Weekly Note 2022.12.05

Year-end Melt-upp

8 min readDec 5, 2022


At the core of my views is the idea that I see policy being on autopilot for the next couple of meetings — in other words, unless there are material deviations, I see it unlikely that we see any policy related shocks over that time and bond volatility will continue to subside.

That thesis was put to the test on Friday’s jobs report which keeps the pressure on the fed’s fight against inflation, after which I commented in the Macrodesiac discord: “think equities will recover the premarket move, if so I would maintain my bullish conviction”. Sure enough, markets reversed and lapped up the dip.

I’m currently focused on any threats to ‘milder European recession than feared’ and ‘China ZCP easing and gradual reopening’ narratives for downside risks to markets. Also with technicals appearing to be back to a critical juncture, I would see it important that those narratives hold up for the grind higher.



  • Bonds Rallying Back From Brutal Year Show Power of Higher Rates — Treasury buyers drawn in after interest payments surged, Market sees best month since March 2020 even with Fed hiking (BBG). Stocks Rise on Cooling Inflation and Fed Moderation. Don’t Celebrate Yet — Christmas came early this year for the stock market. Is there a Grinch waiting to ruin it? (Barrons)
  • Jobs Report Keeps Federal Reserve on Track for 0.5-Point Rate Rise (WSJ). U.S. Jobless Claims Fell Last Week, Showing Solid Labor Market — Proxy for layoffs consistent with low unemployment despite signs of broader slowdown (WSJ). Consumer Spending Jumped in October as Inflation Eased — Personal spending rose 0.8%, with new vehicle purchases helping drive gain (WSJ). Third-Quarter U.S. Growth Was Stronger Than Previously Thought — Job openings in October remained high and far exceeded the number of people seeking work (WSJ). U.S. Economic Growth Slowed This Fall, Fed’s Beige Book Says — Businesses expressed greater uncertainty and increased pessimism for the U.S. economy, according to the Federal Reserve’s latest compilation of economic anecdotes (WSJ).
  • Chinese Solar Manufacturers Dodged U.S. Tariffs, Probe Finds — Commerce Department findings are likely to accelerate importers’ race to find alternative sources (WSJ). Longi Says US Finding on Tariff Evasion Won’t Impact Firm’s Plan — world’s largest solar company, said that the US Commerce Department’s initial findings on Chinese companies circumventing tariffs will not affect the company’s operations nor will it change its plans for the American market (BBG).
  • Business-Software Companies Say Customers Are Pulling Back Amid Economic Concerns — Salesforce, Okta and CrowdStrike describe how clients are delaying certain purchases and becoming more cautious (WSJ). Apple Makes Plans to Move Production Out of China — The iPhone maker is looking to further diversify the supply chain that has powered its growth (WSJ).
  • U.S. Unveils B-21 Raider, the Stealth Bomber Designed to Deter China — Air Force wants 100 of the new jets, priced at $700 million apiece (WSJ). Pentagon Warns China on Asia-Pacific: US Will Keep War-Fighting Edge (BBG).


  • Euro zone factory downturn eased in November, inflationary pressures moderated (RTS). German, French Central Bankers Say Inflation Will Return to Goal — “We’ll bring inflation back to 2% by the end of 2024 or 2025,” Villeroy said. “This isn’t just a forecast, a projection. It’s a commitment.” (BBG).
  • France Prepares for Targeted Blackouts If Energy Crisis, Cold Winter Strain Grid — The contingency plan would cut power to some customers during peak hours, as the country struggles to repair nuclear reactors (WSJ)
  • Britain Is Near Bottom of the Heap for Economic Growth Potential — Former BOE official says dip explains high UK tax burden, Labor shortages behind steep collapse in growth ‘speed limit’ (BBG).
  • OPEC+ Keeps Oil Curbs Despite Russia Price Cap — agreed Sunday to stick to its oil-output targets two days after G7 agreed to a price cap on Russian oil (WSJ). Russia Is Boosting Its Cyber Attacks on Ukraine, Allies, Microsoft Says — Blog post says ransomware-style attacks have been spreading, Cyber attacks by Russia have also targeted supply chains (BBG). Russia Expands Shelling of Kherson, as Power Shortages Drag On in Kyiv (WSJ). Deadly Missile Strike in Poland Exposed Tension Between NATO Allies, Ukraine — Western officials remain rattled by Ukraine’s response, which appeared an attempt to prod NATO a step closer to direct conflict with Moscow. Within hours of a missile landing less than 5 miles inside Poland, the U.S. had determined that the strike was the result of a Ukrainian missile-defense munition, using signals, radar and other intelligence, U.S. defense officials said. Washington was quick to share its conclusions with Poland, which had started investigating the incident. In Bali, Indonesia, on the sidelines of the Group of 20 leaders meeting, President Biden told leaders from other advanced democracies that Washington believed Russia hadn’t fired the missile (WSJ). Ukraine war: Fighting set to slow for winter months, says US intelligence (BBC).


