US un-exceptionalism is the theme
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Hello and welcome to the Saxo Market Call. It is Tuesday, March 11th, 2025. Almost a historic day, you could argue, with markets yesterday. No proximate cause to the sell-off, but the sell-off deepening on top of what has already been a pretty steep decline, at least if we look at the U.S. Of course, that is the exceptionalism here in the U.S.'s case is not a positive one, it's a negative one. We'll talk about why that may be. Elsewhere in the world, we were seeing some risk-off, but this is really all about a huge slide in the U.S.,

At one point down, if I recall, 800-something points on the NASDAQ 100. If we look at where we were top to bottom, so at the worst levels yesterday, the NASDAQ down some 13.4%, and at least the e-mini S&P future has been down 9.87%. So missing an academic, strictly speaking, or strictly defined correction, quote-unquote, by just 0.13%.

And as I put on slide two, I've put up the QQQ, which is the NASDAQ 100 ETF. And you can see we hit a pretty interesting technical level yesterday. The low right on the 61.8% retracement of the rally from the early August low. So an important technical area there.

I would argue we've talked about the 200-day moving average. That has now become resistance. And if that is broken, then we start to look at various Fibonacci retracements top to bottom from what we've seen so far. But for whatever reason, we saw a reasonable bounce in risk sentiment overnight. That was before Donald Trump, Ulla Hansen, was out saying that –

that he's very upset about everyone boycotting, apparently illegal boycotts of Tesla vehicles. I don't know what an illegal boycott is, but he said he was going to buy a Tesla today, and we'll see what impact that has on Tesla stock beyond the 6% bounce it saw in after hours. Yeah, and so far it actually continued, so it's up 10% at this point in time. So we'll see, but yeah, it's...

It is what it is. What can I say? Let's move swiftly on. Let's move swiftly on. And we have the Apple, by the way, closing exactly on its 200-day moving average. I think 200-day moving averages are quite important for a single stock. So that's an important demarcation line for that particular stock as well.

And then I'm finding it quite interesting that we see Euro posting new highs. We see the bunds yields trying to continue back higher. In today's trade, after the news overnight, the German greens are playing really tough on CDU leader Matz's attempt to get this massive new fiscal package through. Again, he's reconvened the old Bundestag, which expires, if you will, or has its last sell-by date on March 25th.

to pass this bill because the new Bundestag is missing

The 66% majority needed by the centrist parties to get these sort of constitutional rules changed to be able to do this type of spending package that he wants to do. And they're playing tough here saying that they're against the – I guess the environmental impacts of defense spending. It almost boggles the mind that this is the case. But let's see what comes of it. They're playing tough but the market is not taking this too seriously just yet.

and then we have oh you you uh helpfully gave us this uh set up this chart on the following page slide three where we can just see the year to date sorted by year to date um also the one week etc

Performance of the MAG-7 stocks and Tesla pretty firmly slipping off the MAG-7 radar in terms of the market cap leaders, but down 45% year-to-date. NVIDIA, a very high beta stock, of course, down 20% and on down the line. Meta is the only one that's still just managing a positive performance year-to-date, with Apple, which I mentioned before, down 9.2%, still a market cap of $3.4 trillion.

And then we have the earnings incoming this week. A couple of interesting names. We had Oracle out with, I think it was slightly disappointing operational results, but a very strong forecast on the spending and data centers and the so-called Stargate project. But the market was partially, I'm sure, due to just simply the across-the-board selling was a little bit down. Oracle shares were a little bit down after the close. We had Volkswagen out this morning. They insisted their top line is going to grow this year.

And that stock is up a couple of percent today.

in today's trade already. And other names reporting this week, Rheinmetall is a really big one because of just the incredible gains that stock has seen. The German defense, I think mostly tanks, I'm not sure, all kinds of other defensive goods that they are producing up with earnings tomorrow, as is Adobe. And I put a chart in there for Adobe. So this was one of those companies that was meant to show that you could get something out of AI in terms of the applications it would generate, could be transformational for the revenue outlook,

I think that explains a lot of its big pump there in late 2023 and into early 2024. I put a chart there on slide four. You can find a link to the slide deck in the podcast episode description, by the way. But as you see from the figures I put there, the quarterly figures which show year-on-year revenue growth, there's just no growth story there.

No exceptional growth story there. A steady 10%-ish, maybe 11%, and actually predicted in the next couple of quarters to drop down towards 9%. So where's the beef in terms of the amazing new apps that are supposed to come, at least for a company like Adobe? Not just there yet.

