Bad Apples, Fading FANGs And Macro Fund ‘Nukes’

Well, it’s all falling apart on Monday, which I guess isn’t entirely surprising considering what happened over the weekend at the APEC summit in Papua New Guinea where Mike Pence decided to completely negate the positive trade vibes Trump emitted in remarks to reporters on Friday.

Fears of an economic “cold war” rippled across U.S. equities on Monday morning and, unfortunately, Apple’s trials and tribulations continued.

Last week, a bevy of suppliers implicitly sounded the alarm on iPhone demand and on Monday, the Wall Street Journal essentially confirmed everyone’s fears. Citing the ubiquitous people familiar with the matter, WSJ warned that Apple has indeed cut production orders over the past several weeks for all three of the new iPhone models.

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“Lower-than-expected demand for Apple’s new iPhones and the company’s decision to offer more models have created turmoil along its supply chain and made it harder to predict the number of components and handsets it needs”, WSJ wrote on Monday morning, in an article the market could have done without.

The FANG+ index is getting shelled again and as a reminder, it’s on pace for a third straight monthly decline which, as you can see, is a rarity.

(Bloomberg)

This is playing out exactly like it has on countless other days over the past couple of months, with Growth underperforming Value, a rotation this market clearly isn’t prepared to handle.

(Bloomberg)

Meanwhile, in his Monday morning missive, Nomura’s Charlie McElligott says Macro funds are “shutting it down” going into the end of the year, “nuking risk-on positioning.”

“Whether due to 1) end of cycle view accelerating, 2) monetization / protection of YTD gains or the most likely 3) a mix of both points #1 and #2, Macro Funds cut risk across the board”, Charlie says. Here’s the breakdown:

Macro Fund Beta to SPX down to just 17^th %ile (from 39^th %ile, and was 79^th %ile one month ago)

Macro Fund Beta to Eurostoxx down to just 22^nd %ile (from 76^h %ile, and was 87^th %ile one month ago)

Macro Fund Beta to EEM down to just 5^th %ile (from 34^th %ile, and was 67^th %ile one month ago)

Macro Fund Beta to Nikkei down to just 39^th %ile (from 80^th %ile, and was 94^th %ile one month ago)

Macro Fund Beta to Crude Oil down to just 34^th %ile (from 84^th %ile, and was 98^th %ile one month ago)