Cross-Asset Liquidity Strategist, CrossBorder Capital

Michael J. Howell

Cross-Asset Liquidity Strategist

Implementing Research Using Alt Data & AI

CrossBorder Capital

CrossBorder Capital is a London-based independent investment advisory firm. Founded in 1996, it exploits a gap in the investment arena by focusing on Central bank liquidity. 

It specialises in the monitoring and analysis of global liquidity flows - an important determinant of asset prices, from currencies through to bonds, equities and real estate.

CrossBorder Capital implements its investment strategy and currently manages over US$ 350m.


Cross Asset Strategy

<ul>
<li>Our US dollar forex risk index which leads the DXY by 12 months is dropping</li>
<li>Dollar bear market signalled. Low point could come in late-2022
</li>
<li>Speed and size of Fed’s liquidity boost a key factor behind USD weakness</li>
<li>Concerns over ‘massive US dollar short’ position misplaced</li>
<li>Weak US dollar bullish for Emerging Markets and Asia</li>
</ul>


Our US dollar forex risk index which leads the DXY by 12 months is dropping
Dollar bear market signalled. Low point could come in late-2022

Speed and size of Fed’s liquidity boost a key factor behind USD weakness
Concerns over ‘massive US dollar short’ position misplaced
Weak US dollar bullish for Emerging Markets and Asia


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

For now we view the recent pullback as a countertrend move that helped correct the extended and overbought conditions we noted over the past two weeks. Overhead resistance on the MSCI EM, EAFE, and ACWI ex-US indexes (all priced in local currency) is something to be aware of, however if the ACWI-US is above $70 our bullish outlook remains appropriate.  In today's report we highlight attractive charts in both defensive and cyclical Sectors. On the semi-defensive side, Sectors covered include Health Care and Services. On the cyclical side, Sectors covered include Energy, Financials, Materials, and Transportation

For now we view the recent pullback as a countertrend move that helped correct the extended and overbought conditions we noted over the past two weeks. Overhead resistance on the MSCI EM, EAFE, and ACWI ex-US indexes (all priced in local currency) is something to be aware of, however if the ACWI-US is above $70 our bullish outlook remains appropriate.  In today's report we highlight attractive charts in both defensive and cyclical Sectors. On the semi-defensive side, Sectors covered include Health Care and Services. On the cyclical side, Sectors covered include Energy, Financials, Materials, and Transportation

Global Equity Strategy: Short-Term Bullish Trends Clash With Longer-Term Resistance

<ul>
<li>Given the huge on-going Central Bank QE, Global Liquidity could soar by 40% in 2020 to some US$190 trillion</li>
<li>This will push the equity/ liquidity ratio down to near historic lows at 0.34 times</li>
<li>This ratio shows how skewed portfolios are towards ‘safety’ and by corollary by how much investors’ mood is depressed</li>
<li>
EM equities are even more depressed on similar measures</li>
<li>From a liquidity-view, stocks are well-underpinned and should continue to rise
</li>
</ul>


Given the huge on-going Central Bank QE, Global Liquidity could soar by 40% in 2020 to some US$190 trillion
This will push the equity/ liquidity ratio down to near historic lows at 0.34 times
This ratio shows how skewed portfolios are towards ‘safety’ and by corollary by how much investors’ mood is depressed

EM equities are even more depressed on similar measures
From a liquidity-view, stocks are well-underpinned and should continue to rise



Macroeconomics

<ul>
<li>China's People's Bank (PBoC) is not following the Fed's lead</li>
<li>Chinese liquidity flows are modest and flat-lining</li>
<li>The US dollar is threatened by the huge scale of Fed easing</li>
<li>This fits long-term need for Chinese real exchange rate to rise. Is is bullish for Asian and EM asset prices</li>
</ul>


China's People's Bank (PBoC) is not following the Fed's lead
Chinese liquidity flows are modest and flat-lining
The US dollar is threatened by the huge scale of Fed easing
This fits long-term need for Chinese real exchange rate to rise. Is is bullish for Asian and EM asset prices


China's People's Bank (PBoC) And The US Dollar

With the MSCI ACWI (ACWI-US) breaking below our $70 “line in the sand” support level we highlighted last week, we believe additional downside is likely and that the path of least resistance is lower for global equities. Considering the damage done to major indexes around the world, any potential bottom is likely to take months to develop and until we see evidence of this repair process we want to be positioned primarily in Sectors with defensive characteristics. Of course, there will be major countertrend rallies along the way, but for now the trend is lower and we would treat rallies as selling opportunities. We outline important technical levels across all markets and highlight actionable opportunities within EM, and the Services and Staples Sectors.

With the MSCI ACWI (ACWI-US) breaking below our $70 “line in the sand” support level we highlighted last week, we believe additional downside is likely and that the path of least resistance is lower for global equities. Considering the damage done to major indexes around the world, any potential bottom is likely to take months to develop and until we see evidence of this repair process we want to be positioned primarily in Sectors with defensive characteristics. Of course, there will be major countertrend rallies along the way, but for now the trend is lower and we would treat rallies as selling opportunities. We outline important technical levels across all markets and highlight actionable opportunities within EM, and the Services and Staples Sectors.

ACWI Below Our Line In The Sand: Further Weakness Expected

China

The MSCI Em (Emerging Markets) Index is a free-float weighted equity index that captures large and mid cap representation across Emerging Markets (EM) countries. The index covers approximately 85% of the free float-adjusted market capitalization in each country.

MSCI Emerging Markets Index (MXEF INDEX)

Why The US Dollar Could Fall By 25%?

Our US dollar forex risk index which leads the DXY by 12 months is dropping Dollar bear market signalled. Low point could come in late-2022 Speed...

Michael J. Howell

Global Equity Strategy: Short-Term Bullish Trends Clash With Longer-Term Resistance

For now we view the recent pullback as a countertrend move that helped correct the extended and overbought conditions we noted over the past two...

Vermilion Research

Could Equities Just Keep Rising?

Given the huge on-going Central Bank QE, Global Liquidity could soar by 40% in 2020 to some US$190 trillion This will push the equity/ liquidity...

Michael J. Howell

China's People's Bank (PBoC) And The US Dollar

China's People's Bank (PBoC) is not following the Fed's lead Chinese liquidity flows are modest and flat-lining The US dollar is threatened by the...

Michael J. Howell

ACWI Below Our Line In The Sand: Further Weakness Expected

With the MSCI ACWI (ACWI-US) breaking below our $70 “line in the sand” support level we highlighted last week, we believe additional downside is...

Vermilion Research