But of course, the longer the shares stay relatively flat, when the company continues to grow at 10% to 11%, at some point it becomes slightly less overpriced relative to its earnings growth. I just think it's interesting to see that a company of Adobe stature is unable to at least show any kind of significant shift in its growth outlook with AI.

All right, let's shift a little bit to the commodities market. I'll get back to FX in a minute. I don't want to just have this be a long monologue here. I've been really, I think I'll go all the way forward to slide seven, just remarking on gold. I mean, it just seems like such an opportunity to, and maybe I'll throw this to you and then I'll go back to why stocks may be selling off and see if I can connect the two things. But

We have semi-fast markets. If you look at the U.S. stock market, it's a fast market. And usually a fast market means you get some contagion across markets. You're seeing, oh, correlations are going to one. We did see a treasury rally yesterday, but it was not really that impulsive relative to what's going on. Equities, currency is very quiet relative to equities. And gold did sell off. So the idea that we sell off a bit, but just not much volatility there.

No, and that potentially also indicates that this market is not in full-blown panic mode because, as you say, what tends to happen when that occurs is basically that all correlations go to one. Basically because...

risk reduction becomes the main focus, volatility spikes. So if you're a leveraged player and you're tracking a certain level of volatility, if that goes up, you have to reduce your risk. And you're not piggybacking or choosing which position to reduce. You do it across the board. And that's why in a situation like that, gold tends to be struggling a bit as well, simply also because it's been very popular recently. There's quite an elevator long there. So I suppose the fact that it hasn't dropped

further than it did overnight. It was 2880, I believe, we've seen now for the past two days being the low. That, I think, is still a signal to this underlying strength that we continue to see. And as I put in, you used Fibonacci's earlier, John, on the NASDAQ. If we use the same on gold and just take the recent run up, then really gold can correct down towards that 2800 level without really significantly hurting the bullish narrative. So we're holding well above that.

Recently, we've just seen a little bit of a shift. So-called fast money, so hedge funds, they've been reducing their exposure, while the ETF, which tends to be a little bit more sticky and longer term, they have been adding to their exposure. So that's also interesting. And I think that ETF addition is probably coming at a time where the market is starting to

at least, well, trying to price in the risk of stagflation in the U.S., i.e. inflation moving higher at a time where growth is slowing, potentially leading to rate cuts. Yeah, and on that note, on the inflation note, we have that inflation data point up tomorrow. We'll talk about the calendar for the rest of the week in a minute. But connecting that thought a little bit then, so we talked, or I mentioned that it is mostly the U.S. market that is really suffering here relative to the rest of the world. And

I really am convinced that this is sort of the anti-US exceptionalism trade perhaps with the way that Trump has postured, the unpopularity for Trump and Vance and otherwise, and Musk in particular. This has generated the rest of the world has maybe some large monies out there reassessing their exposure to the US and whether it needs to take that exposure down. And you could argue, is it PR? Is it just popularity or is it also –

The general notion that the Trump administration is happy to front load the economic pain and a recession, it helps to get interest rates down and maybe recap some of the – or sort of refund at lower rates. But as well, then it gives the chance for their other hoped-for moves at least in terms of deregulation tax cut. And I think that the dream –

whether it fails eventually or otherwise, and that's where I think the popularity risks come in, of using the tariffs as a tool to encourage inbound investment into the U.S. That's sort of the three-pronged, besides all the bit about lower oil prices that they want to do. We'll have a recovery by late 2026. So you could argue it's – I think it's probably a bit of both. So you have to answer if you're a big investor and you have –

holders of your funds that are looking at what you're investing in and saying, so why does it be on a hundred million dollars of a Tesla shares in our, in the fund? This kind of thing is, is probably being looked over as well as just the general, uh,

general weighting of the U.S. got so excessive there at the very highs. Yeah, and I think what investors found outside the U.S. in recent years is simply that if you look at their pension accounts, they've been quite often struggling to keep up with some of the performance that has been seen, especially in the U.S., and that just highlights the fact that for a number of years,

Many investors outside the U.S., they were underweight in the U.S. market, and they were also underweight in technology. And I think probably, unfortunately, last year a lot of investment decisions were made to change that exposure, obviously leaving quite a few left high and stranded at these levels we're seeing right now. But whether we're going to see pension companies make a quick turnaround, they tend to be like supertankers,

before they make any changes, that it takes some time. But there is potentially seen an overweight moving into the U.S. market. And if that is now proving to be the wrong decision, then obviously there will be some additional selling coming down the line. Yeah, and it does feel to me like the sell-off is just a bit strange. The feel of the way it technically – the price action, I guess you could say, just feels a bit different from some of these prior simple, straight-up, the market got over its skis into over-leveraged type of trades. Let's see.

