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. Steno Signals #96 – A major devaluation of the CNY could be imminent
- China is preparing something BIG. That seems more and more obvious to me by the week now. The question is what that BIG thing is.
- China reported a strong 5.2% YoY Q1 despite troubles on the ground, local financial institutions are hoarding bonds because of a weak credit demand growth picture and the Chinese authorities seem to be stockpiling like crazy.
- We have seen plenty of tin-foil theories speculating in the reasons behind those Chinese actions, but maybe China is just preparing a major one-off devaluation of the CNY?
2. Hong Kong: The Glass Is Half Full, Time to BUY Beta
- HSI has now closed above its 3 year downtrend and is poised to advance to its next resistance level
- International brokers finally turning more bullish on the market as the US, Europe and Japan markets turn down
- High beta sectors are set to outperform as global investors reallocate to the cheapest AND 2nd largest tech sector in the world
3. Back Testing the End of Mandatory Lock-Up Periods Monthly Data in Korea
- In this analysis, we provide a back testing analysis of the end of mandatory lock-up periods monthly data in Korea in the past six months.
- All in all, this end of mandatory lock-up period monthly data continues to provide some alpha generating results.
- In the past six months, they have tended to work better in periods when KOSPI declines rather than in periods when KOSPI rises.
4. Will the Ban on Short Selling Stocks in Korea Extended Beyond End of June 2024?
- On 6 November 2023, the Korean government announced that it will temporarily ban short selling stocks until end of June 2024.
- On 25 April 2024, the FSS unveiled for the first time its plan to build a computer system to prevent naked short selling called NSDS (Naked Short Selling Detection System).
- There is a high probability that the the temporary ban on short selling which currently lasts until end of June 2024, could be extended further to 2Q 2025.
5. Great Game: Despite New Aid, Ukraine will lose within 12 months. Plan Accordingly!
- With all eyes on the Middle East for the past weeks and months, we haven’t focused as much on the ongoing war in Ukraine.
- In the big picture, not much has changes on the frontline despite continued heavy losses and a Russian election.
- But now I think it’s time for investors to re-adjust their assessment of the war and consider contingencies for the path ahead.
6. HSCEI Outperformance Is Asia’s Best Kept Secret
- China Enterprise Index (HSCEI) is now the top performing index in Asia on a USD basis
- HSCEI also trades at the lowest P/E multiple in the Asia
- High probability of divergence as US and Europe markets turn down
7. Shipping Watch: No news is bad news (for inflation)
- Headlines in the beginning of 2024 were dominated by shipping and logistic troubles but over the last months that has almost died completely down.
- With “no news” we continue to see spill-overs to goods inflation in coming months.
- In general freight rates have been falling since Jan high but still remain some 50% above 2023 levels
8. Active GEM Funds: Extremes in Positioning & Momentum
- This report identifies stocks at the extremes of their positioning or momentum ranges within our active Global EM fund universe.
- We have pinpointed eight stocks either at their historical positioning extremes or undergoing significant changes in fund ownership, providing detailed ownership profiles for each.
- HDFC Bank loses steam after merger, Nu Holdings surges to new highs, POSCO plunges to new fund ownership lows.
9. The week at a glance: Time for the BoJ to step up, while soft PCE numbers may fool some..
- Welcome to our weekly “the week at a glance” publication where we dissect the most important central bank meetings and key figure releases in a short and sweet format.
- This week we focus on PCE prices, European PMIs and the Bank of Japan.
- Event 1: European PMIs (Tues): A lukewarm, but positive, surprise.
10. Bollinger Bonds
- In our April monthly, we highlighted the combination of fading impulse for momentum stocks (principally tech) and the need for tax related selling in the trading/retail space coming against a background of a correction in the short term bull phase within the longer term bond bear market.
Since the beginning of March, US 10 year yields have gone from 4% to around 4.6%, unwinding the Fed Pivot language that emerged to ‘explain’ the earlier rally.
In our view that was an unlikely ex-post narrative, as is the one emerging now that the Fed will not cut at all.
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. Steno Signals #95 – Is the Next Move a Hike?
- Before getting to the financial word, I just briefly want to reiterate that we find a de-escalation most likely between Iran and Israel after the events unfolding over the weekend.
- Our head of geopolitics, Mikkel Rosenvold, released his take earlier.
- Quote of the week: Iran’s Chief of Staff: “Our attack is over, and we do not wish to continue it, but we will respond forcefully if Israel targets our interests.
2. The week at a glance: Soft CPI in UK and a BIG positive surprise from China?
- Happy Monday and welcome to our short and sweet coverage of the data calendar for the week ahead.
- We try to map the events with market moving potential and exploit weaknesses or skews in the economic consensus around them.
- This week we see strong upside to US retail sales, Chinese GDP, while soft downside to the UK CPI figures.
3. Positioning Watch – Volatility Is Back, but Markets Still Lean into USD Duration.. God Knows Why..
- Hi everyone, and welcome back to our weekly positioning / sentiment overview, which will be delivered to you right as firefighters have hopefully put out the fire at the old exchange building in Copenhagen..
- Markets have started the week off where they left last week, with the USD wrecking ball continuing to prevail, posing headwinds for equity and fixed income markets as Fed pricing has more or less turned upside down lately.
- We generally positioned for this repricing of USD fixed income, but were caught wrongfooted in a few trades along the way admittedly.
4. The Rally in Gold: Clear as Day
- The massive rally in the price of gold coincided with Fed Governor Waller’s speech, in which he stated that he believes the Federal Reserve should buy more T-bills.
