Growth To Rebound in The Fourth Quarter, But Fade in 2020: Weekly Report

EUROPEAN INVESTMENT STRATEGY
WEEKLY REPORT
Growth To Rebound In The Fourth
Quarter, But Fade In 2020
BCA House
View Matrix
October 3, 2019
Periodical European and global growth will rebound in the fourth quarter but the rebound will lack
In this Issue: longevity.
FF Investing On
Impulse...................... 3 Bonds: Expect bond yields to edge modestly higher, especially for those yields that are deeply
FF Don’t Blame Autos in negative territory. Underweight German bunds in a European or global bond portfolio.
For A German
Recession................... 4
Currencies: Zero/negative yielding currencies have the most to gain, and our preference
FF How To Position For
remains the yen.
The Fourth Quarter..... 6
Equities: a tug of war between growth and valuation will leave the broad equity market
FF Fractal Trading
index in a sideways channel. But with the higher yield, prefer equities over bonds.
System....................... 8
FF Cyclical Equity sectors: Non-China cyclical plays will outperform China plays. Continue to over-
Recommendations... 10 weight banks versus resources and/or industrials.
FF Structural
Recommendations... 11 Equity regions: Continue to overweight the Eurostoxx 50 versus the Shanghai Composite
and/or the Nikkei 225.
CHART OF THE WEEK

Credit Growth To Rebound In The Fourth Quarter, Then Fade
%
6-MONTH GLOBAL BOND YIELD IMPULSE* (LS, INVERTED)
6-MONTH GLOBAL CREDIT IMPULSE (RS)
-1.0 .4
Rebound...
-.5 .2
Editorial Board
0 0
Dhaval Joshi
Chief European
Investment Strategist ...then fade
Mohamed El Shennawy .5 -.2
Research Associate
Garry Evans
Senior Vice President
1.0 -.4
Mathieu Savary
Vice President
© BCA Research 2019
Robert Robis
Senior Vice President
2016 2017 2018 2019 2020
*BASED ON SIMPLE AVERAGE OF 10-YEAR GOVT. BOND YIELDS IN THE U.S., FRANCE, AND CHINA.
*ADVANCED BY 4 MONTHS.
editor@bcaresearch.com • www.bcaresearch.com • Copyright © 2019 BCA Research Inc. All Rights Reserved. Refer to last page for important disclaimer. 1
Shamir Popat BOUTIQUE INVESTMENT PARTNERS 253269

BCA RESEARCH INC. EUROPEAN INVESTMENT STRATEGY - WEEKLY REPORT OCTOBER 3, 2019
Discover CHART 2 CHART 3

The Euro Area Bond Yield Impulse The U.S. Bond Yield Impulse
what you Leads Its Credit Impulse Leads Its Credit Impulse
can do %
EURO AREA 6-MONTH:
Bn
EUR
%
U.S. 6-MONTH:
Bn
USD
BOND YIELD IMPULSE* (LS, INVERTED) BOND YIELD IMPULSE* (LS, INVERTED)
with BCA CREDIT IMPULSE (RS) CREDIT IMPULSE (RS)
-1.5 300 300
Analytics. -1.5
-1.0 200 200

-1.0
-.5 100 100

-.5
0 0 0 0
.5 -100 .5 -100
1.0 -200 1.0 -200
1.5 -300 1.5 -300
© BCA Research 2019 © BCA Research 2019
2016 2017 2018 2019 2020 2016 2017 2018 2019 2020
*BASED ON THE FRENCH 10-YEAR GOVT. BOND YIELD AND *BASED ON THE U.S. 10-YEAR GOVT. BOND YIELD.
USING FRANCE AS A PROXY FOR THE EURO AREA. *ADVANCED BY 3 MONTHS.
The market
is concerned C omfort and discomfort are not absolute, they are relative. Put your hand in cold water, and
whether it feels comfortable or uncomfortable depends on where your hand has come from.
If your hand has come from room temperature, the cold water will feel uncomfortable. But if your
about whether
hand has come from an ice bucket, the cold water will feel like bliss!
growth is
accelerating or The same principle applies to how we, and the financial markets, perceive short-term economic
decelerating. growth. After a strong expansion, a pedestrian growth rate of 1 percent feels uncomfortable. But
after an economic contraction, 1 percent growth feels very pleasant.
This leads to two important points:
1. In the short term, the market is less concerned about the rate of growth per se, it is more con-
cerned about whether the rate of growth is accelerating or decelerating.
2. When it comes to the short term drivers of growth – bond yields, credit, and the oil price – we
must focus not on their changes, we must focus on their impulses, meaning the changes in their
changes. This is because it is the impulses of bond yields, credit, and the oil price that drive the
accelerations and decelerations of economic growth, often with a useful lead time of a few months.
The Chart of the Week combined with Charts 2-4 should leave you in no doubt. In the euro area,
United States, and China, the domestic bond yield 6-month impulses have led their domestic
6-month credit impulses with near-perfect precision.

The credit CHART 4 CHART 5

The China Bond Yield Impulse Bond Yield Impulses Were Tailwinds In
impulses Leads Its Credit Impulse The Euro Area And U.S., But Not In China
in the euro %
CHINA 6-MONTH:
Bn
USD 6-MONTH BOND YIELD IMPULSE* (INVERTED):
BOND YIELD IMPULSE* (LS, INVERTED)
area and the CREDIT IMPULSE (RS)
EURO AREA
-1.5 600 U.S.
-1.5 -1.5
U.S. should CHINA
briefly
-1.0 400 -1.0 -1.0
rebound in
the fourth -.5 200 -.5 -.5
quarter.
0 0 0 0
.5 -200 .5
China .5
1.0 -400 1.0 1.0
1.5 -600 1.5 1.5
2016 2017 2018 2019 2020 2016 2017 2018 2019 2020
*BASED ON THE CHINESE 10-YEAR GOVT. BOND YIELD. *BASED ON THE FRENCH 10-YEAR GOVT. BOND YIELD AND
*ADVANCED BY 6 MONTHS. USING FRANCE AS A PROXY FOR THE EURO AREA.
Based on this near-perfect precision, the credit impulses in the euro area and the U.S. should briefly
rebound in the fourth quarter. But expect much less of a rebound, if any, in China. While bond
yields have collapsed in the euro area and the U.S., resulting in tailwind credit impulses, they have
moved much less in China. Indeed, China’s bond yield 6-month impulse has been moving deeper
into headwind territory in the past few months (Chart 5).
It follows that a credit growth rebound in the fourth quarter will be sourced in Europe and the U.S.
rather than in China. From a tactical perspective, this will favour non-China cyclical plays over
China plays. But moving into the early part of 2020, expect the credit impulses to fade across all
the major economies – unless bond yields now fall very sharply everywhere.
Investing On Impulse
Many people still find it confusing that it is the impulses – and not the changes – of bond yields,
credit, and the oil price that drive the accelerations and decelerations of economic growth. To re-
solve this confusion, let’s clarify the point.
A bond yield decline will trigger new borrowing. For example, a given decline in the U.S. bond yield,
say 0.5 percent, will trigger a given increase in the number of mortgage applications (Chart 6). New
borrowing will add to demand, meaning it will generate growth. But in the following period, a further