  • Yen, Won Lead Asia FX Surge as Traders Gird For Slower Fed Hikes — Asian currencies get boost from Powell comments on tightening, China reopening optimism adding to positive sentiment (BBG). China Wins Battle Versus Yuan Bears With 7 Per Dollar in Sight (BBG).
  • A Central Bank That Raised Rates Early Now Talks Up Recession — Reserve Bank of New Zealand governor says the attempt to slow economic spending is deliberate as inflation expectations are targeted (WSJ).
  • China Traders Hunt for Long-Term Reopening Winners After Frenzy (BBG). China signals ease in Covid policy after mass protests — The unrest was triggered by a fire in a high-rise block in the western Xinjiang region that killed 10 people last week. Many Chinese believe long-running Covid restrictions in the city contributed to the deaths, although the authorities deny this. It led to days of widespread protests across various cities, which have since ebbed amid a heavy police presence. Restrictions in major cities like Guangzhou were abruptly lifted on Wednesday, hours after the city saw violent protests that resulted in clashes between police and protesters. A community in the capital Beijing also allowed Covid cases with mild symptoms to isolate at home, according to a Reuters report — a far cry from protocols earlier this year which saw entire buildings and communities locked down, sometimes as a result of just one positive case. Other major cities like Shanghai and Chongqing also saw some rules relaxed (BBC). Shanghai Eases Covid Rules as China’s Policy Shift Expands — Financial hub joins other major cities in loosening rules, Zhengzhou, home to IPhone manufacturing, scraps most testing (BBG). China’s Xi Tells EU Delegation That Protests Reflect Covid Frustration — The Chinese leader’s remarks are his first known responses to recent demonstrations (WSJ). Taiwan Ruling Party’s Election Drubbing Could Ease Tensions With China — Local election results on self-ruled island could persuade Chinese leaders that they can peacefully influence politics there, analysts say (WSJ).
  • North Korea’s Powerful New Missile Has Shortcomings as a Weapon — experts say that for now it lacks the technology that would make it a potent weapon against the U.S. The ICBM tested on Nov. 18 was launched at a lofted trajectory, reaching an altitude of more than 3,700 miles and traveling a distance of about 620 miles. Japanese officials said it had the range to cover the entire U.S. mainland if it were on a regular trajectory (WSJ). North Korea hit with sanctions after ballistic missile tests — US and Asian allies imposed sanctions on three North Korean senior officials associated with recent missile tests (BBC).


Global equities continued to build on the revival in risk appetite last week…

Europe and Asian markets in particular reflecting the increased optimistic around a milder European recession and China reopening.

This brings charts back to a critical juncture:

SPX and DAX after roughly completing their measured moves have hit major pivot points…

and Asian indices have also rallied back to key technical areas.

In stocks, I am long duration stocks (softer US yields/$) and SMid-caps (on a cyclical recovery theme) as I think some have the potential to outperform larger-caps which amassed some defensive positioning.


Big wk/wk shift lower, particularly in TIP yields.

Forward inflation expectations have firmed up slightly in recent weeks but broadly starting to coalesce around the 2.5% mark...

and real yields (blue) continue to make lower lows and settling below pre-NFP levels at Friday close…

Quite the move in 10yr TIP yields from 1.5% to almost 1% in just a few sessions. I’ll be keeping an eye on this against the tap action in NDX as it has come a long way, especially if it recovers the NFP spike.


Long metals still looks to be a good theme - Energy driving the overall Bloomberg commodities index back to the low end of the recent range, almost -10% since the end of November. Markets reaction to the OPEC decision to rollover their existing output quota in the face of Russian price caps was rather tepid (unable to sustain a rally), and I take that to be a positive signal for the broader market. Add to that, softer US yields and Dollar, and I think we continue to see metals continue to firm up along with European and Asian sentiment.


USD is still on the backfoot — we’ve have some consolidation in the 2nd half of November and beginning to poke into new higher ranges into December. I don’t see any reason to fight the weaker USD (or the bid in UST’s just yet) but I’ll be keeping on the radar given the big move in rates and attractive levels to engage in tactical USD longs close by.

NZD has made quite the rally following the historic 75bps hike by the RBNZ is looking more like the final nail in the coffin for the Kiwi. After getting chewed up on my AUDNZD long attempts some weeks back, it is getting my interest again with RBA and BOC on deck this week. NZDCAD and NZDUSD NZDGBP also on the radar to choose from according to the days newsflow/sentiment/momentum etc.

SEK tends to be exceptionally strong during the December month and best expressed via NOKSEK which has been rejecting the 1.06 mark since mid-October and I would be comfortably short as long as it trades below 1.06.

Have a good trading week!