For by now, you will already know the French election results which will be the preeminent driver of all asset prices worldwide for the coming week.
If Nationalist Marine La Pen wins, the demise of the European community will begin, throwing the continent into political confusion and recession. The Euro is toast.
Stock markets everywhere will crash.
If, instead, former investment banker Emmanuel Macron is successful, Armageddon is postponed. He is a French civil servant who is strongly pro trade, pro globalization, pro immigration, and pro EU.
Stock markets everywhere will rally sharply.
Further complicating matters is that the four leading candidates are all polling at around 20% going into the election. In other words, it is anyone’s guess.
What’s worse, 25% of French voters are still undecided.
And, if you correctly predict the outcome, markets may well do the opposite of what you expect, as they have done over the past year.
So wake me up when it’s all over.
I’m going into the election with a 70% cash position, with the Mad Hedge Fund Trader Profit Predictor Market Timing Index posting a very nervous 31.
For more detail on the French election, please click here on my recent research piece, “Why You Should Care About the French Elections”.
As if we did not have enough to worry about.
We are coming out of the worst week of 2017 for stocks, as faith in the president’s many promises melts like an ice cube in the Sahara.
We lurched from crisis to crisis, apparently declaring war on a new country every day, the most recent of which was Canada.
Better stock up on maple syrup before supplies disappear! As for your season tickets to the Toronto Blue Jays, they’re no longer worth the paper they’re printed on.
However, the administration is clearly watching the market.
Whenever it is about to fall off a cliff, someone will come forward with a wildly optimistic tweet or speculation about how soon tax reform will take place, triggering a short covering rally.
On Thursday, it was Treasury Secretary Steven Mnuchin’s turn.
So far, the faders have been winning.
Also disturbing is that fact that the “better than expected” earnings aren’t coming out “better than expected”.
Look no further than Goldman Sachs (GS) and Johnson & Johnson (JNJ) which delivered rare disappointments.
Of course, the gob smacking, eye popping plunge in interest rates is to blame, with the ten-year Treasury yield plunging 50 basis points in a month to 2.16%.
The performance of the Mad Hedge Fund Trader Trade Alert service continues to move from one new all time high to the next.
However, the rate of increase has slowed in recent weeks.
I took two, small, inconsequential losses stopping out of short positions in bonds before the real damage ensued.
Yes, the losses were minimal, but I was robbed of the potential profit from these positions a mere three days before the option expiration.
That was more than made up for by wins in the S&P 500 (SPY) on both the long and short side, and by similar trades in the Volatility Index (VIX).
I also took a punt on the long side in (IBM) in the wake of the company’s disastrous Q1 earnings report. I missed getting off an oil short before the meltdown started by the skin of my teeth.
All of this left me with my 2017 performance at 23.29%, and April up a healthy 2.68%. This compares to a SPY that is up only 4%.
Did I mention that my profits have tripled since I implemented by market timing algorithm six months ago?
I’m sorry, but the harder I work, the luckier I get.
Expect markets to remain in narrow ranges for the four weeks these reports emerge.
It will be a big week for technology earnings, with Amazon (AMZN), Intel (INTC), and Microsoft (MSFT) reporting.
On Monday, April 24th, at 10:30 AM EST, the first report of the week is the April Chicago Fed National Activity Index, a weighted average of 85 monthly economic indicators.
On Tuesday, April 25th at 9:00 AM EST, we receive the S&P 500 Case Shiller Home Price Index for February. My bet is up, up, up!
On Wednesday, April 26th, at 7:00 AM EST, we learn the weekly MBA Mortgage Applications.
Sometime on Wednesday, the Trump will go public with his latest tax plan. Expect it to get shot down immediately.
The weekly EIA Petroleum Status Report is out at 10:30 AM.
On Thursday, April 27th, at 8:30 AM EST, we learn the Weekly Jobless Claims. Last week’s number was essentially unchanged close to a 40 year low.
Also at 8:30 AM the March Durable Goods Orders comes out. March Pending Home Sales is published at 10:00 AM.
On Friday, April 28th at 8:30 AM, we learn the first read on Q1 GDP. Both the Fed and private banks have recently been paring back their forecasts to as low as 0.50%. This one could be a biggy.
Wrapping up the week at 1:00 PM is the Baker Hughes Rig Count, which has been up for most of the last year, boding ill for oil prices.
Oh, and one more thing. The government completely runs out of money tomorrow and will indefinitely shut down. Don’t plan on getting that Social Security check.
Maybe.
As for me, I’m going to spend this weekend practicing my flying skills.
With four potential wars on the menu, they may start calling up 65 year olds.
They can, you know.
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ABOUT THE AUTHOR
The Diary of a Mad Hedge Fund Trader is written by John Thomas, one of the founding fathers of the modern hedge fund industry.
Seeing the incredible inefficiencies and severe mis-pricing offered by the popping of multiple bubbles during the Great Crash of 2008, and missing the adrenaline of the marketplace, he returned to active hedge fund management. With The Diary of a Mad Hedge Fund Trader, his goal is to broaden public understanding of the techniques and strategies employed by the most successful hedge funds so that they may more profitably manage their own money.
John graduated from the University of California at Los Angeles (UCLA) with a degree in biochemistry and a minor in mathematics in 1974. He moved to Tokyo, Japan to join a Japanese securities house as a research analyst, becoming fluent in Japanese. In 1976 he was appointed the Tokyo correspondent for The Economist magazine and the Financial Times. For the next seven years he published thousands of articles about the economies, companies, and leaders of Asia. He was one of the first American correspondents to cover China during the Cultural Revolution.