- Many market pundits argue that changing narratives explain historical gold rallies.
- But digging a bit deeper reveals that, especially since the Great Financial Crisis, the narrative behind gold’s strong performance has been the same and getting stronger.
5. Chinese Data Continues to Improve Incrementally
- Qingming holiday sending surpasses 2019 levels on an absolute and per capita basis
- A further relaxation of housing measures spurs increased mortgage demand
- Two steps forward, one step back -typical signs of a bottoming-out economy.
6. The Liquidity ‘Air Pocket’: A Short Update After US Tax Filing-Week
- Global Liquidity has been the key factor driving risk assets higher. It faces a short-term air pocket that investors need to understand
- Three factors are dragging Global Liquidity — the US Fed, the PBoC and the rising MOVE Index
- Most important near-term, the US money market liquidity has suffered a major hit this week following the April 15th Tax-filing deadline. Next up the QFA at month-end
7. Here Comes the Sentiment Flush
- The S&P 500 violated an uptrend that began in November. The violation resolved with the index is testing initial support nearby at the 50 dma at about 5110.
- Our analysis of market internals concludes that the decline is nearly done. Sentiment is not sufficiently panicked to be contrarian bullish. Technical conditions are oversold but can become more oversold.
- We interpret these conditions as a stock market that’s undergoing final flush before an intermediate-term bottom is formed. We believe any pullback should be temporary and shallow in nature.
8. Hedging Risk Amidst the Escalating Israel-Iran Conflict
- Tensions between Israel and Iran have escalated, potentially leading to a broader conflict involving major global powers, which could significantly impact global financial markets.
- Immediate market reactions could include a drop in global stock markets, a surge in oil prices, and increased demand for safe-haven assets like gold and the US dollar.
- Multi-Asset portfolio managers need to employ strategies such as reducing risky asset exposure, increasing investments in defensive sectors, and diversifying geographically to mitigate the conflict’s impact on investments.
9. Iran’s attack – Large in Size, Harmless in Effect. What’s next?
- Welcome to the weekly Great Game, which is obviously dedicated to the situation in the Middle East.
- We covered Saturday’s attack on Israel in our Debrief, so in this post, I’ll try and look a bit ahead and give our take on what may lie ahead – both in the Israel/Iran conflict, but perhaps even more importantly in the Red Sea deadlock.
- Understanding Iran’s strikeSituation:On Saturday evening, Iran attacked Israel in response to the April 1st bombing of the Iranian embassy in Damascus.
10. Portfolio Watch: The USD Wrecking Ball Is Back
- The USD has been on a roll since the firm US inflation report earlier in the week and we are approaching the point where European trade balances will be impacted substantially by the rally in (energy) commodities.
- Even European Nat Gas seems to be on the move and pairing that move with the broader rise in Oil and Copper leads to a likely “flip” in the Eurozone trade balance.
- When the Euro-zone trade balance shifts from positive to negative, we typically see an impact on the trend of the EUR, which is probably the last thing the ECB needs right now.
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. EM Watch: China is preparing something BIG!
- The below chart of ours have made the rounds in recent days and weeks as China seems to be preparing for something big given the heavy restocking efforts in Copper space.
- As the price trends are diverging in copper versus steel and iron ore, the strategic initiatives of China are becoming increasingly evident in price action across the commodity complex, but we are yet to fully understand and accept the ramifications for global rates.
- We have read plenty of bad takes on why China is building up copper reserves and the most obvious reason seems to be neglected by many.
2. Technically Speaking: The Early Bird Gets the Worm, China Retail Buys Hong Kong
- Hong Kong market is at historically cheap valuations. So what’s new?
- Capitulation bottom in late January/early February dramatically reduced shorts and now long positioning starts.
- China retail buying is taking a cue from China’s government buying programs and SOE company directives.
3. Israel-Iran War Coming?
- Welcome to this week’s Great Game, where we cover current geopolitical events relevant to your portfolio!
- Situation: Israel attacked the Iranian embassy in Damascus, Syria, killing several high ranking Republican Guard officers, and the whole region is now anticipating the Iranian response.
- Meanwhile, Israel and Hamas are making little progress in their truce talks in Cairo while Israel has withdrawn from smaller areas in Southern Gaza amidst heavy diplomatic pressure from the US.
4. Positioning Watch – Reflation bets are back in
- Hello everyone, and welcome back to our weekly positioning/sentiment overview.
- The mood in equity markets is still good, with major indices stabilizing at levels far above all time highs despite taking some time to swallow hawkish comments from Fed officials.
- Markets seemingly don’t care about the repricing of Fed rates until they hear it from Powell’s mouth or until they get a feeling of true pivot (on the pivot).
5. 5 Things We Watch – Rates Pricing, Liquidity turning, Labor Market, Commodities & China
- Hello everyone, and welcome back to our weekly ‘5 Things We Watch’, where we provide 5 of the things we keep an eye out for in global macro in a short and concise format.
- This week we are watching out for the following 5 topics within global macro: Rates Pricing, Liquidity Turning, Labor Market, Commodities, China.
- The market went into the year expecting 7 cuts in total from the Fed, which has now been narrowed down to less than two, all while equity markets have continued their drift higher as the economy is doing better than expected paired with benign liquidity conditions.
6. Yen Weakness Not Solely Due to Bank of Japan as Corporates Play a Critical Role
- The weak yen could be a legacy of aggressive quantitative easing (QE), whereby the BoJ became the largest holder of government bonds, forcing traditional buyers overseas.
