5.10.13: The 13-year Global Macro Trade is Ending (or has Ended)

Since March, 2000 and the bursting of the Tech Bubble of the late 1990’s, we’ve watched the following asset classes:

  • Large-cap equities: SP 500 and such, trade flat to down over the 13 year period which just ended, with two vicious bear markets in 2001 and 2008;
  • Leadership stocks within the large-cap space were Apple (AAPL), IBM (IBM), Amazon (Amazon);   (Long all 3 names)
  • Gold / Commodities: Gold ran from $300 to $1,800 an ounce from early 2000 through August, 2011;
  • The dollar was consistently “weak to weaker” over that time frame;
  • Treasury bonds had an incredible run, possibly concluding a 30-year rally that started in 1980 with Volcker as Federal reserve Chairman;

Where are we today ?

  • The SP 500 has broken out to an all-time high between April 10th and April1 3th and then again in early May, 2013, ending a 13-year consolidation;
  • Former leadership stocks like Apple (AAPL), IBM, Amazon have all started to fade and havent made new highs as the SP 500 has broken out;
  • Gold peaked in August, 2011 with the peak of the European debt crisis and US budget talks;
  • The dollar has gradually started to strengthen versus the yen and eventually versus the euro;
  • The 10-year Treasury yield has not made a new low since late July, 2012, with its low yield near 1.38%;

We are / will gradually return to a “global growth” cycle, which just now might be in its earlier stages, particularly with the Japan economic and stock market resurgence. Japan is still the 3rd largest economy in the world, and might re-take the 2nd spot if China continues to languish.

We are keeping clients invested in “global growth” names that have lagged, GE and FDX being two obvious choices.

We’ll update earnings this weekend. We do think with a number of the initial elements of the March, 2000 “macro trade” ending, shorting Treasuries will eventually be a successful trade for clients. We use the TBF and TBT as inverse-Treasury longs, but the trades have been losers since March, 2010. We think that could change sooner rather than later. The only caveat to that trade, is that so much money is positioned similarly.

Trinity Asset Management, Inc. by:

Brian Gilmartin, CFA

Portfolio manager

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.