Discover CHART 6
A Given Decline In The Bond Yield Triggers A Given Increase In New Borrowing
what you %
U.S. 6-MONTH CHANGE IN:
can do 10-YEAR GOVT. BOND YIELD* (LS, INVERTED)
CONVENTIONAL MORTGAGE APPLICATIONS INDEX (RS) 400
with BCA
-1.0
Analytics. 300
200
-.5
100
0 0
-100
.5
-200
-300
1.0
-400
2016 2017 2018 2019 2020
If the bond yield decline of 0.5 percent will generate the same further new borrowing and growth rate.
The crucial point is that, if the decline in the bond yield is the same, growth will not accelerate.
decline in
the bond Growth will accelerate only if the first 0.5 percent bond yield decline is followed by a bigger, say
yield is 0.6 percent, decline – meaning a tailwind impulse. Conversely and counterintuitively, growth will
the same, decelerate if the first 0.5 percent decline is followed by a smaller, say 0.4 percent, decline – mean-
growth ing a headwind impulse.
will not
accelerate.
Don’t Blame Autos For A German Recession
If the German economy contracts in the third quarter and thereby enters a technical recession, the
knee-jerk response will be to blame the troubles in the auto industry. But the evidence does not
support this story. German new car production rebounded in the third quarter (Chart 7). Begging
the question: if not autos, what is the true culprit for the deceleration?
The likely answer is that Germany recently suffered a severe headwind from the oil price impulse.
Germany has one of the world’s highest volumes of road traffic per unit of GDP, second only to
the U.S. (Table 1). A possible explanation for Germany’s high traffic intensity is that, just like the
U.S., Germany is a decentralised economy with multiple ‘hubs and spokes’ requiring a lot of criss-
crossing of traffic. But unlike the U.S., German transport is highly dependent on oil imports, which
tend to be non-substitutable and highly inelastic to price. As the value of German oil imports rise
in lockstep with the oil price, Germany’s net exports decline, weighing on growth.

Germany The upshot is that the oil price impulse has a CHART 7
major bearing on Germany’s short term growth German Car Production Rebounded
has one of In The Third Quarter
the world’s accelerations and decelerations. The six month 000's 000's
GERMAN NEW CAR PRODUCTION*
highest period ending around June 2019 constituted a 540 540
volumes of severe headwind impulse. This is because a 30

520 520
road traffic percent increase in the oil price in that period

500 500
per unit of followed a 40 percent decline in the previous
480 480
GDP. six month period, equating to a headwind im-
pulse of 70 percent.1 460 460
440 440
Allowing for typical lags of a few months,
420 420
this severe headwind impulse was a major
400 400
contributor to Germany’s recent deceleration.
Oscillations in the oil price’s 6-month impulse 380 380
have explained the oscillations in Germany’s 360 360

6-month economic growth with a spooky ac- 340 340
curacy (Chart 8). The good news is that the oil
320 320
price’s severe headwind impulse has eased – © BCA Research 2019
allowing a rebound in German economic growth 2017 2018 2019

*SEASONALLY ADJUSTED.
during the fourth quarter.
TABLE 1
Nevertheless, a putative rebound could be
Germany Has A Very High Road Traffic
nullified by a wildcard: the ‘geopolitical risk Intensity
impulse’. To be clear this is not an impulse in
COUNTRY
the technical sense, but it is a similar concept:
United States 282
are the number of potential tail-events increas- Germany 224
ing or decreasing? For the fourth quarter, our United Kingdom 179
subjective answer is they are decreasing. Japan 173

France 83
Italy 44
In Europe, the formation of a new coalition
ROAD TRAFFIC IN VEHICLE-KM PER 1000 UNITS OF GDP IN CURRENT
government in Italy has removed Italian poli- USD. ROAD TRAFFIC IS ANY MOVEMENT OF A ROAD VEHICLE ON A
GIVEN ROAD NETWORK.
tics as a possible tail-event for the time being.
Meanwhile, we assume that the Benn-Burt law
in the U.K. has been drafted well enough to eliminate a potential no-deal Brexit on October 31.
Elsewhere, the U.S/China trade war and Middle East tensions are most likely to be in stasis through
the fourth quarter.
1
The 6-month steps in the WTI crude oil price were $74.15, $45.21, and $58.24. The first change equated to a 40 percent decrease
and the second change equated to a 30 percent increase. So the 6-month impulse was 70 percent.

Discover CHART 8
The Oil Price Impulse Explains Oscillations In German Growth
what you % %
WTI CRUDE IN EUROS: 6-MONTH IMPULSE* (LS, INVERTED)
can do GERMANY: NOMINAL GDP, 6-MONTH GROWTH
-80 (RS, ANNUALIZED)
with BCA 5.0
Analytics. -60
4.5
-40
4.0
-20
0 3.5
20
3.0
40
2.5
60
2.0
80
2014 2015 2016 2017 2018 2019 2020

Expect a How To Position For The Fourth Quarter

rebound in After a disappointing third quarter for global and European growth, we expect a rebound in the
the fourth fourth quarter. But at the moment, we do not have any conviction that the rebound’s momentum
quarter. will take it deeply into 2020. Position for the fourth quarter as follows:
Bonds: Expect bond yields to edge modestly higher, especially for those yields that are deeply in
negative territory. Underweight German bunds in a European or global bond portfolio.
Currencies: Zero/negative yielding currencies have the most to gain, and our preference remains
the yen. With a Brexit denouement, the pound could be the biggest mover and our inkling is to the
upside. But we await more clarity before pulling the trigger.
Equities: a tug of war between growth and valuation will leave the broad equity market index in the
sideways range in which it has existed over the past two years (Chart 9). But with a higher yield
than bonds, equities are the preferred asset-class in the ugly contest.
Equity sectors: Non-China cyclical plays will outperform China plays. Continue to overweight banks
versus resources and/or industrials.

Non-China CHART 9 CHART 10

Global Equities Have Gone Stay Overweight Europe
cyclical plays Nowhere For Two Years Versus China
will outper- MSCI ALL-COUNTRY WORLD
Bn %
USD
form China 300 15
plays. 530 530

200 10
510 510 100 5
490 490 0 0
470 470 -100 -5
-200 -10
450 450
-300 -15
430 430
-400 -20
410 410
-500 -25
CHINA: 6-MONTH CREDIT IMPULSE (LS)
390 390 SHANGHAI COMPOSITE VS. EURO STOXX 50,
-600 -30
6-MONTH % CHANGE (RS)
370 370 -700 -35
2016 2017 2018 2019 2020 2016 2017 2018 2019 2020
Equity regions: Continue to overweight the Eurostoxx 50 versus the Shanghai Composite and/or the
Nikkei 225 (Chart 10).
Dhaval Joshi,
Chief European Investment Strategist
dhaval@bcaresearch.com

Discover Fractal Trading System*

what you
The recent surge in the nickel price is due to scares about supply disruption, specifically an Indo-
can do
nesian export ban. However, the extent of the rally appears technically stretched. We would express
with BCA
this as a pair-trade versus gold: long gold / short nickel.
Analytics.
Set a profit target of 11 percent with a symmetrical stop-loss.
Long gold / For any investment, excessive trend following and groupthink can reach a natural point of instabil-
short nickel. ity, at which point the established trend is highly likely to break down with or without an external
catalyst. An early warning sign is the investment’s fractal dimension approaching its natural lower
bound. Encouragingly, this trigger has consistently identified countertrend moves of various mag-
nitudes across all asset classes.
NICKEL VS. GOLD 65-DAY FRACTAL DIMENSION
3.0 3.0
2.5 2.5
2.0 2.0
1.5 1.5
1.3 1.3
The lower bound of the fractal dimension
signals an imminent liquidity shortage
NICKEL VS. GOLD
16 16
15 15
14 14
13 13
12 12
11 11
10 10
9 9
8 8
7 7
2012 2013 2014 2015 2016 2017 2018 2019 2020
* For more details please see the European Investment Strategy Special Report “Fractals, Liquidity & A Trading Model,”
dated December 11, 2014, available at eis.bcaresearch.com.