- Overseas cash hoarding by Japanese affiliates is being cited as another reason for yen weakness. Superior growth opportunities outside of Japan are a reason for the lack of cash repatriation.
- Japan’s exporters currently face formidable competition with China, making a strong yen an unattractive option during a period of higher cost pressures, notably for labour.
7. Indonesia Economics: Disinflation Setbacks Tie Central Bank’s Hands Tighter
- The latest figures show headline inflation inch further away from the central bank’s target, showcasing the difficulties caused by volatile food inflation worldwide.
- In addition to sticky inflation, fiscal policy uncertainty also lurks in the background; the new government has many big-ticket manifesto pledges that need to be funded.
- Still-Strong growth, sticky inflation, and depreciationary risks to the rupiah will cause Bank Indonesia to delay rate cuts, possibly for the whole year.
8. Energy Cable: Melt UP in commodities upcoming?
- Take aways: Booking profits in crude, staying long in broader metals. Crude predicting ISM to turn in 6-9 months time. Sluggish German IP ahead. Last week, we reached our profit level in crude oil, leading us to exit the trade successfully.
- Our outlook remains bullish on commodities, spurred by what we perceive as a reflation head fake.
- This optimism has prompted us to enter a long proxy-position in the Bloomberg Commodity Index (BCOM), as we observe the rally widening across the commodity complex (Chart 1).
9. Gold and Goldilocks
- This week’s ‘CPI Print’ has caused something of a panic in the bond markets and has left the ‘Pivot’ Pundits struggling versus the ‘No Cuts’ crowd, some of whom are now doubling down and even talking about rate rises.
- Traders in other markets are looking across with some degree of concern, long wary of the ability of the bond markets to trigger problems elsewhere.
- So too are the politicians, keen for their particular narrative on the economy to win them votes, but concerned that they need the markets (and by extension the Fed) to support their cause.
10. Looking For Inflation In All The Wrong Places
- Conventional inflation hedge vehicles have exhibited subpar performance despite rising concerns over persistent inflation that will delay the Fed’s rate cuts.
- That’s because 1970s-style “bad inflation” is not present and “good inflation”, which is a by-product of an economic recovery and stronger growth expectations, is becoming dominant narrative.
- Market expectations are shifting from a soft-landing to a no-landing outcome, which should be bullish for cyclical stocks and neutral to bearish for bonds.
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. Gold’s Next Leg Up And Why It Matters
- Gold price is a reflection of underlying global stress in currency markets
- Gold price is a reflection of actual not reported real rates of interest
- Gold price is a reflection of global increased demand from central banks and consumers
2. Steno Signals #93 – Material Stealth QT Upcoming During a War Economy
- Happy Easter and welcome to our flagship editorial! The tide is turning on USD liquidity and the four most recent bills auctions have seen net negative issuance, which is a harbinger for the trend into April, which is typically strongly net issuance negative due to tax seasonality (see chart 1).
- Only during the first lockdown in 2020, did the net amount of outstanding bills increase through this period, which makes for a solid hit ratio in predicting (much) weaker USD liquidity in Q2 this year.
- We wrote on New Years eve of 2023 that “USD liquidity is likely going to increase massively in Q1 due to a series of technicalities surrounding the BTFP, ON RRP and TGA facilities, which makes us set for a material rally (or a blow off top) in Q1.”, which I guess was as precise as it could be.
3. March Themes and Thematic Portfolio Review
- A monthly review at how the markets and our themes are currently performing
- Analysing what went wrong and what went right in stocks and sectors
- Highlighting positions added or removed from the thematic investment portfolio
4. Macro Regime Indicator: From Stealth QE to Stealth QT
- Welcome to our Monthly Macro Regime monitor.
- Coming into March, we wrote that “We see little change to the optimistic and risk-favoring sentiment for March, and we thus remain in the goldilocks ‘Gung Ho’ regime.
- With tailwinds from both liquidity and growth, we continue to see a great case for continuing to move/stay further out of the risk curve when it comes to allocation.
5. Is a Major RMB Depreciation on the Cards?
- Further weakness in the JPY poses a risk to RMB stability
- If major stimulus is unleashed in China, it is likely the RMB will weaken
- Continued incremental easing will benefit the economy in the long term but may disapoint equity investors looking for a quick fix despite Chinese data improving
6. Technically Speaking: Japan Meets Resistance and Hong Kong Finally Breaks Downtrend
- With the BOJ’s struggle to support the yen gaining traction, the NKY and TPX both hit major resistance
- Hong Kong finally breaches resistance with a potential move to 20k in the near term
- Diversification opportunities are abundant with potential negative correlation between China/HK markets and US
7. 5 Things We Watch – EUR-Inflation, Central Banks, The Business Cycle, Positioning & Commodities
- Welcome to our weekly ‘5 Things We Watch’, where we take you through 5 of the things we look out for in global macro.
- With markets hawking up Fed expectations, Euro Area inflation surprising on the downside, and commodities breaking out technically, there are plenty of things to shed some light on!
- This week we are watching out for the following 5 topics within global macro:
- EUR-Inflation
- Central Banks pricing
- The Business Cycle
- Fixed Income Positioning
- Commodities
8. Out of the Box: 6 Reasons the Fed Will Be Hiking Rates in 2024
- Even though the Santa rally in US STIRS has largely been reversed, markets are still pricing in 2.5 full cuts by the end of this year or so with the first to come around summer time.
- Currently, one of the most unappreciated risks by markets would be the Fed actually hiking rates in 2024 and thus we thought we would present 6 compelling and thought provoking arguments for why the Fed hiking in 2024 might not be impossible after all (our base case is a hold).
