Smartkarma Content

1. BoE QT: Pruning A Bad Policy

By Phil Rush, Heteronomics

• The BoE’s annual Quantitative Tightening announcement in September should see it prune the targeted size, we expect by £20bn to £80bn, concentrated in the long-end.
• Fewer maturities in the year ahead would otherwise put too much pressure on active sales into a market that lacks appetite, especially with LDI demand disappearing.
• Pruning the size and duration delays costs crystallising by several billion a year, which the Chancellor will welcome, yet QT’s poor design remains an expensive fiscal disaster.

2. Fed: Politics Vs Fundamentals

By Phil Rush, Heteronomics

• President Trump’s current preference for rate cuts is not unconditional. Higher-order logic suggests this would not override fundamental resilience or fairly prove “TACO”.
• Political pressure is state-dependent, with the messenger mattering more than the objective truth beneath any message. Trump’s Chair will have a stronger hand.
• Brazil suffered President Lula’s pressure, but he still supported his “Golden Boy’s” turn from dovish dissent to forceful rate hikes. Fed pricing ignores the potential for change.

3. France: Déjà Vu?

By Alastair Newton, Heteronomics

• Despite the near certainty that the Bayrou government will fall on 8 September, investors are wary, rather than spooked, reckoning that they have seen all this before.
• They are likely correct to judge that compromises will then be found, allowing the 2026 budget to be passed by a new centrist government.
• However, this would again only be putting off the day when a real crisis point is reached.

4. HEW: Crystalising Policy Divergence

By Phil Rush, Heteronomics

• Spreads between ECB and Fed expectations widened again this week as the ECB held rates with a neutral bias while disappointing US labour market data drive dovish hopes.
• Underlying US services inflation was soft, and initial jobless claims spiked, albeit over Labor Day. We think US pricing has gone too far, and political pressure won’t dominate.
• Guidance with the Fed’s upcoming cut could start to correct that. The BoE will hold rates, after more hawkish macro news next week, and should trim its QT plan this year.

5. The Heat Is On: News Flow and Sentiment in CHINA / HONG KONG (September 11)

By David Mudd

• HSTECH index is showing increasing strength as Hong Kong continues it Secular Bull Market.  Continued strong market breadth indicates both rotational buying and new investors entering the market.
• Southbound buying from mainland investors remains strong after the “Liberation Day announcement.  Mainland investor volume is now 20% of total volume in the Hong Kong market.
• China Biotech and Drug sectors were hit as the U.S. administration indicated it may begin restricting import of Chinese-made drugs and to cut off the pipeline of Chinese-invented experimental drugs.

6. Technically Speaking Breakouts & Breakdowns – HONG KONG (September 10)

By David Mudd

• The Hong Kong secular bull market continues to broaden and has broken all long term resistance levels. The HSCEI has beaten Asian and global peers over the last 18 months.
• Growth and Momentum factors have been the best performers in the HSCI year to date. The Materials and Healthcare sectors continue to show increasing strength in their relative returns.
• Cloud Village (9899 HK) had a breakout pattern from a continuation triangle after reporting a deal to stream Korean drama series to Chinese market. The company’s profits grew in 1H25.

7. ECB: Balanced In The Good Place

By Phil Rush, Heteronomics

• Staying in the ECB’s “good place” encouraged a neutral bias around its unanimous decision for no change, while being appropriately open to tackling future shocks.
• Staff inflation forecasts still undershoot the target, with recent upside news seemingly postponing passthrough rather than trimming the extent into something like our view.
• President Lagarde sounded relaxed about France’s spread widening, and the ECB did not discuss the TPI. We still expect no ECB easing against this, or further rate cuts.

8. Walker’s Weekly: Dr. Jim’s Summary of Key Global Macro Developments – 12 September 2025

By Dr. Jim Walker, Aletheia Capital

• US producer prices softened in August, but structural factors keep inflation pressures elevated despite Fed rate cuts.

• Labour market revisions show weaker US job growth, raising doubts on monthly payroll data reliability.

• Japan’s GDP growth headline looks strong, but weak domestic demand and lower business spending reveal fragile fundamentals.

9. Seasonal Weakness Ahead?

By Cam Hui, Pennock Idea Hub

• We are seeing fundamental headwinds in the form of elevated valuations and earnings uncertainty from tariffs, which won’t be visible until Q3 earnings season.
• On the other hand, the technical outlook appears relatively benign.
• Our base case calls for some choppiness ahead. We are near-term cautious, but not bearish.

10. Waller’s Gambit

By Cam Hui, Pennock Idea Hub

• Fed Governor Chris Waller is a leading candidate to be the next Fed Chair, and the issue of Fed independence is paramount.
• Our evaluation of his economic case for rate cuts should be whether the decisions are based on sound data, theory and solid judgment.
• He has shown solid thinking on employment, but his justification for rate cuts based on the Fed’s inflation mandate is weaker and shows signs of wishful thinking.