Fractal Trading System

The post-June 9, 2016 fractal trading model rules are:
1. When the fractal dimension approaches the lower limit after an investment has been in an established trend it is a potential trigger
for a liquidity-triggered trend reversal. Therefore, open a countertrend position.
2. The profit target is a one-third reversal of the preceding 13-week move. Apply a symmetrical stop-loss.
3. Close the position at the profit target or stop-loss. Otherwise close the position after 13 weeks.
4. Use the position size multiple to control risk. The position size will be smaller for more risky positions.
PROFIT TARGET / MAXIMUM TRADING RULE

INITIATION POSITION
POSITIONS STOP-LOSS RETURN RETURN** COMMENTS
DATE SIZE
(%) (%)* (%)
LONG GOLD / SHORT NICKEL 3-OCT-19 11.0 0.25 OPEN POSITION
SHORT ITALIAN 10-YEAR BTP 19-SEP-19 3.0 1 0.4 -0.2 OPEN POSITION
SHORT U.S. 10-YEAR T-BOND 12-SEP-19 1.5 1 1.5 1.5
LONG SPAIN VERSUS BELGIUM 22-AUG-19 3.5 1 2.6 2.1 OPEN POSITION
SHORT NICKEL VERSUS COPPER 8-AUG-19 10.0 0.25 NONE -2.5
SHORT NEW ZEALAND ELECTRICITY VERSUS MARKET 25-JUL-19 7.0 0.5 3.0 -2.7 OPEN POSITION
SHORT ASX 200 VERSUS FTSE100 11-JUL-19 2.0 1 1.4 -2.0
SHORT ATHEX COMPOSITE VERSUS EUROSTOXX 600 4-JUL-19 7.0 0.5 6.0 1.1 OPEN POSITION
SHORT EURO AREA INDUSTRIALS VERSUS MARKET 27-JUN-19 2.0 1 2.4 2.0
SHORT MSCI ALL-COUNTRY WORLD 20-JUN-19 4.0 1 4.2 4.0
SHORT FINANCIAL SERVICES VERSUS MARKET 13-JUN-19 2.0 1 0.9 -1.5
SHORT RUSSIA (MOEX) VERSUS JAPAN (NIKKEI) 6-JUN-19 5.0 0.5 7.3 2.5
SHORT BITCOIN 23-MAY-19 27.0 0.1 4.3 -2.7
SHORT NZX 50 VERSUS FTSE100 16-MAY-19 2.0 1 2.8 2.0
SHORT CHINA VERSUS JAPAN 2-MAY-19 2.5 1 11.3 2.5
SHORT TECH VERSUS HEALTHCARE 25-APR-19 6.5 0.5 12.0 3.3
SHORT WTI / LONG LMEX 18-APR-19 5.0 0.5 15.2 2.5
SHORT 10-YEAR OAT 4-APR-19 1.3 1 0.7 -1.3
LONG SEK/NOK 28-MAR-19 1.5 1 0.5 -1.5
LONG AUD/CNY 14-MAR-19 1.5 1 1.6 1.5
LONG ALUMINIUM VERSUS TIN 28-FEB-19 6.5 0.5 8.4 3.3
LONG NIKKEI 225 VERSUS HANG SENG 14-FEB-19 4.5 1 3.4 1.4
SHORT 30-YEAR T-BONDS 7-FEB-19 3.0 1 1.3 -3.0
LONG DAX VERSUS 30-YEAR BUND 31-JAN-19 2.5 1 7.4 2.5
SHORT INDIAN RUPEE VERSUS PAKISTAN RUPEE 17-JAN-19 3.0 1 1.2 -3.0
LONG GLOBAL INDUSTRIALS VERSUS UTILITIES 10-JAN-19 3.0 1 3.6 3.0
LONG LITECOIN AND ETHEREUM 20-DEC-18 60.0 0.05 60.7 3.0
LONG EUR/NZD 13-DEC-18 2.5 1 3.0 2.5
LONG MIB VERSUS EUROSTOXX 29-NOV-18 5.0 0.5 3.9 1.3
LONG EM / SHORT DM 22-NOV-18 2.5 1 7.7 2.5
LONG NICKEL / SHORT PALLADIUM 15-NOV-18 14.0 0.25 NONE -3.5
LONG PORTUGAL / SHORT HUNGARY 25-OCT-18 6.0 0.5 1.0 -3.0
SHORT AUSTRALIAN TELECOMS VERSUS INSURANCE 18-OCT-18 7.0 0.5 NONE -3.5
LONG CRB INDUSTRIALS VERSUS MSCI WORLD 11-OCT-18 2.0 1 15.9 2.0
LONG EUROSTOXX50 VERSUS NIKKEI225 4-OCT-18 3.5 1 10.3 3.5
SHORT U.S. TELECOM / LONG U.S. AUTOS 20-SEP-18 9.0 0.33 9.1 -3.0
SHORT PALLADIUM/LONG COPPER 13-SEP-18 6.0 0.5 0.2 -3.0
LONG CHINA / SHORT INDIA 6-SEP-18 9.0 0.33 9.5 3.0
SHORT EUROPEAN HEALTHCARE VERSUS BANKS 30-AUG-18 10.0 0.25 8.2 0.6
LONG BASIC RESOURCES VERSUS CHEMICALS 23-AUG-18 3.5 1 3.6 3.5
LONG EM / SHORT DM 2-AUG-18 2.5 1 NONE -2.5
LONG GOLD 19-JUL-18 3.0 1 0.2 -3.0
SHORT TRADE-WEIGHTED DOLLAR 5-JUL-18 2.0 1 0.8 -0.8
SHORT CONSUMER SERVICES VERSUS
28-JUN-18 2.5 1 1.2 -2.5
CONSUMER GOODS
SHORT EURO AREA ENERGY VERSUS
14-JUN-18 6.0 0.5 0.6 -2.3
FINANCIALS
LONG PLATINUM / SHORT NICKEL 7-JUN-18 14.0 0.25 7.8 2.0
LONG PLN / USD 31-MAY-18 3.5 1 3.1 2.1
LONG POLAND / SHORT ITALY 17-MAY-18 5.0 0.5 7.8 2.5
SHORT EURO AREA ENERGY VERSUS
3-MAY-18 5.0 0.5 6.3 2.5
GLOBAL BASIC MATERIALS
LONG SEK / GBP 19-APR-18 3.0 1 3.9 3.0
10-YEAR BONDS: SHORT SPAIN / LONG GERMANY 12-APR-18 1.0 2 5.5 2.0
LONG AUD/NOK 5-APR-18 2.0 1 3.2 2.0
SHORT NICKEL / LONG LEAD 22-MAR-18 8.0 0.5 4.0 -4.0
SHORT HELSINKI OMX / LONG EUROSTOXX 600 15-MAR-18 3.0 1 3.6 3.0
SHORT CHILEAN PESO / USD 8-MAR-18 2.7 1 6.1 2.7
LONG GLOBAL UTILITIES VERSUS MARKET 8-FEB-18 3.5 1 5.4 3.5
LONG USD/ZAR 1-FEB-18 6.0 0.5 6.5 3.0
SHORT JAPANESE ENERGY VERSUS MARKET 25-JAN-18 8.0 0.5 9.4 4.0
SHORT S&P500 / LONG EUROSTOXX50 11-JAN-18 2.0 1 0.1 -2.0
SHORT PALLADIUM 4-JAN-18 6.0 0.5 15.0 3.0
* THE MAXIMUM RETURN CAPTURES THE POSITION’S POINT OF MAXIMUM PROFIT (UNWEIGHTED BY THE POSITION SIZE).
** THE TRADING RULE RETURN IS WEIGHTED BY THE POSITION SIZE.