All right. Yeah, let's go to a foreign exchange where I've put up the usual slide, slide five, where you see that strong euro rally. And the reason the euro is only 5.5 is it's an average of the euro positive reading, so trend reading across all of G10. And now we have a Norwegian krona that's suddenly trying to get a little bit cheeky with a rally after –

very strong Norwegian core inflation print yesterday. So have a look at Euronauki, but of course it's Eurostocki as well. So the Swedish krona has been sort of a multiplier on top of the euro strength, continues to rally heavily. And then in the weak category, we have the US dollar, but also the Australian and Canadian dollar feeling a bit of that risk off, I think, yesterday. There's still also the uncertainty on tariffs in Canada and

The new liberal leader, Mark Carney, will become prime minister as well, putting up a pretty tough rhetoric against Trump. How does that play? I think there's some risks around that. But we also saw oil prices a bit lower, and I'll talk to you about that in a moment, Ula. And then on the individual pairs, sort of the new currency – or sorry, the trend readings there. So pointing out that the Aussie dollar has just not been able to get anything going even though we have a relatively weak U.S. dollar environment.

Same goes for dollar. Canada, I'm not saying that we're about to flip into a negative trend there just yet, but it's struggling to show any consistent upside. I think part of that as well, that the Chinese renminbi remains sort of anchored to the U.S. dollar. More interesting, I think, is the euro trying to break higher.

Against Euro-Swiss again, it was a bit surprising the scale of the retracement we saw in Euro-Swiss, but it now is back above 96 before we stepped in here. And when I took this chart snapshot, it was at 95, well below 96. So that's back on the move there. Important show of support. I think it makes sense if we're seeing a transformation fiscally in Europe, much higher rates, much more investment in Europe that Euro-Swiss could reprice solidly higher.

Euro-starling, similar. And Euro-yen, I think, is a really curious one because I have a feeling that Japan would like dollar-yen very much lower. But as long as yields are on the rise, it makes it a very tough sledding for yen to get any upside against just about anything, even as Japanese yields also are on the rise. So let's see. We also have the end of the financial year coming up, some really interesting seasonals.

for the end of Japanese financial year is end of March. All right, let's slip over to oil. We're seeing a bit of downside here. I guess some of that's on growth concerns, general risk off. But I guess it's hard to know where. You've put up some useful charts on where the breakeven price is in the U.S., but what are you looking for sort of as the next bigger signal in the oil market? Yeah.

I think first, well, most certainly whether this economic or worries about economic downturn, whether that materializes, because that's part of the fright that has been coming into the oil market recently, that there are concerns that a global trade war will ultimately lead to lower growth and with that lower demand.

But at the same time also, we come down. We're below $70 now in Brent. We are even lower in WTI. So we're approaching, I would say, an area of pain for some producers, high-cost producers, and that could ultimately – will ultimately arrest the slide that we're seeing. So I think we're not a million miles from some support in the market. We're still highlighting 65 potentially as a target on Brent. We're still holding above that.

This week we will see the monthly all-market reports from OPEC, EIA and IEA. And as per usual, we have seen them starting to converge towards each other. OPEC tends to be quite optimistic, IEA not so optimistic, EIA seems to be the sound voice in the room.

been stuck somewhere in the middle. So we'll see where this demand outlook is heading and that will really help also help set the stage for the coming months. And just worth noting as well, the

The near 20% correction we had now from the peak earlier this year has led to quite a significant amount of selling in the futures market from managed money or hedge funds. And I show that on slide six as well. And that basically leaves the market quite

a bit more exposed to a positive surprise. You can especially see the red area, which is the gross short. So the naked short position is quite elevated as well. And that basically is a signal that, yeah, first of all, the market is negative. But at the same time, also, just be aware, if there is a technical or fundamental change in the market, then traders like these will be unprepared for a potential bounce. Yeah, and if you want to hear a bullish oil –

The bullish oil case, you can have a listen to that podcast we passed along. Top traders unplugged with – I can't remember his first name. Adam Rosenzweig. That was in the prior slides. So those slides were the last podcast from Friday. And maybe briefly on grains, we've seen a bit of volatility here. I guess some of that recent sell-off before the bounce was on the Chinese market.

