supply constraints emerging as our best-correlated indicator for 5yr5yr inflation expectations in recent months</li>
<li>Reporting on supply constraints surged to a new cycle-high +5.2x STDEVs earlier this month, and remains elevated at +3.8x; among a basket of commodities, China (ZCE) coal futures have been the most strongly correlated with our supply constraints indicator at 58% in the T6M, followed by Newcastle coal futures, significantly ahead of other commodity correlations</li>
<li>The sharp rally in ZCE Coal to a new 52-wk high this week (+45% YTD), driven by persistent coal shortages in China, has had far-reaching implications for global cost curves across a wide range of commodities from aluminum to plastics and fertilizers; shortages have also led to electricity rationing in multiple provinces, limiting production and lifting prices on key commodities and manufactured goods</li>
<li>Record low Chinese coal inventories are raising fears of another severe coal supply crunch in the winter, suggesting tight coal supply may continue driving inflation in the coming months</li>
<li>While the China coal shortage is hardly the only source of supply constraints currently driving global inflationary pressures, we believe the correlations are not spurious; a near-record US trade gap, record Chinese exports and spiking China PPI all point to accelerating inflation transmission from China to the US consumer, with the coal crunch a key driver</li>
</ul><div class="content-highlight"><p>TMI Data Science utilizes text mining/NLP to build custom leading indicators using unstructured data sourced from the global financial, trade &amp; traditional media. Our proprietary tools text-mine the global media to discern and quantify nuanced qualitative shifts in press coverage as they apply to macroeconomics, equity indexes/ETFs, commodities, currencies, fixed income &amp; individual equities. </p></div>


Our text-mined inflation indicators have seen greater volatility over the summer months, with media reporting of supply constraints emerging as our best-correlated indicator for 5yr5yr inflation expectations in recent months
Reporting on supply constraints surged to a new cycle-high +5.2x STDEVs earlier this month, and remains elevated at +3.8x; among a basket of commodities, China (ZCE) coal futures have been the most strongly correlated with our supply constraints indicator at 58% in the T6M, followed by Newcastle coal futures, significantly ahead of other commodity correlations
The sharp rally in ZCE Coal to a new 52-wk high this week (+45% YTD), driven by persistent coal shortages in China, has had far-reaching implications for global cost curves across a wide range of commodities from aluminum to plastics and fertilizers; shortages have also led to electricity rationing in multiple provinces, limiting production and lifting prices on key commodities and manufactured goods
Record low Chinese coal inventories are raising fears of another severe coal supply crunch in the winter, suggesting tight coal supply may continue driving inflation in the coming months
While the China coal shortage is hardly the only source of supply constraints currently driving global inflationary pressures, we believe the correlations are not spurious; a near-record US trade gap, record Chinese exports and spiking China PPI all point to accelerating inflation transmission from China to the US consumer, with the coal crunch a key driver
TMI Data Science utilizes text mining/NLP to build custom leading indicators using unstructured data sourced from the global financial, trade &amp; traditional media. Our proprietary tools text-mine the global media to discern and quantify nuanced qualitative shifts in press coverage as they apply to macroeconomics, equity indexes/ETFs, commodities, currencies, fixed income &amp; individual equities. 

TMI Snapshot: Supply Constraints & Chinese Coal Correlations Stand Out as Inflationary Drivers

<ul>
<li>In a New York Times Op-Ed (<a href="https://www.nytimes.com/2021/08/19/opinion/biden-afghanistan-johnson.html" target="_blank" rel="noopener">"To Save His Presidency, Biden Must Tell the Truth About Afghanistan"</a>, August 19) historian and Georgetown University professor Michael Kazin suggests that "the president and his fellow Democrats face a political environment so daunting that even the slightest disruption could derail their domestic agenda"; Kazin draws an analogy to LBJ as "the last time a war blew up in the face of a Democratic president, it derailed his domestic agenda and stalled the most ambitious social reforms of a generation"</li>
<li>We employ text mining to characterize negative media coverage of Biden in the context of the Afghanistan withdrawal, along with other metrics offering clues on potential damage from a week of turbulence in American foreign policy</li>
<li>While the volume of negative coverage in the Conservative media is significantly larger, once we normalize the data it becomes apparent that outrage over the Afghanistan withdrawal is anomalously high on both sides of the aisle</li>
<li>We recognize links between the Afghanistan withdrawal and progress on domestic policy are unlikely to be apparent, as the fate of the budget resolution and infrastructure bill lies solely in the hands of the Democratic Party, and any overt attempt by moderate/centrist Democrats to capitalize on plunging presidential approval in the aftermath of the withdrawal would not be received well</li>
<li>The key indicator of incremental dissent in the Democratic Party remains the actions of Senators Joe Manchin and Kyrsten Sinema, who have already established themselves as thorns in their party's side and are potentially emboldened by recent events to oppose the progressive elements of Biden's agenda more forcefully</li>
<li>Challenges to Biden's domestic agenda could have significant market implications given the inflationary impact of infrastructure and social spending packages, as well as positioning in infrastructure equities; in fact, the quantum of negative Biden coverage in the Liberal media has been quite strongly correlated with a number of cyclical themes as we illustrate below</li>
</ul><div class="content-highlight"><p>TMI Data Science utilizes text mining and Natural Language Processing to build custom leading indicators using unstructured data sourced from the global financial, trade &amp; traditional media. Our proprietary tools text-mine the global media to discern and quantify nuanced qualitative shifts in press coverage as they apply to macroeconomics, equity indexes/ETFs, commodities, currencies, fixed income &amp; individual equities. </p></div>