Cyclical Recommendations
INITIATION/
ASSET ALLOCATION MODIFICATION RETURN (%) COMMENTS
DATE
INITIATION/
EQUITY ALLOCATION MODIFICATION RETURN (%) COMMMENTS
DATE
LONG EURO STOXX50 VERSUS NIKKEI 225 11-JUL-19 -1.0
LONG BANKS VERSUS INDUSTRIALS 11-JUL-19 -2.9
LONG EURO STOXX50 VERSUS SHANGHAI COMPOSITE 2-MAY-19 6.9
RETURN IS BASED ON EVOLVING

LONG GERMANY, FRANCE, IRELAND AND SWITZERLAND
31-JAN-19 3.6 ALLOCATION. INITIATION DATE
VERSUS MARKET
WAS 13-NOV-14
RETURN IS BASED ON EVOLVING

SHORT NORWAY AND NETHERLANDS VERSUS MARKET 2-MAY-19 2.9 ALLOCATION. INITIATION DATE
WAS 13-NOV-14
LONG EUROPEAN HEALTHCARE VERSUS INDUSTRIALS 27-JUN-19 4.0
LONG FTSE100 VERSUS FTSE250 23-FEB-17 -1.8
INITIATION/
BONDS, RATES, AND CURRENCY ALLOCATIONS MODIFICATION RETURN (%) COMMENTS
DATE
LONG YEN / SHORT EURO 1-FEB-18 15.6
WAS LONG EUR/GBP FROM

31-MAR-16 TO 29-JUN-17 AND
LONG EURO AND SWEDISH KRONA / SHORT DOLLAR 24-AUG-17 2.5
LONG EURO/USD FROM 29-JUN-17
TO 24-AUG-17
LONG EURO / SHORT YUAN 22-DEC-16 7.8

Structural Recommendations
INITIATION/
ASSET ALLOCATION MODIFICATION RETURN (%) COMMENTS
DATE
LONG DAX VERSUS 30-YEAR BUND 31-JAN-19 -11.0
LONG HEALTHCARE AND U.S. T-BOND GERMAN BUND SWITCHED

13-MAR-14 67.1
(40:60 COMBINATION) TO T-BOND ON 23-APR-15
INITIATION/
EQUITY ALLOCATION MODIFICATION RETURN (%) COMMENTS
DATE
LONG EUROPEAN CLOTHES VS. MARKET 6-DEC-18 12.0
LONG TERM INVESTORS
LONG ANIMAL CARE BASKET VERSUS EUROSTOXX600 10-AUG-17 1.8
CAN GO LONG ONLY
LONG GERMAN CONSUMER SERVICES VERSUS
24-JAN-13 9.9
THE MARKET
LONG GERMAN REAL ESTATE EQUITIES /
5-APR-12 65.6
SHORT EURO AREA EQUITIES
LONG PERSONAL PRODUCTS VERSUS MARKET 22-DEC-11 53.9
LONG COMPUTER HARDWARE VERSUS MARKET 22-DEC-11 82.1
LONG HEALTHCARE VERSUS MARKET 14-APR-11 22.0
INITIATION/
BONDS, RATES, AND CURRENCY ALLOCATIONS MODIFICATION RETURN (%) COMMENTS
DATE
LONG 30-YEAR T-BOND AND BTP /
30-MAY-19 6.4
SHORT 30-YEAR BUND AND BONO
LONG 10-YEAR ITALIAN BTPS /
20-DEC-18 5.8
SHORT 10-YEAR SPANISH BONOS
LONG DEC 2022 EURODOLLAR /
30-NOV-17 -0.8 LEVERED UP 5 TIMES
SHORT EURIBOR FUTURES
LONG 5-YEAR U.K. GILTS 8-OCT-14 14.8

Closed Fractal Trades

INITIATION POSITION
TRADES CLOSED IN 2018 STOP-LOSS RETURN RETURN**
DATE SIZE
(%) (%)* (%)
SHORT BITCOIN 21-DEC-17 $12750/28000 0.1 139.5 2.9
LONG SILVER 14-DEC-17 4.5 1 11.6 4.5
SHORT WTI CRUDE 30-NOV-17 7.5 0.33 2.6 -2.5
SHORT NIKKEI 225 / LONG EUROSTOXX50 9-NOV-17 3.0 1 1.0 -3.0
LONG NZD / USD 2-NOV-17 3.0 1 6.8 3.0
SHORT COPPER / LONG TIN 26-OCT-17 5.0 0.5 5.9 2.5
LONG IBEX 35 / SHORT EUROSTOXX50 12-OCT-17 2.5 1 2.1 1.7
LONG U.K. PERSONAL AND HOUSEHOLD GOODS /
21-SEP-17 4.5 0.5 1.5 0.1
SHORT U.K. FOOD AND BEVS.
SHORT RUB / USD 9-MAR-17 3.0 1 1.5 -3.0
LONG TIN / SHORT COPPER 23-FEB-17 5.0 0.5 13.4 2.5
SHORT MSCI AC WORLD 9-FEB-17 2.5 1 NONE -2.5
SHORT BASIC MATERIALS EQUITIES 2-FEB-17 3.5 1 2.5 0.8
LONG NOK/RUB 26-JAN-17 2.0 1 3.2 2.0
SHORT ITALY MIB / LONG HONG KONG HANG SENG 12-JAN-17 6.0 0.5 9.5 3.0

INITIATION POSITION
DATE SIZE
(%) (%)* (%)
SHORT NORWAY / LONG SWITZERLAND 19-OCT-17 2.0 1 1.5 -2.0

10-YEAR BONDS: LONG CANADA /
5-OCT-17 1.0 2 1.7 2.0
SHORT GERMANY
LONG USD / CAD 14-SEP-17 2.5 1 5.9 2.5
SHORT BASIC MATERIALS VERSUS MARKET 7-SEP-17 2.5 1 2.5 2.5
SHORT NICKEL / LONG SILVER 31-AUG-17 8.0 0.5 9.2 4.0
SHORT MSCI TURKEY / LONG EUROSTOXX600 17-AUG-17 5.0 0.5 9.7 -2.5
SHORT MSCI CHINA / LONG MSCI EM 3-AUG-17 2.5 1 NONE -2.5
LONG USD/CAD 27-JUL-17 2.5 1 3.5 2.5
LONG MEDIASET ESPANA / SHORT IBEX35 20-JUL-17 5.0 0.5 2.5 -2.5
LONG DM / SHORT EM 29-JUN-17 3.0 1 NONE -3.0
LONG NICKEL / SHORT PALLADIUM 15-JUN-17 10.0 0.5 29.7 5.0
SHORT EURO / DOLLAR 8-JUN-17 2.0 1 1.2 -2.0
LONG NICKEL / SHORT TIN 25-MAY-17 6.5 0.5 27.0 3.3
SHORT CAC40 / LONG EUROSTOXX600 11-MAY-17 1.5 1 1.3 0.7
10-YEAR BONDS: SHORT PORTUGAL / LONG SPAIN 4-MAY-17 2.5 1 NONE -2.5
LONG FTSE100 / SHORT IBEX35 27-APR-17 4.0 1 4.7 4.0
LONG SUGAR / SHORT ALUMINIUM 13-APR-17 10.0 0.5 1.5 -5.0
SHORT AEX 16-MAR-17 2.5 1 0.8 -2.5
LONG GOLD 15-DEC-16 4.0 1 8.8 4.0
SHORT GREEK 10-YEAR BOND 8-DEC-16 4.0 1 7.2 4.0
LONG ITALY / SHORT FRANCE 10-YEAR BOND 5-DEC-16 0.6 2 1.3 1.2
LONG PLATINUM / SHORT PALLADIUM 24-NOV-16 8.0 0.5 9.8 4.0
SHORT FRENCH BANKS / LONG CAC40 3-NOV-16 6.0 0.5 1.7 -3.0
LONG SILVER / SHORT LEAD 13-OCT-16 8.0 0.5 5.5 -4.0


