Bessent panics, gold and crypto rip, equity technicals pivotal

Welcome to the Saxo market call. Before we get started, it's important we emphasize that the views and opinions expressed in this podcast are those of the host and guests and do not constitute investment advice or recommendations. All information provided is for educational and entertainment purposes only. Hey everyone it is Friday 21st of August 2026. It's a pretty negative day on the market. Yesterday we've stabilized quite a bit in Asia overnight. The futures had a treasury secretary bessent out attempting damage control. Marking not terribly impressed but neither did it to test the US treasury further by selling that long end after a big recovery in yields. That shouldn't say recovery in yields because bonds sold off again. Essentially we're back to unchanged in a 10-year yield since we were before this of course Wednesday US treasury buyback announcement. Bessent again I think this was purely just he was monitoring like a good hedge fund manager that he was monitoring the noise on the wires after the original announcement seeing the price action and wanted to do damage control with this press presser he did a short one yesterday. He said things like well the the buyback program could be bigger. We're also looking into a fiscal initiative to address higher borrowing costs in years ahead. We have a big toolkit explicitly saying look this is signaling yields don't reflect the underlying fundamentals according to him and quote unquote don't trade the headlines. I thought that was a bit telling he's concerned about trying to massage the market. Marking not really having much of it but you know neither did it like I said really challenged the treasury further we're still maybe slightly below half the halfway mark in the range on the 30-year which is probably certainly the key that was the one that set the new high for the cycle. The 30-year U.S. yield that is at 5.24% below 5.25 in any case it was as low as I think 5.18 at the low. So yeah we're all holding our breath is this enough to inspire confidence does anybody want to attack the situation or do we just figure that it just means that they escalate the response function. Of course the answer is yes at some level but is that some level some disorderly price action first that really triggers broad concern across markets. Don't know there's lots to there's lots of commentary out in the space as I mentioned yesterday. I think the most sort of typical worst case kind of stromal drang article was from no surprise Ambrose Evans Prichard of the telegraph he was the go-to guy during a whole post GFC environment with you everything is super dramatic and this is you know right on the right on the edge of something incredible incredibly important happening across markets. I don't disagree with him but you know is the timing now is it in three months over the midterms as he suggests it might be you know he mentions this economist what's his name this German economist who do you go don't bush in economics things take longer to happen than you think they will and they happen faster than you thought they could that certainly is what happens in these men's key moments in these meltdown scenarios like a leave of bankruptcy like a pandemic etc but is that what we face I really don't know or do we have a treasury and a fed that is on the case before these types of forces can be properly unleashed again I think the answer is yes but is it does it anticipate and front-run any kind of disorder when this debt situation comes to a head or do we have to see some disorder and market dysfunction first an existential question day to day certainly for those that are super leveraged and there's lots of mention everywhere about this so-called basis trade where you have hedge funds that are massively massively short. US treasury futures looking to pick up some very tiny price discrepancies at massive leverage versus some underlying physical bonds that they hold on the long side sort of helping in a way to not in a way kind of a de facto way to to support the treasury market at the margin what is this trading out over eight hundred billion dollars in size many point to this so-called basis trade which is some twice I think it is the size it was at the breakout of the pandemic when the US treasury market suddenly showed it's a disorder and we saw US treasury selling off rather than rallying as the market was panicking really really scary couple days there were before that was a situation was righted by the combined actions of the Fed and the treasury so yeah I mean you know I'll send a link to the article there you can kind of get it I think if you're a little clever on how you look at it from the telegraph otherwise they probably have a cheap trial subscription I'll just read the last bit he says it's a really good commentary actually even though he's always dramatic because you know you have to be a bit these days to get attention good eyeballs on your piece he ends with the disaster is nearly complete now we await the US midterm elections should the democratic transfer of power in Congress be obstructed by meddling with the results in swing states we may have our trigger so you know a credible stab at what what sure the trigger might be that could spark unrest in US treasuries unrest in markets some kind of constitutional crisis etc. in any case we're not much the wiser we have some preliminary PMI is coming in for Europe this morning what's the read I guess the read is that services is poor than expected so below 50 and actually worse than the prior read of the 49 spot something both in Germany and in France it was been some really nasty weather I don't know if that's part of it but on the manufacturing side both beating 51.5 on France and the manufacturing and therefore above 50 from the prior 49.8 and that was much better than expected and then on Germany 54.1 the best since 2022 and certainly beating the prior 52.2 and expectations and let's see what we have for