Smartkarma Daily Briefs

• Happy Sunday, and welcome to my weekly editorial on everything macro and markets.
• It’s been an incredibly eventful weekend in Trump-land, and those who expected him to save all the fireworks for the inauguration speech have already been left behind.
• To recap, Trump has either officially or via leaks/sources hinted at the following:The launch of the official meme-Trump-coin, which has gone absolutely through the roof, taking SOL to new highs alongside it.

• Discussion on potential tariffs and their impact on global markets, with a focus on Canada, China, and Mexico
• Analysis of the upcoming BOJ meeting and its potential impact on the Japanese yen
• Update on UK’s economic challenges, including concerns about fiscal math and potential trade war implications

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• A Q1 2025 tactical ETF Portfolio, on four themes: Technology & AI Leadership (30% exposure), Cryptocurrency Ecosystem (15% exposure), Quality Factor (35% exposure), and Strategic Regional Opportunities (12% net exposure).
• Investment approach includes sophisticated risk management framework with position-level controls, crypto-specific risk management, stop-loss strategy, and a three-phase implementation process designed to balance risk and capitalize on emerging market trends.
• Targets 130% Gross, net long exposure of 45%, information ratio above 0.85, 12% maximum drawdown, seeks risk-adjusted return of +15%, ETF positions in AI, Crypto, Cash Flow, and regional hedges.

• US natural gas market experiencing significant weather-related demand in January, with colder than 10-year normal temperatures
• Europe facing tight gas market balances and lower storage levels, requiring increased LNG imports to reach storage targets
• Uncertainty around Russian pipeline gas increases to Europe and potential impact of US sanctions on Russian energy sectors present bearish risk factors for gas prices

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• Respectable labour market data and strong service sector activity have forced US Treasury investors to soberly revise their expectations of Fed policy rate reductions in 2025 to one cut. 
• Recoveries in corporate sector sentiment since the presidential election suggest a robust economic growth outlook, making it tough to justify meaningful Fed policy easing.
• Strong capital inflows will boost the dollar exchange rate. Deflation risks in China have risen, raising the attraction of weakening the yuan and risking the ire of the Trump administration.

• Underweight Korean equities and the won, not because of the political crisis but because of what business cycle indicators are signalling. 
• The Korean corporate profit cycle is deteriorating, capex slowing, inventories rising and exports to key markets weakening which does not bode well for earnings growth.
• A recession is not forecast though. Mortgage borrowing is strengthening, inflation easing and we expect another 75bps of policy rate cuts in 2025.

• 2024 was a great year for risk assets, with the S&P up 23% and Bitcoin up 150%
• The year started with concerns about a recession and aggressive Fed rate cuts, but ended with market consensus aligning and a strong performance
• The narrative heading into 2025 includes concerns about Trump’s impact on deregulation and tariffs, as well as potential inflation from immigration policies

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• Global government issuance trends are bearish, with widening deficits and increasing net issuance in major economies
• Euro area, UK, and US are all facing significant supply pressures, leading to concerns about term premium and yield curve steepening
• Japan is expected to see a slowdown in net issuance, but QT policies will still impact the JGB curve, potentially leading to a flattening bias in 2025.

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• The US infrastructure is in need of billions of dollars in investments to bring it up to speed, highlighted by the $1.1 trillion Infrastructure Investment Economy and Jobs act.
• There is a focus on reshoring and revitalizing the US economy through infrastructure investments, with private companies playing a significant role in funding major projects.
• Demographic trends, such as the rise of the millennial generation, are driving demand for housing and impacting the housing market, with lower interest rates potentially helping to alleviate some of the pressures.

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• The Investmentcase for Gold Some time has passed since I wrote the last time about gold.
• Currently, a situation is developing that could become interesting for investors in the shiny metal.
• While till this day many market experts have the opinion that the gold price is highly correlated to the US-Dollar as well as the relative trajectory of where yields are headed, I think that gold is primarily driven by liquidity conditions.