INITIATION POSITION
DATE SIZE
(%) (%)* (%)
LONG COPPER / SHORT TIN 27-OCT-16 6.5 0.5 26.5 3.3

LONG SEK / NOK 6-OCT-16 2.0 1 1.9 -2.0
LONG PLATINUM / SHORT PALLADIUM 6-OCT-16 7.5 0.5 13.4 3.8
LONG ALUMINIUM / SHORT LEAD 22-SEP-16 6.5 0.5 8.3 3.3
LONG U.K. TELECOMS / SHORT FTSE 100 8-SEP-16 4.0 1 1.3 -4.0
SHORT MSCI EMERGING MARKETS 25-AUG-16 3.5 1 4.0 3.5
SHORT SEMICONDUCTORS 11-AUG-16 6.5 0.5 0.1 -3.3
SHORT U.K. A-RATED CORPORATE BONDS 11-AUG-16 4.0 1 5.1 4.0
SHORT U.K. A-RATED CORPORATE BONDS 28-JUL-16 2.6 1 0.3 -2.6
LONG SWISS / SHORT U.K. 10-YEAR 21-JUL-16 1.7 1 0.5 -1.7
LONG U.K. TELECOMS / SHORT U.K. ENERGY 14-JUL-16 8.0 0.5 12.2 4.0
LONG U.K. HOMEBUILDERS /

30-JUN-16 12.0 0.5 16.6 6.0
SHORT EUROSTOXX 600
LONG U.K. CLOTHING AND ACCESSORIES 9-JUN-16 6.0 1 19.4 -6.0

SHORT EUROPEAN COMPUTER SERVICES 2-JUN-16 4.5 1 12.5 4.5
SHORT SOYBEAN FUTURES 19-MAY-16 10.0 0.5 2.0 -1.5
SHORT CONSTRUCTION AND BUILDING MATERIALS 12-MAY-16 3.0 1 7.0 3.0
SHORT BASIC MATERIALS 28-APR-16 10.0 0.5 6.6 1.4
SHORT EQUITIES (MSCI WORLD) 21-APR-16 4.0 1 3.6 3.6
SHORT TURKEY ISTANBUL 100 /

7-APR-16 5.0 0.5 10.5 2.5
LONG EUROSTOXX 50
SHORT GERMAN INDUSTRIALS / LONG DAX 24-MAR-16 2.0 1 NONE -3.6
SHORT 30-YEAR JGBS /

24-MAR-16 10.0 0.5 1.2 -0.6
LONG CANADIAN 30-YEAR BONDS
SHORT AEX / LONG EUROSTOXX 50 3-MAR-16 4.0 1 1.7 1.6

LONG CAC 40 / SHORT FTSE100 25-FEB-16 3.0 1 3.3 3.0
SHORT U.K. GOLD MINERS 18-FEB-16 20.0 0.25 NONE -4.2
LONG SWISS BONDS / SHORT GERMAN BOND 18-FEB-16 0.8 3 0.1 -3.3
LONG EUROPEAN CONSUMER FINANCE /

4-FEB-16 10.0 0.5 2.3 0.9
SHORT EUROSTOXX 600
LONG POUND / DOLLAR 21-JAN-16 4.0 1 2.9 0.5

SHORT IRISH EQUITIES / LONG EUROSTOXX 50 14-JAN-16 8.0 0.5 4.2 1.5
SHORT EUROPEAN RENEWABLE ENERGY 7-JAN-16 5.0 1 17.6 5.0
SHORT EUROPEAN BREWERS 10-DEC-15 5.0 1 8.3 4.3


TARGET MAXIMUM TRADING RULE
INITIATION
TRADES CLOSED IN 2015 RETURN RETURN RETURN
DATE
(%) (%)* (%)
SHORT 7-YEAR GERMAN BUNDS / LONG CANADIAN

3-DEC-15 5.0 3.1 2.2
7-YEAR BONDS
SHORT GERMAN TECHNOLOGY VERSUS HE MARKET 19-NOV-15 5.0 1.1 -2.5
LONG 10-YEAR DANISH BONDS /

5-NOV-15 5.0 0.8 0.7
SHORT 10-YEAR GERMAN BUNDS
SHORT EUROPEAN TOYS SECTOR 21-OCT-15 5.0 3.8 -2.5
SHORT CAC40 / LONG EUROSTOXX 50 7-OCT-15 5.0 2.4 1.2
LONG ZAR / YEN 9-SEP-15 2.5 6.3 2.5
LONG AEX / SHORT ISEQ 9-SEP-15 5.0 6.3 -2.5
LONG ZAR / YEN 2-SEP-15 2.5 2.0 -1.3
LONG GOLD 12-AUG-15 5.0 3.8 0.0
LONG CAD / GBP 22-JUL-15 2.5 1.2 -0.9
LONG NZD /AUD AND NZD / CAD 1-JUL-15 2.5 3.8 2.5
LONG GERMAN BUND 10-JUN-15 5.0 3.8 3.0
SHORT SHANGHAI A SHARE / LONG EUROSTOXX 600 3-JUN-15 5.0 26.8 -2.5
SHORT SHANGHAI A SHARE / LONG EUROSTOXX 600 27-MAY-15 5.0 22.1 5.0
SHORT HANG SENG 15-APR-15 5.0 3.4 1.3
LONG TIN 8-APR-15 5.0 NONE -5.0
SHORT GBP / EUR 1-APR-15 2.5 2.6 1.7
SHORT GBP / EUR 4-MAR-15 2.5 2.2 0.4
SHORT GERMAN AUTOS VS. THE MARKET 18-FEB-15 5.0 2.0 -1.7
LONG AUD / USD 4-FEB-15 2.5 1.8 1.0
LONG TRADE WEIGHTED EURO 28-JAN-15 5.0 1.3 0.3
LONG MXN / USD 14-JAN-15 2.5 0.7 -1.7
SHORT EUROPEAN RETAILERS, LONG EUROSTOXX 600 7-JAN-15 5.0 0.4 0.2
* WITHIN 8 WEEKS OF INITIATION.

