Are all Assets created Equal?

In an environment of unlimited money printing, all assets will rise but not all assets are created equal.

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TRACKRECORD DAILY

7 min readApr 30, 2021

Amazon reported earnings that blew estimates out of the water, with sales surging 44% on the year. Yet another tech giant (after Apple, Facebook, and Alphabet) reporting double digits growth in their revenue and earnings.

The trend is entrenched and showing no sign of slowing down. There’s really no need to try to be cute. Stay with what works.

In an environment of unlimited money printing, all assets will rise but not all assets are created equal. Some are more equal than others and the tech giants are showing this in their dominance and their growth.

MARKET OBSERVATION

The Silent Bull Market In Traditional Energy (Coal)

US coal generation rises to six-month high in February: EIA

The green narrative has starved funding to the traditional energy sector. The Covid crisis along with

Environmental, Social, and Governance (ESG) initiatives have exacerbated this supply deficit acutely. As we eventually emerge from the covid crisis, pent-up demand in developed world economies, a rising middle-class in emerging markets and realization that traditional ESG standards are not enough to provide for stable energy, we will still have to rely heavily on traditional energy sources for a long enough time to come.

DAY AHEAD

Euro Flash PMIs

The flash estimate of first quarter GDP growth is due out of the Eurozone. Fresh lockdowns are expected to have dragged the euro area economy into a double-dip recession, highlighting Europe’s bumpy recovery road. However, forward-looking indicators suggest a rebound is already underway, and combined with the pick-up in Europe’s vaccination pace, investors are more optimistic about the months ahead.

TRADING PLAN

1. Currencies : Keep short USD and long NZD, & CNH. The resistance for USDCNH is at 6.55–6.57. Support for NZD is at 0.7140–50. Stay short USD.

2. Commodities : Uranium — Long Uranium stocks. See how we are invested in this view in our TrackRecord Model Portfolio .

Key risks: US bond yields seem to have stabilised for now. Sudden spikes may lead to a stronger USD and weaken risk sentiment. US-China tension remains a wildcard.

3. Equities :

Equity Index: : Long Nasdaq futures. Yet another mind-blowing earnings report from another the tech giant, Amazon. Stay long.

Single Stocks: Fundamentals continue to favour the continued rally of risk assets in the weeks ahead. Don’t miss out on the asymmetric opportunities we have highlighted in our TrackRecord Model Portfolio.

Key risks : Higher US yields and inflation fears are the key risks.

WHAT HAPPENED YESTERDAY

As of New York Close 29 Apr 2021,

MARKET MOVEMENTS

Advance Q1 GDP increased at a 6.4% annualized rate (expected 6.5%). Initial jobless claims for the week ending April 24 decreased by 13,000 to 553,000 (expected 530,000). Continuing claims for the week ending April 17 increased by 9,000 to 3.660 million. The four-week moving average, which smooths out volatility in the weekly figures, was 611,750. Although this is a pandemic low, the lowest since March 14, 2020, it is still too high and is why the Fed isn’t going to be in a rush to tighten policy.
U.S. 2-yr Bond yield decreased one basis point to 0.16%, and the 10-yr yield increased 2 basis points to 1.65%. The U.S. Dollar Index was little changed at 90.62. Brent Oil ($68.49, +2.18%) settled above $65 per barrel. Tokyo is out on holiday for its Golden week, so trading activity during Asia hours could be subdued.
In the cryptocurrency market, Ethereum, the second largest digital currency in terms of market capitalization, hit another record high on Thursday of $2,800. Ethereum continues to garner institutional interest, especially with the explosion of decentralized finance, or DeFi, which are crypto platforms that facilitate lending, trading & other activities outside of traditional banking institutions. These platforms are built on Ethereum and other similar protocols.
S&P 500 advanced +0.7% on Thursday, setting intraday and closing record highs (+0.82%) in a bumpy session. The comeback effort was uneven, though, as the Nasdaq 100 (+0.5%) closed well off opening (record) highs (+1.23%), the Dow Jones Industrial Average (+0.7%) closed near session highs, and the Russell 2000 (-0.4%) closed lower.
Pre-US market hours, the futures market touched intraday highs with tech giant, Facebook (FB 329.51, +22.41, +7.3%), leading the charge higher after its mind blowing earnings report that exceeded expectations after-hours the day before.
After hours, Amazon released its first-quarter earnings, beating Wall Street’s expectations for earnings and revenue with sales surging 44%. Its shares climbed more than +3% in extended trading. Earnings: $15.79 per share vs. $9.54 per share expected. Revenue: $108.52 billion vs. $104.47 billion expected. Amazon’s guidance for the second quarter implies that it expects the momentum to continue, which should ease investor fears that business could slow in a post-pandemic environment. The company expects to post revenue between $110 billion and $116 billion, surpassing Wall Street’s projection of $108.6 billion.
Twitter plunged -11.51% in extended trading on user miss and low guidance. Earnings: 16 cents per share, adjusted, vs. 14 cents forecast. Revenue: $1.04 billion vs. $1.03 billion forecast. Monetizable daily active users (mDAUs): 199 million vs. 200 million expected forecast by FactSet. The company reported revenue of $1.04 billion for the quarter, which was up 28% from $808 million a year prior. Twitter also reported a profit of $68 million, contrasted with a loss of $8.4 million a year ago.Twitter guided that it is expecting revenue between $980 million and $1.08 billion in the second quarter. Analysts were expecting guidance of $1.06 billion on average.

HEADLINES & MARKET IMPACT

U.S. Senate overwhelmingly passes $35 billion water infrastructure bill

Notable Snippet: Democrats hope it will help advance President Joe Biden’s $2 trillion American Jobs Plan, which is focused on transforming the United States into a clean energy economy, while Republicans said its success shows an appetite for legislation focused on more traditional infrastructure investments. “To truly ‘Build Back Better,’ our nation must prioritize putting Americans back to work repairing and upgrading the aging pipes we all depend on to deliver our water,” said bill co-sponsor Senator Tammy Duckworth, a Democrat, referencing Biden’s sweeping climate change-focused infrastructure plan.

THEMATIC CONTEXT: “In the early months of the crisis, we have been postulating that countries will “build their way” out of this crisis via unlimited fiscal policy. We believe China to be the frontrunner of this playbook and that western economies will be following behind. This is extremely good for asset prices and positive for commodities. We remain bullish on the economic trajectory and industrial demand only reaffirms it.” — 16th Feb 2021

Pfizer begins exporting U.S.-made COVID-19 vaccine to Mexico

Notable Snippet: Pfizer Inc’s shipment of COVID-19 vaccine to Mexico this week includes doses made in its U.S. plant, the first of what are expected to be ongoing exports of its shots from the United States, a source familiar with the matter told Reuters on Thursday. Pfizer has shipped more than 10 million doses to Mexico so far, becoming its largest supplier of COVID-19 vaccine. Pfizer and German partner BioNTech SE have been supplying other countries with doses from its main European production plant in Belgium.

India COVID cases cross 18 million, gravediggers work round the clock

Notable Snippet: India’s total COVID-19 cases passed 18 million on Thursday after another world record number of daily infections, as gravediggers worked around the clock to bury victims and hundreds more were cremated in makeshift pyres in parks and parking lots. India reported 379,257 new infections and 3,645 new deaths on Thursday, health ministry data showed, the highest number of fatalities in a single day since the start of the pandemic. The world’s second most populous nation is in deep crisis, with hospitals and morgues overwhelmed.