1. EA: Defying Disinflationary Narratives

By Phil Rush, Heteronomics

• Dovish hopes for EA disinflation continue to be disappointed by resilient outcomes. The rise to 2.1% in August amid sticky core pressures is opposite to the dovish narrative.
• Euro appreciation’s disinflationary shock is being offset by domestic resilience, which was most surprising in Northern Europe. Our errors were relatively small and balanced.
• Ongoing upside surprises have defied recent consensus expectations of a drift down to 1.8%. The ECB faces broad upside news that should reassure it against cutting again.

2. Cutting After Pauses

By Phil Rush, Heteronomics

• The BoE and Fed rarely resume cutting cycles after a pause, yet the Fed seems set to break its hold with a cut just as the BoE and ECB enter their own pauses.
• 2002-03 is the best historical parallel for the Fed, which signals potential cuts should be shallow and are likely to be reversed. Politics is no match for the fundamental need.
• Persistently excessive UK pressures should prevent the BoE from cutting in November or beyond, with a quarterly pause historically unlikely to resolve in another rate cut.

3. HEW: Pauses On And Off

By Phil Rush, Heteronomics

• Another disappointing payroll release provides the fundamental cover needed for the Fed to end its pause with a rate cut on 17 September without being too political.
• The BoE is starting its own pause, and if it goes a quarter without cutting, historically, it’s not resumed the cycle. Its DMP survey confirmed inflation’s persistent problem.
• Another upside inflation surprise seems set to keep the ECB on hold amid record low unemployment. We also expect it to preserve its view that policy is in a good place.

4. Liz Truss on the ‘Doom Loop’ Engulfing the UK Economy

By Odd Lots, Odd Lots

• Legacy systems can’t handle usage-based billing, slowing down product launches
• Metronome allows for quick roll out of new pricing models in minutes
• Guest interview with Liz Truss discussing economic challenges and the need for policy shifts

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only.

5. BoE Survey Says Inflation Persists

By Phil Rush, Heteronomics

• CFOs are telling the BoE that they plan to keep raising prices by more than 3% in 2026. The BoE should take notice, as this survey’s previous warnings have proven accurate.
• Expected increases reflect the passthrough of further wage increases beyond a pace consistent with the target. They exceed even our already hawkish forecasts.
• The BoE is unlikely to realise the sharp drop in wage growth it expects by year’s end, without a shock to break the current regime, bolstering our call for no more rate cuts.

6. HEM: Politicised Policy Pricing

By Phil Rush, Heteronomics

• Persistent inflationary pressures pared dovish guidance and pricing for the BoE and ECB, but Fed pricing is stuck.
• Blocking a rare resumption of Fed easing looks unlikely, but history suggests cuts would be shallow and reversed.
• Peer pressure is weak during a policy mistake. The BoE faces domestic problems that prevent further easing.

7. HONG KONG ALPHA PORTFOLIO (August 2025)

By David Mudd

• Hong Kong Alpha portfolio gained 11.34% in October outperforming its benchmark and HK indexes.  The portfolio’s Sharpe ratio increased to 2.91 and the beta and correlation to its benchmark decreased.
• The Hong Kong Alpha portfolio is generating significant alpha (idiosyncratic) returns since launch, with 40% of returns represented by superior stock selection, with the remaining due to sector weighting.
• At the end of August, we bought Luk Fook Holdings Intl (590 HK) for the portfolio as retail demand for gold products in mainland China increases.

8. 182: Private Credit: Hype, Hazard, or the Next Big Thing in Long-Term Growth? With Huw Van Steeni…

By The Money Maze Podcast, The Money Maze Podcast

• Private assets, gold, and real estate are recommended for investment to recreate what our parents had financially
• Private credit is reshaping wealth portfolios, with a shift towards insurance companies funding the majority of assets in private credit
• The role of private credit has grown significantly post-financial crisis, with a focus on higher quality, lower risk assets and loans to hard assets such as infrastructure.

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only.

9. Everything is a bit Brown

By Mark Tinker, Market Thinker

• We often talk of people wanting things to be Black and White and being disconcerted when they realise that they are in fact always Grey, but we would extend that metaphor to the full colour spectrum.
• We want things to be clear and bright and in vivid colour, but in fact everything is, well, basically a bit brown, the colour you get when all the other paints are mixed together and thus, to us at least, it represents the current and pervading sense of muddle and confusion.
• Politically, we see Red socialists embracing Green issues as their central policy, while Greens are pursuing Red Marxism (the author James Delingpole wrote a great book about this called ‘Watermelons’ as in Green on the outside, Red on the inside. But we would just merge the two colours and get brown.)

10. We Know More Than We Can Say Precisely

By Thomas Lam

• The current and expected deterioration of the underlying fiscal trend is troubling
• But the empirical and theoretical relationships between fiscal variables and longer-term interest rates are complex
• My decomposition of longer-term rates and econometric estimates can potentially add to the available research on this