- The first argument has to do with year-on-year inflation seemingly having reached its equilibrium at 3%, a range in which it has found itself for the last year or so.
9. The Stock Market’s Q2 Challenges
- The S&P 500 ended the quarter exhibiting a series of “good overbought” conditions which are signals of strong momentum. Can the bullish momentum continue?
- Equity price momentum in Q2 is dependent on continued rising EPS estimates, a tame bond market response to higher Treasury coupon issuance, and a possible liquidity squeeze.
- The market is vulnerable to a setback. A lot has to go right.
10. Positioning Watch – Steepener bets back on?
- Hello everyone, and welcome back to our weekly positioning watch! Hope you all had a great time off during the Easter break.
- The market narrative has remained more or less intact after the break, with equity sentiment still going strong until today despite a bit of a hiccup delivered from the Fed, with especially Waller but also to a certain extent Powell pushing back on the 3 rate cuts priced in just a couple of weeks ago.
- The scenario with 0 Fed cuts in 2024 is looking to come into play, right as European central banks have likely received the final evidence for them to start cutting rates, with German CPI surprising on the dovish side, and UK Retail Prices collapsed, paving the way for both BoE and ECB to cut rates before the Fed, which admittedly has a more difficult time battling inflation.
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. 5 Things We Watch – Cyclicals, Baltimore Bridge, ECB, USDJPY & Sentiment
- Loads of stuff are going on in Global Macro, with global equities on the rise yet again, the JPY struggling a bit after unsuccessful attempts from policymakers, including the verbal FX intervention from MoF and BoJ today, and the Spanish HICP numbers, which we hit right on the mark! The benign base effects and dovish outlook has potentially paved the way for a cut in June, but what should you look out for in the meantime?
- We give you 5 topics from our watchlist.
- This week we are watching out for the following 5 topics within global macro.
2. Great Game – Moscow terror, Netanyahu Furious and Biden climbing polls
- Welcome to this week’s Great Game.
- We’re going to try out a slightly new format this time.
- Instead of unfolding one major topic, we will cover a couple stories more briefly, so you are covered on the most important stories in geopolitics right now.
3. Positioning Watch – Time to get out of the cyclical trade?
- Hello everyone, and welcome back to our weekly positioning watch! The weather in Copenhagen is sunny, and so is the mood in markets, with aggregate equity fund flows in the US reaching 2-year highs this week.
- Markets are certainly back into full risk-on mode, with the Fed promising rate cuts amidst reflationary trends in the US, which is a trend that is slowly but surely spreading to the rest of the world.
- The cyclical rebound is not truly there yet in Europe, which means that European indices are starting to get flagged as overpriced in our quant-models.
4. Energy Cable #62: Biden is selling crude straddles, while something is cooking in China
- Last week we took healthy profits in some of our global reflation bets.
- We got out of silver and copper, but remain in the broad materials ETF.
- Data out of China is a bit unclear with some prints being bullish and others bearish and then ambiguous data points such as the BOOMING copper stock.
5. Are Chair Powell and I on the Same Page?
- The ongoing Fed pause puts emphasis on the interactions between financial conditions and headline growth
- My proprietary measure of financial market conditions seems to be broadly consistent with the Fed Board’s indicator of financial conditions
- Chair Powell alluded to the prospect that financial conditions are currently “weighing on economic activity”
6. Explainer: the 3 faces of Chinese consumer pessimism
- Cautious but promising signs emerge from China’s consumer demand landscape.
- According to China’s statistics bureau, consumer prices saw a 0.7% increase year-on-year in February, marking the first rise since August.
- The extended Lunar New Year holiday period, spanning 8 days instead of the usual 7, nearly matched pre-pandemic domestic spending levels.
7. Steno Signals #92 – The head fake reflation?
- It is always lovely to get back on the road and meet a load of fund managers, and it is nice to see that a few reflation skepticals are still found out there.
- I went to London to meet with a bunch of the big funds in town, hot on the heels of Powell’s reflationary Fed meeting on Wednesday.
- It almost annoyed me how “vanilla” my analysis had to be on the back of it, as the Fed is moving the needle lower and lower and lower on the implied Real Fed Funds rate every meeting currently, no matter the underlying developments in inflation and/or growth.
8. Whither the Yen?
- The Bank of Japan is caught between a rock and a hard place
- The JPY’s only hope is a US recession and lower US interest rates
- Japan’s inflation problem to resume as imported inflation bites into purchasing power once again
9. India Deep Dive: Record Allocations Mask Growing Underweight
- Record Allocations Mask Caution: Record investments in India contrast with a rising underweight, as selected managers pare back exposure.
- Valuations Prompt Strategic Pause: Record underweights among Value funds reflect valuation concerns, with growth funds also seeing overweights decline.
- India vs. China: Allocation Shifts: The stark contrast in allocation trends underscores a strategic pivot within EM, highlighting record divergences between the two.
10. Ifo Nugget: What reflation in Germany?
Price expectations in services ex. real estate continued its downtrend and we now find ourselves at 2018-19 levels in what is pointing towards lower core inflation readings in the second half of the year.
Meanwhile price expectations in manufacturing climbed and looks like they have bottomed out at levels consistent with the price mandate of the ECB.
The drop in input prices, the global reflation story and expectations of ECB rate cuts seem to have had an effect and the question now becomes which of the two manufacturing and service price expectations will impact inflation come Summer and Fall the most.