the broader eurozone on the manufacturing side also in line with Germany makes sense 52.8 versus 51.8 expected 51.9 prior and on services so unchanged at 51.7 so the services look somehow compensating the rest of Europe relative to Germany and France is sub 50-year-old not a huge reaction into into Europe at all and fixed income or otherwise but just worth noting on the German manufacturing front in particular I think all right let's wrap the general US equity market section yesterday I think spooked a little bit by you know it wasn't disorderly but the way that you'll snap back after was a clear attempt to manage the situation by the Treasury so we did see an asset 100 off almost three quarters of percent S&P 500 off 0.9 and the broader market around around the same little bit less than that on the S&P 500 equal weight and then I think you know this yields angle hitting it Russell 2000 the most minus 1.34% and if you pull up a chart of your Russell 2000 it's pretty ugly the classic momentum divergence we saw Sprint higher back in that late July and I think it is maybe it was already August new highs very marginally so and now we're coming off those highs with pretty high momentum so certainly pointing to this risk of a bear market consolidation or even a correction as I outlined two days ago and a similar vibe with the technicals in the S&P 500 and we're getting closer to that key 7717 area on the cash we closed at 7640 for 0 yesterday so just 20 something points away from that although we are up 17 points here in after hours there was a report from Walmart they showed their weakest on a report of course earnings after the close no sorry before the open yesterday as I highlighted and I said how it was coming I didn't talk about it because the results were not in with yesterday's podcast but Walmart shares down 9% pretty chunky move it's a ridiculously overvalued company relative to its fundamentals in our view as a as a function of a pass of investing and being rewarded for its size and passive indices but so that's a chunky move once again in a single component there it was noted that they only grew 2.6% in same store sales as the weakest growth in six years they complained about drug prices being lower because of I guess some of the Trump administration efforts to get lower prices in for people and their guidance underwhelmed so that was an interesting read I think they mentioned as well that the per visit or per per store visit spending was somewhat lower and let's let's remember 2.6% in an economy that's not only growing far faster than that that's a nominal result so that's a pretty weak result for for Walmart I don't have anything on my on my highlights for today it's usually not much reporting going on on a Friday but next week did not highlight this earlier this week we have none other than Nvidia reporting on Wednesday next week a critical test for the whole semiconductor space obviously the whole AI trade after all the you know noise about circular financing the noise about competition from the likes of cerebrus and others you know what are they saying you know that jensen Wong is going to come out with his maximum cheerleading approach but you know it's critical stuff just as a a sentiment test in the market next week we also crowd strike on Wednesday and sales force adulant and octa as well and then Thursday marvel and by the way the socks semiconductor index was up half a percent yesterday possibly on the. that strong Marvel move to a degree, where it rose over 5%, talking about the investment pact with Google to produce or have a bit to produce chips or design and produce chips. All right, a couple of things to note. We're coming in a little more stable here. The market certainly isn't panicking just yet. I think 4 and 3/4% on the US tenure, you just have to have that 10-year yield on your screen because I do feel like if we're starting to see a sell-off on the Treasury market, it really does put pressure and all likelihood on valuations and stocks and concerns around the stability of the US Treasury market. So, a few 4 and 3/4% is just just below the cycle high that's been tested in multiple occasions. It's more important than the 30-year, but also we need to watch the 30-year if it's of course testing and going to those new highs. But just along the lines of some of the big moves within the index and divergences, somebody putting on one of the chats that I follow yesterday, a chart of how many stocks had negative beta to the S&P 500. So, it just shows you that things are moving in very different directions underneath the surface. It was over 100 charts. It's basically almost like unprecedented in modern market history. Suggesting me, there are a lot of these combined long short trades. We've talked about this before with software as a service. Being traded as a group, you want to be long, AI hardware trades and you want to be short these software as a service trades was a consensus trade that was on for some time. And we were banging on about this quite strongly when that trade was maxing out. Now we've seen a significant reversal. Take an into it, one of these tax reporting software largely and accounting software that has risen over 40% from its lows going into next week's earnings. It's not to say that's a recommendation. And then you have to wonder at some point, this trade has kind of reset and the market is maybe moving on. But it's just a highlight. These divergences and moves underneath the surface, I think suggest that a lot of players in the market that are getting a bit stressed here and that can lead to deleverging is maybe another argument for this bearish correction scenario. And then just a little bit back to the US Treasury announcement. Some of the figures he puts in that Ambrose Evans Pritchard puts in the article he quotes the IMF about needing to, was it $6 trillion the US has to roll every three months. And the annual gross financing needs in 2010 for the US were 26% of GDP. They're going to be 45% of GDP this