China moving on tariffs against US grains. Is that what we're seeing here? That is correct, but also just a phenomenal amount of speculative interest, again, from hedge funds. And as we know, these guys are not married to the positions. If there is a change in the technical or fundamental outlook, they need to hit the exit fairly hard. And that's what we've seen just in

And that sell-off that I'm showing you on slide 8 was extended by the China countermeasures against US tariffs, basically raising tariffs on corn, soybeans and other agricultural commodities. And that helped drive prices down. But since then, we've actually seen the market doing quite a decent recovery, almost recovering half of what we lost yesterday.

We have a report today from the U.S. Department of Agriculture, the monthly WASDE report. The main focus is the ending stock expectation for the end of this year, or this crop year, which is around August time after the incoming harvest. And as you can see, there are some expectations for lower corn stocks today.

and as well the soybeans compared to the last report. So that potentially could add some additional support. But generally a market that's really been stuck in this rollercoaster speculative craze that we've seen for a number of months.

All right. Let's roll forward to the appendix, slide nine. Lots of reads and listens on many things, a lot of them critical of Trump, a lot of them sort of – but not – I will never pass along anything that's simply critical of Trump that's purely partisan. Yes, the one link I have is to Democratic Senator Chris Murphy running down some of the –

very corrupt things that Trump is doing. I spoke about that on a recent podcast that maybe there is some features as well as bugs to some of the rules moving against money laundering in the U.S., etc. But I think there's arguably some very corrupt things going on at the highest levels here involving Mr. Trump himself, and there's a pretty good documentation of those in that tweet thread.

But as well, the first link there, Jeffrey Sachs, a very remarkable speech, I think, to the EU Parliament. He's sort of regretting that Europe allowed itself to get dragged along by what he sees as the US warmongering and a war that never really had to happen or it could have easily been stopped quite early on if the US hadn't made such dramatic defense promises. I'm not saying I 100% agree or disagree with it. I think it's just a –

a very impassioned and qualified speech. And then as well, two podcasts on sort of the existential crisis we all face in this new era, not just Trump himself with the way markets work, the phenomenon of Bitcoin, but also generally along the lines of corruption, especially in both of those podcasts, the one with Hidden Forces and with Ben Hunt and Grant Williams. And then sort of a more balanced podcast

piece that you could argue from the Wall Street Journal's Kessler if you have access to that behind the paywall and the usual every pieces as well. Now, importantly, let's look at the calendar for the upcoming week because there's a couple of important points here coming up. Of course, we do have tomorrow's US CPI numbers. We have to see if the steel and loon tariffs go into effect. It does look like they will tomorrow as well. But we also have a government funding deadline in the US, really critical stuff. Don't have a strong feel for how

How significant the odds are that, A, there's at least – I know there's at least one Republican House member that is, of course, driving Trump absolutely insane because he doesn't want to sign on for this thing because he feels it's fiscally irresponsible and he's not seeing the fiscal cutting that was promised. And, B, even if it does pass and then goes to the Senate and passes there, well –

Its passage could be stopped if the Democrats want to pick up the fight here on social program news.

If they do so, they can stop this thing, but it's at the cost of a U.S. government shutdown and all of the chaos that that brings. The only reason I think they would do that is sort of making a stand on principles and seeing if they could get a new version of this bill done during the emergency of a government shutdown. There would be all kinds of finger pointing, of course. Trump would have to say, look, the Democrats want to shut down our government and they're just being irresponsible, yada, yada, whereas the Democrats would be trying to make a stand on principles.

Not something they've really shown signs of doing, to be fair. But in theory, it's possible. It's an event risk that has to be passed, gotten to the other side of before we can be sure of anything here.

And yeah, that's – and then the long-term chart on Appendix 5, slide 11, the QQQ, the very long-term chart. If you want to have a look at that, you can see how while this sell-off feels pretty remarkable, it's not really that remarkable on a weekly chart stretching back five years. Just a basic 38.2% retracement would take us down almost another 10%. And a 61.8% retracement, let's hope we don't see that, would take us all the way down to 363. I think the equivalent on the –

NASDAQ 100 is around 17,700 something just for perspective there. All right. Let's see if these markets remain in white knuckle mode or if we managed to put together

a bounce here and where that bounce takes us. And also I think importantly, the mix of whether this remains a U S only phenomenon and, and how this sorts itself out geographically, as well as all of the other themes and cross themes in this crazy market. So that's a wrap for today. And we'll be back soon with the next Saxo market call.