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. What Really Matters Is Global Liquidity…But It Looks Set to Zag Before It Zigs Higher
- The main driver of asset prices looks set to stall, albeit temporarily. Global Liquidity is at a new all-time peak, but it is flat-lining
- Global Liquidity compromised by a stumbling US Fed as it copes with the errant RRP and TGA, and by an erratic People’s Bank of China. Q2 could prove tricky
- Look to diversify elsewhere. Commodity markets are on the move. But strong economies do not always have strong financial markets
2. Korean Government Announces Tax Incentives for Shares Cancellation and Dividends
- On 19 March, Choi Sang-Mok announced that the Korean government plans to provide corporate tax reduction benefits to companies that cancel their treasury shares.
- The separate taxation of dividend income is also expected to be promoted. All of these are law amendment issues and must go through the legislative process of the National Assembly.
- At this time, the Korean government did not provide the entire details about the exact amount of corporate tax reductions from share cancellation and separate taxation of dividend income.
3. Back-Testing the Impact of National Assembly Elections on the Korean Stock Market
- In this insight, we provide a back-testing analysis of the impact of the National Assembly Elections on the Korean stock market.
- KOSPI tends to display positive price performance one month and three months prior to the election date leading up to the election date.
- On the other hand, KOSPI tends to decline one month and three months post the election date. We believe that post National Assembly Election, KOSPI could face greater headwinds.
4. Hong Kong: A Tale of Two Markets and When to Re-Enter
- The bad news is that Hong Kong will not have a V-Shaped recovery which will keep market sentiment subdued
- The good news is that Hong Kong will not have a V-Shaped recovery which will contribute to a reduction in overall market volatility
- After an epic bear market, Hong Kong will enter a secular bull market this year
5. Japan Removes Negative Interest Rate Policy – The End of an Era and Long Yen?
- Zooming out reveals that the Bank of Japan has not shifted to a different monetary policy regime.
- The negative relationship between total debt-to-GDP and interest rates has been confirmed once again.
- With the Federal Reserve poised to cut rates more than three times this year, the case for a short yen position is thin.
6. Federal Reserve Signals “Victory” over Inflation Setting the Stage for the Next Round of Inflation
- Three 25 bps rate cuts signaled for the remainder of 2024 and 175bps by the end of 2025
- Bank of Japan, despite a rate hike keeps monetary policy extremely accommodative
- Reported inflation will return making sector selection in equities key
7. Portfolio Watch: Markets sniffing out the Chinese resurgence case
- Macro Portfolio: Markets sniffing out the Chinese resurgence case. Our conviction in pro-cyclical trends have been confirmed in markets this week, and the case for a Chinese revitalisation is becoming increasingly stronger.
- The continued surge in Copper this morning is noteworthy, particularly given the buildup of inventory by China in the past few months.
- An increasing stockpile can be a positive indicator, especially if it results from a deliberate effort by China to restock in anticipation of an economic stimulus.
8. Steno Signals #91 – No more recessions ever!?
- Happy Sunday from Sunny Copenhagen and welcome to our flagship editorial! Is the business cycle dead?
- It is a fair question to ask after what seems like years of recession chasing once again ending in tears for the macro bears.
- This sublime graphic created by the great Lee Coppock is exceptionally telling.
9. Monday Macro – Asset allocation update, the Nvidia show, stubborn rates, and Gold
- I’ve promised to keep updating my asset allocation tables every couple of months – and, on cue, here they are!
- They come in two guises. The first, below, is my overall take on the range of asset classes. There aren’t any changes this time. I’m still wary of equities, especially US equities, though, paradoxically, if I must own US equities, I would rather own the really big mega-cap tech names.
- I have a neutral position overall in equities, which implies a 60/40 equities/bonds balance, which hasn’t changed for a while – I wouldn’t be racing to put even more money to work in equities.
10. Chinese Momentum: Driving Markets or a Crowded Consensus?
- China’s government is targeting an economic expansion of approximately 5% again this year.
- A challenging objective considering the myriad of challenges facing the world’s second-largest economy.
- These challenges include weak consumer spending, a real estate sector in turmoil, efforts by the US to limit its technological advancements, unprecedented youth unemployment rates, and significant debt levels among local governments.
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. Steno Signals #90 – More Liquidity to the Most Hated Rally in Recent History
- Welcome to our flagship editorial! Is it the year 2021, 2007 or 1995?
- These historical analogies are often used in sell-side reports, and we are going to jump the bandwagon with a few semi-fishy analogies today.
- I do get some vibes that are reminiscent of melt-up years ahead of crisis years.
2. China Moves to Directly Support the Market
- China has now moved from supporting its economy to directly target its markets.
- Market demand and volume is supported through government buying and company buybacks.
- New regulatory measures will substantially decrease selling pressure going forward.
3. The Bank of Japan Plays Footsie with the Market-Will They or Won’t They?
- US economic data while surprising on the upside fails to buoy the USD vs the JPY
- BOJ awaiting shunto talks for more evidence of a sustained move out of deflation
- What are the implications for global markets if mass repatriation of Japanese capital
4. Walker’s Weekly: Dr. Jim’s Summary of Key Global Macro Developments | 8 Mar 2024
- Gold Prices Surge: Gold reaches all-time highs against the US dollar and fiat currencies worldwide, signaling skepticism towards central bank policies.
- Economic Indicators: India maintains strong economic activity despite political uncertainties, while China’s export performance exceeds expectations.
- Corporate Profits and Currency Impact: Japan’s corporate profits fall short of expectations, highlighting vulnerabilities to external factors like currency values.
