After a massively successful copper trade (up 7.17% since Dec 2nd monthly piece and closed today for profit taking) based on the thesis I wrote on this and last month’s monthly piece, I thought it would be great to supplement Putamen Growth Fund performance by also adding tactical trades based on current macro conditions. Derivatives, such as futures and options, are the most suitable tools to implement these ideas due to the inherent leverage and possibility to establish sizeable trade with minimum slippage cost.
As global manufacturing conditions improve and risk aversion is declining, we are turning bearish on U.S. yields. We think global economic slowdown has bottomed and will improve in 2020, resulting in rebound of global yields. Historically the S&P500 performance has been a good indicator as to the movement of U.S. 10-year yield in the coming 6-9 months and it is currently pointing to a level around 2.6% in Q2 2020. Speculative positioning is also consistent to levels that has historically signified a bottom in bond yield.
Bottom line: short U.S. 10-year Notes