Chief Economist & Political Strategist, CrossASEAN Research

Prasenjit K. Basu

Chief Economist & Political Strategist

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

Macroeconomics

<ul>
<li>The hike to 22-year-high 5.375% restores a clearly positive real policy rate. Powell said there's "still a long way to go" before reaching 2% target, so policy must remain restrictive.</li>
<li>We think a mild recession coupled with 6+ months of YoY declines in M2 will enable core PCE inflation to recede to 3.5%YoY by Nov'23 and 2.5% by Jun'24. </li>
<li>Key indicator is MoM change in core PCE. The cumulative MoM gain in core PCE has averaged over 4.5% in the past 29 months. 5.5% peak FF rate by Sep'23. </li>
</ul>


The hike to 22-year-high 5.375% restores a clearly positive real policy rate. Powell said there's "still a long way to go" before reaching 2% target, so policy must remain restrictive.
We think a mild recession coupled with 6+ months of YoY declines in M2 will enable core PCE inflation to recede to 3.5%YoY by Nov'23 and 2.5% by Jun'24. 
Key indicator is MoM change in core PCE. The cumulative MoM gain in core PCE has averaged over 4.5% in the past 29 months. 5.5% peak FF rate by Sep'23. 


With a Positive Real FF Rate Restored, FOMC Hiking Cycle Is Nearly Done

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

<ul>
<li>Ever since our 5/30/23 ETF Pathfinder, our view has been that we cannot be bearish unless a key support level breaks (at the time, that was 4050 on the SPX).</li>
<li>The S&amp;P 500 is now above 4300-4325 -- a level that, in January this year, we had anticipated would cap upside for 2023.</li>
<li>We believe 4300-4325 will act as major support moving forward, and we are bullish as long as the SPX is above 4300; we discussed this in our 7/3/23 ETF Pathfinder.</li>
</ul>


Ever since our 5/30/23 ETF Pathfinder, our view has been that we cannot be bearish unless a key support level breaks (at the time, that was 4050 on the SPX).
The S&amp;P 500 is now above 4300-4325 -- a level that, in January this year, we had anticipated would cap upside for 2023.
We believe 4300-4325 will act as major support moving forward, and we are bullish as long as the SPX is above 4300; we discussed this in our 7/3/23 ETF Pathfinder.


DXY Break Below $101 Suggests Breakouts Likely Coming for Equal-Weight SPX, Dow, and Russell 2000

<ul>
<li>The S&amp;P 500 is 1% above the 4300-4325 area which we anticipated would cap upside for 2023.</li>
<li>Our view since our 5/30/23 ETF Pathfinder is that we cannot be bearish if the SPX is above 4050, and we subsequently moved that line-in-the-sand up to 4165-4200 on 6/6/23.</li>
<li>We are moving that threshold up to 4300, which is short-term support to watch; a break below it could bring selling pressure.</li>
</ul>


The S&amp;P 500 is 1% above the 4300-4325 area which we anticipated would cap upside for 2023.
Our view since our 5/30/23 ETF Pathfinder is that we cannot be bearish if the SPX is above 4050, and we subsequently moved that line-in-the-sand up to 4165-4200 on 6/6/23.
We are moving that threshold up to 4300, which is short-term support to watch; a break below it could bring selling pressure.


Consolidation Likely, But Little Reason to Be Bearish; Buys Within Biotech, Latin American Banks

<ul>
<li>With core PCE and core CPI both rising more than 4.8%MoM annualised in recent months, and up 4.7%YoY and 5.3%YoY respectively, the pause could only be justified with forward hawkishness.  </li>
<li>ISM manufacturing PMI below 50 for six months, manufacturing new orders below 50 for 9 months, and Services PMI at 50.3 now, suggest that the US is already in recession.</li>
<li>We continue expecting the FedFunds rate to peak at 5.5%, with the Apr-Sep'23 recession and lagged impact of rate hikes enabling core PCE inflation to subside to 3%YoY by end-2023.</li>
</ul>


With core PCE and core CPI both rising more than 4.8%MoM annualised in recent months, and up 4.7%YoY and 5.3%YoY respectively, the pause could only be justified with forward hawkishness.  
ISM manufacturing PMI below 50 for six months, manufacturing new orders below 50 for 9 months, and Services PMI at 50.3 now, suggest that the US is already in recession.
We continue expecting the FedFunds rate to peak at 5.5%, with the Apr-Sep'23 recession and lagged impact of rate hikes enabling core PCE inflation to subside to 3%YoY by end-2023.


FOMC's Hawkish Pause: Recession and a FF Peak of 5.5% to Finally Restrain Core PCE

iShares Russell 2000 ETF / Technical Analysis

<ul>
<li>The S&amp;P 500 broke above 4200 and the 2-month megaphone pattern on Friday, and is already approaching the 4300-4325 area which we have anticipated would cap upside for 2023.</li>
<li>While we would be cautious at these levels given our expectation for inflation to remain elevated, we cannot get too bearish if the S&amp;P 500 is above 4165-4200.</li>
<li>Breadth remains weak within the S&amp;P 500, but we are starting to see breadth improvement within small-cap Russell 2000 (IWM). More on that below, IWM targets include $190 and $200-202.</li>
</ul>


The S&amp;P 500 broke above 4200 and the 2-month megaphone pattern on Friday, and is already approaching the 4300-4325 area which we have anticipated would cap upside for 2023.
While we would be cautious at these levels given our expectation for inflation to remain elevated, we cannot get too bearish if the S&amp;P 500 is above 4165-4200.
Breadth remains weak within the S&amp;P 500, but we are starting to see breadth improvement within small-cap Russell 2000 (IWM). More on that below, IWM targets include $190 and $200-202.


Russell 2000 Breakout Attempt Underway; Small-Cap Breadth Improving; KRE, KBE, XRT Test Key Levels

United States

The Dow Jones Industrial Average is a price-weighted average of 30 blue-chip stocks that are generally the leaders in their industry. It has been a widely followed indicator of the stock market since October 1, 1928.

Dow Jones Industrial Average (INDU INDEX)

Dow Jones Industrial Average (INDU INDEX)

With a Positive Real FF Rate Restored, FOMC Hiking Cycle Is Nearly Done

Core PCE has risen annualised 4.5%+ since CY21. M2 contraction since Dec'22, and imminent recession, should enable core PCE inflation to recede...

Prasenjit K. Basu

DXY Break Below $101 Suggests Breakouts Likely Coming for Equal-Weight SPX, Dow, and Russell 2000

$DXY Break Below $101 Suggests Breakouts Likely Coming for Equal-Weight SPX $RSP, Dow $DJI, and Russell 2000 $IWM $RTY. $SPX remains bullish as...

Vermilion Research

Consolidation Likely, But Little Reason to Be Bearish; Buys Within Biotech, Latin American Banks

$SPX is 1% above 4300-4325 which we anticipated would cap upside for 2023. Our view since May 30 (ETF Pathfinder) is we cannot be bearish if SPX is...

Vermilion Research

FOMC's Hawkish Pause: Recession and a FF Peak of 5.5% to Finally Restrain Core PCE

We've FOMC critics since Dec'21. ISM manuf'g new orders <50 for 9 months affirm the US is in recession. That, with the FF rate at 5.5% by Sep'23,...

Prasenjit K. Basu

Russell 2000 Breakout Attempt Underway; Small-Cap Breadth Improving; KRE, KBE, XRT Test Key Levels

Breadth remains weak within the $SPX, but we're seeing breadth improve within the small-cap Russell 2000 $IWM. All this points to a breakout above...

Vermilion Research