5. 5 Things We Watch – US CPI, Japan, China, Germany & Central Banks
- Welcome back to our weekly 5 Things We Watch, where we go through 5 things that we keep an eye on in the world of global macro.
- With Japanese wage negotiations and the US CPI report out, there are plenty of things to shed some light on, so let’s get to it!This week we are watching out for the following 5 topics within global macro: US CPI, Japan, China, Germany, Central Banks.
- 1) US CPI Report leaves the Fed in a difficult situation. Yesterday’s CPI report revealed that the inflation outlook is not as benign as the Fed would have hoped, with energy / transportation services dragging the MoM figure higher.
6. Positioning Watch – Bye Bye Japanese Consensus Case?
- Hello everyone, and welcome back to our weekly positioning watch, which today will start at the growing number of BoJ officials who are now supporting an exit from NIRP possibly already in March, sending Nikkei 225 down >2% in Asia hours yesterday, while China and China-proxies were bid – quite a surprising dynamic in Asian equities, which we won’t rule out to continue over the next weeks, as markets are likely shifting away from Japanese equities if a hike actually comes through.
- Our 250-day prediction from our PCA-tool (the blue line) has also been flagging the rally in Japanese equities, and now see a major divergence in the trend relative to the macro fundamentals, which has left a >2 standard deviations fair value gap, which seems likely to be closed via a retracement lower in Nikkei.
- Chart of the week: Our models have been bearish Japan since early 2024It looks like some parts of the markets had already sniffed out the slight overpricing of Japanese equities given risks of substantial moves in JPY-rates, and inflows into US-traded Japan ETFs have decreased since early February, while China ETFs began to see modest inflows, but has now went back into negative territory.
7. US Inflation: Bad Enough for Powell to Change Course?
- For the second consecutive month, inflation has exceeded expectations, raising questions about the ‘stickiness’ of core inflation.
- The real shocker was the Core Services, excluding Housing CPI, which increased to an eye-popping 6.8% on a three-month annualized basis.
- Most likely, the latest CPI numbers aren’t the catalyst that ends the stock market rally.
8. Energy Cable #60: Copper getting some help from China?
- Take aways: Chinese deflation and high USD rates really putting a damper on copper. Interesting divergence in the USD and crude oil. Russia not sticking to its production cuts pledge. The risk/reward in commodities is getting increasingly compelling across the board, but it is early days. Since the beginning of last year when the world had all its chips on the Chinese reopening copper has been range bound between USD 360 and 390.
- In other words copper has almost been as boring as watching paint dry.
- It hasn’t gotten much help either up until now.
9. Monday Macro – a deep dive into housing plus Trump Vs2 and the markets
- When I first started writing for Money Week, I found myself in a slightly awkward position.
- At the time – this was many years ago – editors Merryn Somerset Webb and John Stepek were notably bearish on the UK housing market.
- I think it fair to say they were the masters of doom and gloom, not for entirely unfair reasons (you can guess all the rational drivers they focused on).
10. US Inflation Watch: OER a one-off?
- We see US inflation printing at 0.37% MoM in headline terms and 0.26% MoM in core terms.
- That leaves us in line with consensus, but with a bias/tilt towards an 0.1%-points surprise on the low side of consensus.
- The re-acceleration of owners equivalent of rent to levels close to 0.6% in January looked odd, but on a “good day” we should likely expect a reversal to the trend just above 0.4% MoM in February (see chart 1).
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. Portfolio Watch: What if We Add a Rate Cut to This Fire..
- The cyclical rotation is slowly but slowly rolling and if central banks add rate cuts to this mix, we are staring directly into the melt up.
- Welcome to our weekly Portfolio Watch, where we assess the tradeable themes and discuss our portfolio composition.
- In this revamped version of the series, we will touch upon the developments in our Macro Alpha Portfolio and our Digital Assets Portfolio.
2. 3 Take-Aways from Li Qiang’s Speech
- Welcome to this week’s Great Game where we turn our attention to China.
- The Communist Party is annual National People’s Congress where Premier Li Qiang (Xi’s right hand man) delivered a very noteworthy speech on the Central Committee’s financial and political plans.
- Watching a speech from a Chinese politician is a very different beast from watching top US politicians address the masses.
3. February Themes and Thematic Portfolio Review
- A monthly review at how the markets and our themes are currently performing
- Analysing what went wrong and what went right in stocks and sectors
- Highlighting positions added or removed from the thematic investment portfolio
4. Positioning Watch – Are the unpopular bets back in town?
- Hello everyone, and welcome back to our weekly positioning watch! Equity markets continue their drift higher for yet another week, and it seems safe to say that markets are now more concerned about liquidity/growth than rates to reiterate ourselves, as equity markets have not attributed the U-turn in rates expectations any value whatsoever.
- As the growth and liquidity outlook still looks decent for the weeks/months ahead, we keep our long risk asset bias.
- The rates outlook looks to have a bigger impact in FX and especially the carry-heavy side of this asset class, and with the market likely going to up-hawk expectations even further if inflation picks up momentum, it could be time for a revival of the USD – FX volatility has at least started to pick up a bit of momentum (bullish USD).
5. Macro Regime Indicator: MORE liquidity is coming
- Greetings and welcome to this month’s Macro Regime Indicator.
- Financial markets have behaved pretty much just as we laid out in last month’s predictions.
- Sentiment remains strong and the US consumer continues to spend.