In a New York Times Op-Ed ("To Save His Presidency, Biden Must Tell the Truth About Afghanistan", August 19) historian and Georgetown University professor Michael Kazin suggests that "the president and his fellow Democrats face a political environment so daunting that even the slightest disruption could derail their domestic agenda"; Kazin draws an analogy to LBJ as "the last time a war blew up in the face of a Democratic president, it derailed his domestic agenda and stalled the most ambitious social reforms of a generation"
We employ text mining to characterize negative media coverage of Biden in the context of the Afghanistan withdrawal, along with other metrics offering clues on potential damage from a week of turbulence in American foreign policy
While the volume of negative coverage in the Conservative media is significantly larger, once we normalize the data it becomes apparent that outrage over the Afghanistan withdrawal is anomalously high on both sides of the aisle
We recognize links between the Afghanistan withdrawal and progress on domestic policy are unlikely to be apparent, as the fate of the budget resolution and infrastructure bill lies solely in the hands of the Democratic Party, and any overt attempt by moderate/centrist Democrats to capitalize on plunging presidential approval in the aftermath of the withdrawal would not be received well
The key indicator of incremental dissent in the Democratic Party remains the actions of Senators Joe Manchin and Kyrsten Sinema, who have already established themselves as thorns in their party's side and are potentially emboldened by recent events to oppose the progressive elements of Biden's agenda more forcefully
Challenges to Biden's domestic agenda could have significant market implications given the inflationary impact of infrastructure and social spending packages, as well as positioning in infrastructure equities; in fact, the quantum of negative Biden coverage in the Liberal media has been quite strongly correlated with a number of cyclical themes as we illustrate below
TMI Data Science utilizes text mining and Natural Language Processing to build custom leading indicators using unstructured data sourced from the global financial, trade &amp; traditional media. Our proprietary tools text-mine the global media to discern and quantify nuanced qualitative shifts in press coverage as they apply to macroeconomics, equity indexes/ETFs, commodities, currencies, fixed income &amp; individual equities. 

TMI Snapshot:  Will the Afghanistan Fiasco Harm Biden's Domestic Agenda?

United States

iShares TIPS ETF is an exchange-traded fund incorporated in the USA. The ETF will track the Bloomberg Barclays Capital US Treasury Inflation Notes Index. The Index measures the performance  of inflation protected public obligation of the US Treasury, also known as "TIPS". 

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Steno Signals #72 – When a Recession Meets a Melt-Up in Equities and Bonds

The BoJ no longer has a firm guidance towards higher 10yr bond yields, the Fed accepted higher long bond yields as an excuse to pause and economic...

Steno Research

Portfolio Watch: November Bear Market Rally?

As I am sure you are aware we have been awaiting the exact market move we have seen this week: The long end of the UST curve catching a breather...

Steno Research

The Biggest Macro Risk You Might Be Ignoring

Investing is all about probabilities: all you need to do is assess the chances markets are assigning to different scenarios today and anticipate...

Alfonso Peccatiello (Alf)

TMI Snapshot: Supply Constraints & Chinese Coal Correlations Stand Out as Inflationary Drivers

Supply constraints appear to be a key driver of inflation expectations recently; we find that Chinese coal prices are strongly correlated with our...

Elan Gore

TMI Snapshot: Will the Afghanistan Fiasco Harm Biden's Domestic Agenda?

It may be difficult to link chaos in Afghanistan to domestic policy, but we are seeing some cracks in the Democratic narrative as outrage over the...

Elan Gore

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