Closed Recommendations
INITIATION CLOSE TOTAL RETURN LINK TO
RECOMMENDATIONS CLOSED IN 2018/19
DATE DATE (%) REPORTS
SHORT 30:60:10 PORTFOLIO OF EQUITIES: BONDS: OIL 8-MAY-19 22-AUG-19 -1.0 22-AUG-19
LONG EUROPEAN AIRLINES VERSUS MARKET 1-FEB-18 11-JUL-19 -35.8 11-JUL-19
LONG EURO AREA RETAILERS / SHORT U.S RETAILERS 15-JUN-17 11-JUL-19 -32.4 11-JUL-19
LONG EUROSTOXX VERSUS EUROSTOXX50 23-FEB-17 11-JUL-19 0.3 11-JUL-19
LONG EURO STOXX AND SHORT VIX TERM STRUCTURE
30-MAR-16 11-JUL-19 50.1 11-JUL-19
(100:40 COMBINATION)
LONG GERMAN CONSUMER SERVICES / SHORT GERMAN EXPORTERS 24-SEP-15 11-JUL-19 -2.4 11-JUL-19
LONG SPANISH REAL ESTATE EQUITIES VERSUS MARKET 23-APR-15 11-JUL-19 -1.9 11-JUL-19
LONG SWISS EQUITIES AND CASH (50:50 COMBINATION) 22-JAN-15 11-JUL-19 20.1 11-JUL-19
LONG SPANISH BANK EQUITIES / SHORT AUSTRALIAN BANK EQUITIES 18-JUN-14 11-JUL-19 -6.3 11-JUL-19
LONG EURO AREA TELECOMS VERSUS MARKET 8-AUG-13 11-JUL-19 0.3 11-JUL-19
SHORT U.K. CONSUMER SERVICES VERSUS THE MARKET 7-MAR-13 11-JUL-19 -9.2 11-JUL-19
LONG 10-YEAR NORWEGIAN BONDS / SHORT 10-YEAR GERMAN BUNDS 30-NOV-17 11-JUL-19 -4.1 11-JUL-19
LONG 10-YEAR U.K. GILTS / SHORT 10-YEAR IRISH BONDS 30-NOV-17 11-JUL-19 2.7 11-JUL-19
LONG 10-YEAR ITALIAN BONDS / SHORT 10-YEAR FRENCH OATS 16-NOV-17 11-JUL-19 -1.1 11-JUL-19
LONG 10-YEAR U.K. GILTS / SHORT 10-YEAR GERMAN BUNDS 9-NOV-17 11-JUL-19 -0.4 11-JUL-19
LONG DEC 2019 3M STERLING FUTURE 25-FEB-16 11-JUL-19 1.4 11-JUL-19
LONG DEC 2019 EURODOLLAR FUTURE 25-FEB-16 11-JUL-19 -2.6 11-JUL-19
LONG 10-YEAR DANISH BONDS / SHORT 10-YEAR GERMAN BUNDS 5-NOV-15 11-JUL-19 3.7 11-JUL-19
LONG 5-YEAR GERMAN CPI INFLATION SWAP 14-NOV-13 11-JUL-19 0.4 11-JUL-19
OVER 10-YEAR BONDS: LONG U.S. / SHORT GERMANY 25-JUL-13 11-JUL-19 -5.6 11-JUL-19
LONG 10-YEAR U.K. GILTS / SHORT 10-YEAR SWEDISH BONDS 14-FEB-13 11-JUL-19 -0.5 11-JUL-19
VIX FUTURE: LONG NEAR-MONTH / SHORT FAR-MONTH 27-FEB-14 11-JUL-19 1.5 11-JUL-19
SHORT SOVEREIGN YIELD SPREAD FUTURES (ITALY VS. GERMANY) 3-NOV-12 11-JUL-19 2.6 11-JUL-19
LONG VIX (S&P 500) / SHORT VDAX (DAX) (10% EXPOSURE) 20-OCT-11 11-JUL-19 6.7 11-JUL-19
LONG 10-YEAR SPANISH BONDS / SHORT 10-YEAR FRENCH OATS 12-NOV-15 4-JUL-19 9.4 4-JUL-19
LONG 10-YEAR PORTUGESE BONDS VERSUS EURO AREA 24-OCT-13 4-JUL-19 48.2 4-JUL-19
LONG EUROPEAN BANKS RELATIVE PLUS U.S. T-BOND
29-NOV-18 23-MAY-19 3.2 23-MAY-19
(25:75 COMBINATION)
LONG INDUSTRIAL COMMODITIES VERSUS EQUITIES 11-0CT-18 14-FEB-19 1.0 14-FEB-19
LONG EUROSTOXX 600 / SHORT MSCI WORLD EX. U.S.
20-SEP-12 29-OCT-18 -17.8 1-NOV-18
(CURRENCY UNHEDGED)
LONG IRELAND / SHORT SPAIN 12-APR-12 26-OCT-18 17.7 1-NOV-18
SHORT BASIC MATERIALS VERSUS MARKET 30-NOV-17 04-OCT-18 7.1 20-SEP-18
LONG GLOBAL 30-YEAR GOVERNMENT BONDS 10-MAY-18 04-OCT-18 0.0 20-SEP-18
SHORT BANKS VERSUS HEALTHCARE 01-FEB-18 30-AUG-18 22.6 30-AUG-18
SHORT TURKISH LIRA / LONG SOUTH AFRICAN RAND 20-MAR-14 23-AUG-18 104.9 23-AUG-18
SHORT POLAND / LONG EUROSTOXX600 29-JUN-17 17-MAY-18 11.9 17-MAY-18
LONG EQUITY PLUS AT-THE-MONEY PUT OPTION (MARCH 2018 EXPIRY) 27-JUL-17 31-MAR-18 8.5 27-JUL-17

Closed Recommendations - continued

RECOMMENDATIONS CLOSED IN 2017
SHORT EURO AREA BANKS VERSUS MARKET 3-DEC-15 14-SEP-17 4.8 14-SEP-17

RECOMMENDATIONS CLOSED IN 2015/16
LONG 10-YEAR U.K. GILTS AND SPANISH BONOS (50:50 COMBINATION) 7-APR-16 22-SEP-16 6.6 22-SEP-16
LONG U.K. A RATED CORPORATE BONDS 13-OCT-11 28-JUL-16 42.4 28-JUL-16
LONG EURO / SHORT DOLLAR 30-OCT-14 31-MAR-16 -11.4 31-MAR-16
SHORT POUND / LONG DOLLAR 20-FEB-14 31-MAR-16 17.2 31-MAR-16
LONG DEC 2018 EURODOLLAR / SHORT DEC 2018 EURIBOR 5-NOV-15 25-FEB-16 3.9 25-FEB-16
LONG DEC 2017 3M STERLING FUTURE 11-JUN-15 25-FEB-16 5.2 25-FEB-16
LONG OVER 10-YEAR AGGREGATE EURO AREA BOND 28-NOV-13 10-DEC-15 31.7 10-DEC-15
ITALIAN GOVT. BONDS: 2-10 YEAR FLATTENER 27-SEP-12 10-DEC-15 33.2 10-DEC-15
LONG DEC 2017 EURODOLLAR / SHORT DEC 2017 EURIBOR 23-APR-15 5-NOV-15 1.5 5-NOV-15
LONG NETHERLANDS EQUITIES / SHORT U.K. EQUITIES 28-MAR-13 18-JUN-15 30.4 18-JUN-15
LONG JUNE 2016 3M STERLING FUTURE (LEVERED UP 5 TIMES) 27-FEB-14 11-JUN-15 0.5 11-JUN-15
LONG EURO AREA LARGE CAPS / SHORT EURO AREA SMALL CAPS 1-NOV-12 5-MAR-15 -12.1 5-MAR-15
PROTECTOR PORTFOLIO 4-AUG-11 22-JAN-15 44.1 22-JAN-15

RECOMMENDATIONS CLOSED IN 2014
LONG GERMAN EQUITIES / SHORT SWISS EQUITIES 9-JUN-14 13-NOV-14 -7.6 13-NOV-14
LONG GERMAN & ITALIAN EQUITIES / SHORT FRENCH &
8-MAR-12 13-NOV-14 -2.8 13-NOV-14
SPANISH EQUITIES
SHORT SEPTEMBER 2014 EURO / DOLLAR CALL OPTION STRIKE 1:45 20-MAR-14 25-SEP-14 1.4 SEP 25/14
LONG POLISH AND CZECH EQUITIES (50:50) VERSUS EUROPE 7-NOV-13 5-AUG-14 -1.4 AUG 7/14
LONG GREEK EQUITIES VERSUS EURO AREA 17-OCT-13 5-AUG-14 -2.1 AUG 7/14
LONG SWISS EQUITIES / SHORT EURO AREA EQUITIES 8-SEP-11 5-JUN-14 2.3 JUN 5/14
SHORT COPPER 21-FEB-14 29-MAY-14 2.9 MAY 29/14
LONG SWISS AND ITALIAN 10-YEAR BONDS (50:50 RATIO) 9-AUG-12 3-APR-14 14.8 APR 3/14
SHORT TURKISH LIRA / LONG U.S. DOLLAR 7-NOV-13 20-MAR-14 10.1 MAR 20/14
LONG DOW JONES LUXURY INDEX / SHORT EURO STOXX 14-APR-11 20-MAR-14 32.5 MAR 20/14
SHORT MARCH 2014 EURO / DOLLAR CALL OPTION STRIKE 1.45 31-OCT-13 6-MAR-14 0.9 OCT 31/13
LONG JUNE 2014 3M STERLING FUTURE 4-JUL-13 27-FEB-14 0.6 FEB 27/14
VIX FUTURE: LONG NEAR-MONTH / SHORT FAR-MONTH (20% EXPOSURE) 9-JAN-14 30-JAN-14 3.1 JAN 30/14
EURO STOXX VOLATILITY FUTURES: LONG 1-MONTH / SHORT 6-MONTH

