This weekly newsletter pulls together summaries of the top ten most-read Insights across Macro and Cross Asset Strategy on Smartkarma.
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1. ‘It’s the Liquidity, Stupid’ | Protect the Pile Episode 11
- SP 500 at all-time high, up 8% year to date despite Iran conflict
- NASDAQ also at all-time high, up 12.5% year to date
- Liquidity driving market, Fed balance sheet growing at 6-7% annually, leading to market growth
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2. EM Fixed Income: Parsing peace talks and payrolls
- US and Iran reportedly in talks to end war with a short memorandum
- Market reaction to announcements and risk-reward analysis in various asset classes
- Focus on EMFX trading stronger on hopes of resolution, with underlying fundamentals supporting EM growth and positioning clearing out
This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only.
3. US: Awkwardly Overinflated Again
- US inflation surged beyond expectations in April to exceed levels that the consensus forecast at the height of its tariff concerns last year, as these costs cannot be avoided.
- Core services inflation trended up to an annualised 4.7%, matching the highs of 2025, to indicate excessive underlying inflationary pressures and possible second-round effects.
- Inflation is stuck above the target, presenting a greater case to hike than cut. If this builds, we still don’t believe Trump’s new Chair will ignore the hawkish fundamentals.
4. Rates: Temporal Decay Inverted
- Markets price BoE hikes while the consensus forecasts cuts. Some of this is because risks skew to higher inflation and rates, raising the mean (market) over modal forecasts.
- Each day of supply disruption deepens the shock, crystallising some risk, and pulling the modal forecasts towards market pricing in an inversion of the usual temporal decay.
- Energy prices, not macro, currently drive rate pricing, and we see supply normalisation priced too quickly. We are more hawkish than the consensus and see upside risks.
5. “National Dividend” For Excess Profits from Korean Semiconductor Companies? Karl Marx Would Be Proud
- KOSPI declined by 2.3% on Monday (11 May), mainly due to concerns about imposing “national dividend” for excess profits from AI/semiconductor related companies in Korea (Samsung Electronics and SK Hynix).
- In the near term (1-2 years), it is highly UNLIKELY for the Korean government to suddenly provide national dividends for excess profits from major AI/semiconductor companies in Korea.
- However, when the AGI becomes a reality, the idea of providing “national dividend” or by another name Universal Basic Income (UBI) could become a reality in 5-10 years.
6. HONG KONG ALPHA PORTFOLIO: (April 2026)
- The Hong Kong Alpha portfolio posted a -0.5% return for April. Since its inception, the HK Alpha portfolio has outperformed the HK indexes by 38.69% to 60.42%.
- Overall alpha generation remains at 64% of overall returns. The Sharpe ratio for the portfolio is 1.15, compared with 0.89 for the benchmark.
- As the US retreats from its war in Iran, we have repositioned the portfolio by adding exposure to the AI-related tech sector, including platform, agentic, and hardware.
7. CHARTING COURSE: China Summit Between the Lines and Trumpflation! (May 15)
- President Xi began the China summit with a warning on Taiwan. The statement reveals the extent to which US soft power has declined.
- Agreements from the summit were mostly perfunctory and did not result in any meaningful changes in China’s support for Iran and opposition to the war.
- Trumpflation is here, as PPI surges in April and consumers pay the highest gasoline prices in 4 years. Treasury yields are on the move with the 2-year above 4%.
8. UK: GDP Reaches Seasonal Peak Again
- UK GDP ended Q1 on a high, with 0.3% m-o-m growth instead of a contraction delivering 0.6% q-o-q. We maintain our call for April-May weakness to slow Q2 to 0.1%.
- The monthly profile is following the seasonal path of the past four years, but the 5yr sample in ONS analysis means they won’t find it until 2027, prolonging the problem.
- Underlying activity has filled in some of the Q1 hole, and the smaller rebound into Q2 doesn’t fundamentally matter beyond providing doves with an excuse to hike less.
9. EA Crawls In Tight Space
- Confirmation of a Q1 slowing in the Euro area exaggerates the 5bps change in a region that has long crawled forward slowly. Ireland’s volatility drove the latest change.
- The EA’s performance looks particularly pathetic relative to its peers, but the UK’s Q1 surge is residual seasonality, and the US strength is longstanding.
- Unproductive defence spending is not the hoped-for panacea, so the EA doesn’t need to grow fast to build excess demand with inflation that is leading the ECB to hike.
10. Lower Korean Stock Market on 15 May = NPS’s Plan on 28 May + Profit Taking on AI/Tech Stocks?
- On 15 May, the NPS (the big whale) announced that it plans to finalize the mid-term asset allocation plan on 28 May.
- All in all, the NPS is likely to raise the 5% limit for strategic and tactical asset allocation.
- The exact amount that it raises by remains uncertain. If NPS does not raise this limit enough, that could result in a major BEARISH pressure on the Korean stock market.