6. Nowcasting Nearly Half of Global GDP
- My hybrid nowcasting framework tracks the inflation-adjusted or real GDP growth rates of US, Euro Area and Japan
- My nowcasts for the individual G3 economies are prospectively diverging at the beginning of 2024
- But in aggregate, my nowcast suggests that G3 GDP growth is potentially tracking softer through the first-half of 2024 on average
7. How to Trade the YOLO and FOMO Market
- A YOLO and FOMO mania has gripped stock market psychology and it’s unclear when the mindset will reverse. Numerous warnings are appearing and the market can correct at any time.
- We are long-term bullish on stocks, but remain cautious near term.
- Despite our cautious short-term outlook, traders are advised against taking a short position until some tangible signs of a bearish reversal appear.
8. Monday Macro – a deep dive into stocks and bonds for the long run
- This week, I’m going to try and combine my three interests: 1. working out what the heck markets might do next,
- 2. figuring out how economic growth rates impact stock market returns (surely there must be some relationship or are they entirely unrelated), and
- 3. digging into the economic history record books to see what’s worked in the past in investment terms.
9. Are You Ready To Be A Contrarian Cigar Butt Investor?
- We review Warren Buffett’s shareholder letter and his pivot from deep value to QGARP investing.
- We offered two case studies to compare and contrast his approach: 1) Berkshire’s holdings in Japan, which was successful; and 2) China, a deep value opportunity that he ignored.
- We are agnostic in our opinion between the two approaches and believe both can offer alpha, but on different time horizons.
10. Commodity & Shipping Watch: Time to get back into the shipping bets?
- Negative roll yield killing BCOM returns, even as spot has performed OK
- We need to see some serious stimulus out of China for broad commodities to rally
- Macro data turning bullish in shipping and the Container output from Shanghai is showing signs of a STRONG rebound
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. Hong Kong Dollar Carry Trade and Its Influence on Hong Kong Market
- Hong Kong Dollar (HKD) Carry Trade (CT) is an good leading indicator of the directional trend of the Hong Kong Market
- Recently the HKD CT has been trending to a less positive/flat position
- Hong Kong Aggregate Balance will no longer provide cushion against HIBOR rising due to the HKD peg system
2. FSC Announces Corporate Value Up Reforms Details
- On 26 February, South Korea announced its long awaited Corporate Value Up reform plan details to improve shareholder returns of listed Korean companies.
- Due to the lofty expectations about these corporate reforms, there was some disappointment when the details actually came out. KOSPI declined by 0.8% today following these corporate reform details.
- Many investors are likely to take a “wait and see” attitude to see if real, material, positive changes will be announced in 2Q/3Q, before committing additional capital into Korean equities.
3. The Week Ahead – US Core PCE, Euro Area Flash Inflation and Japan CPI
- Global equities finished the week on a high note, with Nvidia’s strong earnings boosting markets, especially in Japan.
- European yields rose due to strong PMIs, while the dollar weakened and the euro and pound strengthened.
- In the US, core PCE inflation is expected to be strong, with potential temporary factors contributing to the high readings.
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4. Positioning Watch – Commodities Are Finally Moving
- Hello everyone, and welcome back to our weekly positioning watch! We have been all about the possibility of a cyclical rebound with the US economy showing great signs at the moment, and China is also potentially looking to beat the fairly bearish expectations (and why barely anyone has been net long cyclicals in all asset spaces).
- This leaves markets with a great divergence, as Europe is yet to show the same signs of momentum, and inflation expectations (between USD and EUR) are also starting to diverge, but positioning has not followed accordingly.
- Let’s rerun our current trades to kick things off: Equities: Long Materials and Long Korea (as a China proxy).
5. NPS to Invest 11 Trillion Won in Low PBR/Value Stocks in Korea?
- NPS is in discussion to invest nearly 11 trillion won in low PBR/undervalued Korean stocks.
- Korea Exchange is in discussion with NPS to create a new index tracking low PBR/undervalued stocks in Korea in efforts to boost government’s efforts to boost the local stock market
- This index is tentatively named Korea Value-Up Index and institutional investors are expected to use it as one of the benchmark indices for equity investments.
6. Steno Signals #88: Anyone left willing to bet on rate cuts in H1?
- It seems like no one is willing to add bets on rate cuts in H1 after even the doves from the ECB and the Fed have been hard to convince of spring action lately.
- G3 central bankers have been on parade with messages around the risks of easing prematurely after watching the cocktail of 1) higher freight rates, 2) sticky wages and 3) easing financial conditions, especially in the US.
- We have seen front-end back paddling in rates space ever since New Years accordingly and the almost bizarre uniformity in views and positioning has been blown into pieces in a matter of weeks.
7. The Weekly Market Monitor – Please Give a Warm Welcome to BITCOIN
- Bitcoin rose nearly 20% this week, and the impact of spot Bitcoin ETFs is huge, but with a twist.
- This week’s US personal income data provides yet another chart showing that the recession is already behind us. But will the US consumer keep spending?
- That new The Economist cover does not bode well for stocks, but the moving average does. Yet, sentiment remains in Frenzy.
8. How the Rise of ‘Pod Shops’ Is Reshaping the Way Markets Trade
- Recent market volatility with large moves in individual stocks
- Multistrategy hedge funds may be impacting these market movements
- Goose Hollow Capital founder Krishna Kumar discusses the workings of pod shops and their impact on stock trading
This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only.
9. Money Watch: Trillions of USDs Are Waiting to Be Unleashed
- Money trends were abysmal for most parts of 2022 and the early parts of 2023, but we are starting to see interesting trends arising in the global money growth with clear geographical divergences.