16-MAY-13 9-JAN-14 0.1 JAN 9/14
(10% EXPOSURE)

European Asset Performance

LAST 1-WEEK 1-MONTH YEAR-TO-DATE
CURRENCY PERFORMANCES VERSUS THE DOLLAR*
(%) (%) (%) (%)
EURO/USD 1.1 -0.7 -0.5 -3.8
GBP/USD 1.2 -2.0 1.3 -3.0
CHF/USD 1.0 -0.8 -0.3 -0.3
SWE/USD 9.9 -2.1 -0.5 -8.7
DEN/USD 9.1 -1.3 -0.3 -4.5
NOR/USD 6.8 -0.8 -0.5 -3.6
LAST 1-WEEK 1-MONTH YEAR-TO-DATE

10-YEAR GOVERNMENT BOND YIELD
(%) (BPs) (BPs) (BPs)
U.K. 0.5 -5.8 5.5 -76.9
GERMANY -0.6 3.6 13.8 -75.3
SWITZERLAND -0.7 9.2 24.8 -55.4
SWEDEN -0.3 0.6 7.1 -81.2
1-WEEK 1-MONTH YEAR-TO-DATE

EQUITY SECTOR PERFORMANCE**
(%) (%) (%)
ENERGY 0.9 4.0 2.1
MATERIALS 0.7 2.3 10.4
CAPITAL GOODS -0.5 1.2 19.0
COMMERCIAL SERVICES & SUPPLIES -0.1 -1.6 21.6
TRANSPORTATION -0.5 -0.7 15.5
AUTOMOBILES & COMPONENTS 0.1 5.1 8.6
CONSUMER DURABLES & APPAREL -1.3 -0.3 26.8
HOTELS, RESTAURANTS & LEISURE -0.3 0.0 12.3
MEDIA -0.2 0.1 8.6
RETAILING 0.8 -1.0 25.0
FOOD & STAPLE RETAILING 0.4 5.8 10.3
HOUSEHOLD & PERSONAL PRODUCTS -0.3 -3.6 15.0
HEALTH CARE & EQUIPMENT SERVICES -3.1 -2.8 22.3
PHARMACEUTICALS & BIOTECHNOLOGY -0.8 -0.9 15.4
BANKS 0.6 7.3 -1.5
DIVERSIFIED FINANCIALS -0.4 3.2 17.2
INSURANCE 0.7 6.2 16.7
REAL ESTATE 2.9 5.1 8.5
SOFTWARE & SERVICES -1.1 -1.6 18.0
TECHNOLOGY HARDWARE & EQUIPMENT -1.9 2.1 3.6
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENTS 0.4 10.0 45.7
TELECOMMUNICATION 0.1 2.0 2.5
UTILITIES 0.7 2.5 20.0
* POSITIVE PERCENTAGE CHANGE DENOTES APPRECIATION VERSUS THE US DOLLAR.
** BASED ON 10 GICS SECTORS; EXPRESSED IN LOCAL CURRENCY TERMS; SOURCE: MSCI INC. (SEE LAST PAGE).

European Asset Performance

COUNTRY EQUITY PERFORMANCE - LARGE CAP* CHANGE CHANGE CHANGE
(%) (%) (%)
U.K. 1.0 0.9 7.4
SWITZERLAND -0.5 -0.5 19.1
FRANCE -0.6 1.8 18.0
GERMANY -0.4 2.2 10.3
NETHERLANDS -0.3 2.6 26.1
AUSTRIA -4.0 2.0 3.3
ITALY 0.2 2.4 14.2
SPAIN 0.5 4.0 8.4
PORTUGAL 0.8 3.2 19.2
IRELAND 1.7 1.5 32.6
BELGIUM 0.2 0.8 30.6
FINLAND -1.5 0.6 0.3
DENMARK -2.6 -1.7 15.9
NORWAY 0.0 6.9 4.1
SWEDEN 0.1 4.6 13.3

COUNTRY EQUITY PERFORMANCE - SMALL CAP* CHANGE CHANGE CHANGE
(%) (%) (%)
U.K. 0.0 2.4 13.5
SWITZERLAND -0.5 2.4 15.6
FRANCE -0.7 0.2 18.2
GERMANY 0.2 2.1 14.3
NETHERLANDS 0.0 2.4 19.7
AUSTRIA -0.6 2.8 11.3
ITALY 0.3 2.9 14.9
SPAIN 0.5 2.1 6.2
PORTUGAL 0.3 0.0 -6.7
IRELAND 0.1 7.0 -0.6
BELGIUM -0.8 -0.1 25.1
FINLAND 0.6 3.2 11.1
DENMARK -1.6 0.9 0.9
NORWAY -1.0 1.9 4.1
SWEDEN 0.5 0.8 19.9
* EXPRESSED IN LOCAL CURRENCY TERMS; SOURCE: MSCI INC. (SEE LAST PAGE).

Indicators To Watch - Bond Yields

% % % %
2-YEAR GOVERNMENT BOND YIELD: 2-YEAR GOVERNMENT BOND YIELD:
3.5 GERMANY 3.5 3.5 GERMANY 3.5
PORTUGAL BELGIUM
3.0 IRELAND 3.0 3.0 SPAIN 3.0
ITALY
2.5 2.5 2.5 2.5
2.0 2.0 2.0 2.0
1.5 1.5 1.5 1.5
1.0 1.0 1.0 1.0
.5 .5 .5 .5
0 0 0 0
-.5 -.5 -.5 -.5
-1.0 -1.0 -1.0 -1.0
-1.5 -1.5 -1.5 -1.5

JAN JUL JAN JUL JAN JUL JAN JUL JAN JUL JAN JUL JAN JUL JAN JUL JAN JUL JAN JUL
2015 2016 2017 2018 2019 2015 2016 2017 2018 2019
% % % %
2-YEAR GOVERNMENT BOND YIELD: 2-YEAR GOVERNMENT BOND YIELD:

GERMANY GERMANY
1.5 FRANCE 1.5 1.5 FINLAND (3-YEAR) 1.5
NETHERLANDS AUSTRIA
1.0 1.0 1.0 1.0
.5 .5 .5 .5
0 0 0 0
-.5 -.5 -.5 -.5
2015 2016 2017 2018 2019 2015 2016 2017 2018 2019

Indicators To Watch - Interest Rate Expectations

% % % %
INTEREST RATE EXPECTED INTEREST RATE EXPECTED
5.0 IN DECEMBER 2018*: 5.0 5.0 IN JUNE 2019*: 5.0
U.S. U.S.
4.5 U.K. 4.5 4.5 U.K. 4.5
EURO AREA EURO AREA
4.0 4.0 4.0 4.0
SWITZERLAND SWITZERLAND
3.5 3.5 3.5 3.5
3.0 3.0 3.0 3.0
2.5 2.5 2.5 2.5
2.0 2.0 2.0 2.0
1.5 1.5 1.5 1.5
1.0 1.0 1.0 1.0
.5 .5 .5 .5
0 0 0 0
-.5 -.5 -.5 -.5
-1.0 -1.0 -1.0 -1.0

