13 Iranian scenarios, hedge fund performance and data from ADP

8 янв. 2020 г.

The conflict between the US and Iran as long as it continues to develop in the verbal plane. In response to Trump’s 52 goals, Iran has developed 13 scenarios for causing maximum damage to the United States in response to the assassination of General Soleimani, who killed about 50 people in a crush yesterday.

According to Iran, even the weakest of these scenarios could be a historical nightmare for Americans. In addition, the Iranian Parliament recognized the Pentagon as a terrorist organization.

Although there are no casualties according to preliminary reports, there is no immediate response from the United States, despite some reduction in the level of tension among investors in this regard, we do not recommend relaxing. On the contrary, we use these moments for the purpose of earning: we recommend buying gold and the Japanese yen in the area of daily lows.

But let's digress from the conflict between Iran and the USA. According to the results of 2019, hedge funds generated an average of 8.6% yield curve. This is despite the fact that the S&P 500 index grew by 32%. How can one not recall the already legendary Buffet bet, which bet that hedge funds for 10 years will not be able to surpass the market as a whole? In general, we have one more confirmation of the futility of investing in hedge funds - it is cheaper and easier to invest in Index Funds or ETFs.

In terms of macroeconomic statistics, yesterday was remembered by relatively good data from the Eurozone: retail sales are better than expected (1% with a forecast of 0.6%), and inflation is at its highest for the last 8 months. Which, however, it did not stop the euro from testing the support level of 1.1160. Good shopping opportunity, by the way.

Statistics from the US came out better than expected. All indicators, including trade balance, production orders, as well as ISM index of business activity in the services sector exceeded experts' expectations. In this situation, yesterday's strengthening of the dollar can be considered quite justified and logical. But again, the data are not so good and not so important as to somehow change the balance of power in the foreign exchange market.

Today is interesting primarily for US employment data from ADP. Of course, they are not as important as the Friday NFPs but nevertheless, the labor market is very important in terms of assessing the state of the country's economy.

Our basic trading ideas today are unchanged: we sell the dollar primarily against the yen, the euro and the British pound, buy gold, the Japanese yen, and simply sell the Russian ruble.