- Japan, China and the Euro zone have reported January M1, M2 and M3 developments and while trends remain benign in JPY and CNY, the money trends in EUR are re-worsening.
- A gap seems to be opening between USD and EUR money trends, which rhymes well with our strong thesis of a growing inflation gap between the US and the Euro zone.
10. Macro Nugget: Trillions of USDs waiting to be unleashed
- If we look at M2 trends (narrow money + time deposit / MMFs and similar assets), the broad USD measure remains a staggering 18% above trend with M2 nominally trending almost 4 trillion USDs above a long-term trajectory.
- The similar trend in EURs is much less extraordinary with M2 currently 7% above trend, which translates to a little more than 1 trillion EURs nominally.
- There is still a large excess of USDs in the systemSo where are those excess USDs parked?
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. Easy Money to Low PBR Stocks in KOSPI 200 Is Now Over – What’s Next?
- There are 92 stocks in KOSPI 200 that are trading at less than 1x PBR. These 92 stocks are up on average 6% YTD.
- Among these 92 stocks, 40 of them are trading at below 0.5x PBR. These 40 stocks are up on average 8.2%.
- In this insight, we argue that the “easy money” of making money by increasing capital allocation to low PBR stocks in Korea is nearly over in the near term.
2. Portfolio Watch – Have markets traded the cyclical rebound in advance?
- Welcome to our weekly portfolio watch, which today will be all about the (potential) upcoming rebound in the cyclical momentum.
- As always we share our trade thoughts and ideas and provide you with our current allocation.
- Yesterday’s PPI came in hot as we expected (0.6% MoM in core PPI vs 0.1% expected), which serves as an early sign of a reacceleration in inflationary pressures, which have been our base case since the continuation of the tensions in the Red Sea: It looks like the increase in US freight rates has started to impact producer prices.
3. The Week That Was in ASEAN@Smartkarma – BBNI’s Aspirations, Oceanagold IPO, and Thailand’s Recovery
- The past week saw insights on Bank Negara Indonesia (BBNI IJ), Bank Mandiri (BMRI IJ), OceanaGold Philippines, Sam Holdings IPO, and the most SET50 Index rebalance.
- There were also macro insights on Thailand with some optimism, Vietnam as it starts to recover, Malaysia with lingering concerns, and the Philippines, as the BSP keeps rates on hold.
- The Week That Was in ASEAN@Smartkarma is filled with an eclectic mix of differentiated, substantive, and actionable insights, macro and equity bottom-up, from across Southeast Asia.
4. Positioning Watch – Low FX volatility provides cheap leverage for a rebound in manufacturing
- Hello everyone, and welcome back to our weekly Positioning Watch.
- Markets were caught on the wrong side of expectations last week with PPI coming in substantially hotter than expected, but equity sentiment has remained decent outside of some profit taking in Tech, as the cocktail of better liquidity conditions and a brightening economic outlook is likely to prevail – and positioning provides very decent opportunities to trade the potential comeback for cyclical assets.
- As this week’s chart of the week we present to you what looks to be the theme of Q1 2024, and the reason why right now is not a good time to be contrarian: momentum is king, and “go with the flow” currently performs WAY better than cherry-picking the good old value stocks.
5. Indonesia Politics: Prabowo Wins, But Does Indonesia?
- Ex-General Prabowo Subianto got third-time lucky in his bid for the presidency. We caution, however, that things will not be “business as usual” under the erratic strongman.
- Contrary to his campaign rhetoric of providing “continuity Jokowi”, we argue that Prabowo will not pursue several positive aspects of the Widodo agenda with the same vigour.
- Short-Term political intrigue and long-run degradation in governance are material risks given the election results and preceding developments, These are due cause for worry.
6. Energy Cable: All the upside left in Henry Hub
- Greetings from a rainy and cold Copenhagen.
- Since we haven’t talked about natural gas for a while we will start out here before turning to crude.
- Last week saw Henry Hub making lows last seen during the first wave of Covid in the spring of 2020.
7. Great Game – Asian elections and Ukraine outlook
- Welcome to this week’s rundown of international events and the impact on your portfolio.
- There is still some time to go on my cease-fire prediction from last week, so let’s focus on some other topics that we’re talking about right now.
- As a new addition to our offering, we’re experimenting with video editions of certain articles as many of you have requested.
8. US CPI Inflation 3.09% y-o-y (consensus 2.9%) in Jan-24
- The US CPI inflation rate for January 2024 exceeded expectations, slowing down to 3.09% y-o-y, marking the lowest growth since June 2023.
- The US Core CPI inflation rate stayed at 3.9% y-o-y.
- This rate was 0.2pp above consensus expectations, further supporting the hawkish surprise.
This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only.
9. India Politics: Opposition Coalition Fractures, Boosting Modi’s Chances
- The opposition INDIA coalition is facing severe setbacks in their efforts to form a united front against prime minister Modi and the ruling BJP.
- While the BJP was always the favourite to win the next elections, the fragmentation of opposition forces opened a wider path for a landslide majority win.
- How Modi uses his political capital in such an event will be pivotal to whether India can take advantage of its current position in the world.
10. The Weekly Market Monitor – The 34-Year Wait Is Over!
- First, Japan entered a recession, and a week later, the Nikkei hit an all-time high after 34 years. Any idea why this is?
- The Institute of International Finance (IIF) has updated its global debt chart. Be aware that it does NOT show the true underlying trend.
- You are only allowed to trade Chinese equities if you are going to buy them. China will have a serious long-term issue in attracting fresh capital.