2015 2016 2017 2018 2019 2015 2016 2017 2018 2019
* BASED ON DECEMBER 2018 EURODOLLAR, SHORT STERLING, * BASED ON JUNE 2019 EURODOLLAR, SHORT STERLING,
EURIBOR AND EUROSWISS FUTURES CONTRACTS. EURIBOR AND EUROSWISS FUTURES CONTRACTS.
SOURCE: BLOOMBERG BARCLAYS INDICES. SOURCE: BLOOMBERG BARCLAYS INDICES.
% % % %
INTEREST RATE EXPECTED INTEREST RATE EXPECTED
5.0 IN DECEMBER 2019*: 5.0 5.0 IN JUNE 2020*: 5.0
U.S. U.S.
4.5 U.K. 4.5 4.5 U.K. 4.5
EURO AREA EURO AREA
4.0 4.0 4.0 4.0
SWITZERLAND SWITZERLAND
3.5 3.5 3.5 3.5
3.0 3.0 3.0 3.0
2.5 2.5 2.5 2.5
2.0 2.0 2.0 2.0
1.5 1.5 1.5 1.5
1.0 1.0 1.0 1.0
.5 .5 .5 .5
0 0 0 0
-.5 -.5 -.5 -.5
-1.0 © BCA Research 2019 -1.0 -1.0 -1.0

2015 2016 2017 2018 2019 2015 2016 2017 2018 2019
* BASED ON DECEMBER 2019 EURODOLLAR, SHORT STERLING, * BASED ON JUNE 2019 EURODOLLAR, SHORT STERLING,
EURIBOR AND EUROSWISS FUTURES CONTRACTS. EURIBOR AND EUROSWISS FUTURES CONTRACTS.
SOURCE: BLOOMBERG BARCLAYS INDICES. SOURCE: BLOOMBERG BARCLAYS INDICES.

Archive Of Previous Reports

Please click on the links below to view reports:
1. A German Recession Is Baked In The Market Cake. Now What? - September 19, 2019
2. If This Is ‘Japanification’, Then Bring It On! - September 12, 2019
3. Brexit: Rock Meets Hard Place - September 5, 2019
4. The Case Against ‘Secular Stagnation’ - August 29, 2019
5. Stocks, Bonds, Or Cash? - August 22, 2019
6. Are Markets Going Up Or Down? - August 8, 2019
7. How Central Banks Have Misunderstood Inflation - July 25, 2019
8. What Goes On Between Those Walls? BCA’s Diverging Views In The Open - July 19, 2019
9. Picking Countries The Right Way Again - July 11, 2019
10. The Interest Impulse Is Fading - July 4, 2019
11. Bund Yield, How Low Can You Go? - June 27, 2019
12. A Pivotal Moment For Monetary Policy - June 20, 2019
13. As Goes Europe, So Goes The World - June 13, 2019
14. Why The Neutral Rate Of Interest Is Zero - June 6, 2019
15. Europe’s Huge Imbalances Are A Force For Self-Preservation - May 30, 2019
16. Why The Consensus On Growth Is Wrong - May 23, 2019
17. Corrections And Catalysts - May 16, 2019
18. Suffering Market Vertigo - May 2, 2019
19. Can Euro Stoxx Outperformance Continue? - April 25, 2019
20. The Biggest Risks To The European And Global Economy Are... - April 18, 2019
21. Monetarists, Keynesians, And Modern Monetary Theory - April 11, 2019
22. Why 2019 Is The Opposite Of 2018 (An Update) - April 4, 2019
23. Europe Vs. America: The Big Call - March 28, 2019
24. The Rule Of 4 Becomes The Rule Of 3 - March 21, 2019
25. Important Message From The Currency Markets - March 14, 2019
26. Opulence And Rebellion: Made In France - March 7, 2019
27. Why A Catastrophic No-Deal Might Be Good... For The EU - February 28, 2019
28. A European Cycle ‘Made In China’- February 21, 2019
29. What Are The Markets Telling Us? - February 14, 2019
30. Why 2019 Is A Pivotal Year For Monetary Policy - February 7, 2019

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Growth To Rebound in The Fourth Quarter, But Fade in 2020: Weekly Report

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Growth To Rebound in The Fourth Quarter, But Fade in 2020: Weekly Report

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EUROPEAN INVESTMENT STRATEGY

CHART OF THE WEEK

Shamir Popat BOUTIQUE INVESTMENT PARTNERS 253269

Discover CHART 2 CHART 3

-1.0 200 200

-.5 100 100

1.0 -200 1.0 -200

1.5 -300 1.5 -300

© BCA Research 2019 © BCA Research 2019

This leads to two important points:

Shamir Popat BOUTIQUE INVESTMENT PARTNERS 253269

The credit CHART 4 CHART 5

1.0 -400 1.0 1.0

1.5 -600 1.5 1.5

© BCA Research 2019 © BCA Research 2019

Shamir Popat BOUTIQUE INVESTMENT PARTNERS 253269

2016 2017 2018 2019 2020

Shamir Popat BOUTIQUE INVESTMENT PARTNERS 253269

volumes of severe headwind impulse. This is because a 30

road traffic percent increase in the oil price in that period

have explained the oscillations in Germany’s 360 360

allowing a rebound in German economic growth 2017 2018 2019

subjective answer is they are decreasing. Japan 173

Shamir Popat BOUTIQUE INVESTMENT PARTNERS 253269

2014 2015 2016 2017 2018 2019 2020

Expect a How To Position For The Fourth Quarter

Shamir Popat BOUTIQUE INVESTMENT PARTNERS 253269

Non-China CHART 9 CHART 10

plays. 530 530

510 510 100 5

470 470 -100 -5

Shamir Popat BOUTIQUE INVESTMENT PARTNERS 253269

Discover Fractal Trading System*

NICKEL VS. GOLD 65-DAY FRACTAL DIMENSION

2012 2013 2014 2015 2016 2017 2018 2019 2020

Shamir Popat BOUTIQUE INVESTMENT PARTNERS 253269

Fractal Trading System

PROFIT TARGET / MAXIMUM TRADING RULE

Shamir Popat BOUTIQUE INVESTMENT PARTNERS 253269

LONG BANKS VERSUS INDUSTRIALS 11-JUL-19 -2.9

LONG EURO STOXX50 VERSUS SHANGHAI COMPOSITE 2-MAY-19 6.9

RETURN IS BASED ON EVOLVING

RETURN IS BASED ON EVOLVING

LONG EUROPEAN HEALTHCARE VERSUS INDUSTRIALS 27-JUN-19 4.0

LONG FTSE100 VERSUS FTSE250 23-FEB-17 -1.8

WAS LONG EUR/GBP FROM

LONG EURO / SHORT YUAN 22-DEC-16 7.8

Shamir Popat BOUTIQUE INVESTMENT PARTNERS 253269

LONG HEALTHCARE AND U.S. T-BOND GERMAN BUND SWITCHED

LONG PERSONAL PRODUCTS VERSUS MARKET 22-DEC-11 53.9

LONG COMPUTER HARDWARE VERSUS MARKET 22-DEC-11 82.1

LONG HEALTHCARE VERSUS MARKET 14-APR-11 22.0

LONG 5-YEAR U.K. GILTS 8-OCT-14 14.8

Shamir Popat BOUTIQUE INVESTMENT PARTNERS 253269

Closed Fractal Trades

PROFIT TARGET / MAXIMUM TRADING RULE

SHORT NORWAY / LONG SWITZERLAND 19-OCT-17 2.0 1 1.5 -2.0

Shamir Popat BOUTIQUE INVESTMENT PARTNERS 253269

Closed Fractal Trades

LONG COPPER / SHORT TIN 27-OCT-16 6.5 0.5 26.5 3.3

LONG U.K. HOMEBUILDERS /

LONG U.K. CLOTHING AND ACCESSORIES 9-JUN-16 6.0 1 19.4 -6.0

SHORT TURKEY ISTANBUL 100 /