year and rising to 60% of GDP. I don't know if it was the early 2030s or actually 2030 itself, but these numbers are just are just staggering. At some point, the message is these things will matter and the whole buyback announcement is a recognition of this. And the Treasury trying to front-run this and of course inspire market confidence. The market is not confident. If you look at the value of the US dollar, which is lower, dollar in by the way, I felt like it made some sense. I think I outlined this quite well yesterday, at least I tried to. The idea that if you'll snap back higher and especially if they placed or traded to new highs, the dollar in might not fall. And I think there was somewhat of a bounce in yields and the dollar in did bounce back towards 159 plus. But now it's down to 158.65. Yields look a little bit tame here. So I think there may be a green. As long as we're staying fairly orderly, it could be room for yen to continue to thrive. Especially we need to see the JGB market doing likewise. Stability that is. And another one that just sticks out is something painful to watch at these levels is you're in 185.5. To me, it looks like a crazy level, but there's not yet a technical reason for the bearers to feel like they should get involved again. Makes a lot of sense also to see Aussie coming in bid here a bit more strongly. Yeah, there was that employment data that the market didn't like earlier this week. But with these metals prices ripping higher, we've got gold at 4580 now, clearing that key 200 and moving average. We talked about it 4500. Silver is pushing on 70 now. And the next big level is there around 71 dollars if you look at flatline levels. And then the 200 day moving average there is around 72. So silver trying to join the party. And again, the dollar versus hard assets is certainly suffering here with this move. And the star performer has been Bitcoin. We're also heading into as highlight yesterday to this Jackson whole Wyoming conference or symposium next week, where the whole title and the whole focus is on this, what is it called financial innovation, implications for payments and policy. You know, people argued that we're aligning all the ducks, putting all the ducks in a row for, you know, the US to take advantage of stablecoin infrastructure to maintain the US dollar as to global reserve currency. Would allow people throughout the world, whether for simply they don't want to have their money parked in their local currency or don't trust their local government, all the way down to other maybe even slightly dodgy players in the global economy. I don't so I want to get into details there. Feeling like they can park their money in stablecoin funds, rather than having to possibly have them, I don't know, in gold or in cash, which is a ask public Escobar can be a bit troublesome to to deal with in terms of a storage of wealth. So I'm very curious there, but the immediate question is more on the Worsh's signaling on interest rates, which has really been flubbed this whole situation around forward guidance. So really curious to see what his speech will contain next week and if there's a more clear message on simply signaling, look, we can't hike rates, acknowledging that somehow, even if it's indirectly, or trying to maintain his, his moxie that, you know, I'm the inflation fighter and we need to reduce this fed balance sheet and we're going to get inflation down, whatever it takes. So watching for that certainly, and if I didn't mention, I think at least coming into this morning, I think it's going up even further since I looked at it more closely this morning, but the Bitcoin was up almost 17% and I saw it even higher still some minutes before, yes, almost 78,000 now as I'm speaking when it was 75 something earlier. This really has a lit the cryptocurrency space on fire. I think partially for good reason with this incoming news about Jackson Hole or their speech from Jackson Hole, the various Trump administration moves on crypto, whether it's for corruption or not for corruption, it doesn't matter. It's, there is a US official welcoming of crypto infrastructure. So all these things are lining suddenly after all the negative coverage on crypto with sailors, strategies, stock and all these things forced selling Bitcoin and otherwise to meet this and that preferred share payment to whatever the immediate focus was. There's been a lot of flows, I know it's into crypto as well. All right, I will include a couple of links in today's podcast episode description. There was one that was interesting and it's not for me to assess, but I just thought it was certainly a potential shift in the AI hardware space that some of these locally run or small language models can actually match the performance, performance of large language models for certain tasks. I assume that requires that the task doesn't require too much memory all at one time, so things like agentic AI that might be in a different category require the data centers, the hyperscalers, but it's just to put it on your radar, something to track in the future, whether some of this AI is just going to go straight into a box that sits on your desk rather than needing to refer at least for a very significant portion of AI tasks as opposed to having to have everything done in the cloud with these massive Nvidia and other data center based systems. Then there's a long, I haven't read it yet, but it's basically a rabbit hole piece from the Fed on stablecoins. If you want to go down that one ahead of this big Jackson Hole event, I think it's title of what payment stablecoins and cross-border payments, benefits and implications for monetary policy implementation. Sounds pretty heavy, but maybe worth certain some strong consideration on what it means for the long term for the use of crypto space ahead of the Jackson Hole symposium next week and a Worship speech on Friday. Okay, that's a wrap for today. Stay careful out there and we'll be back next week for the next Saxon article. [Music]