Macro and Cross Asset Strategy

1. UK Structurally Unemployed

By Phil Rush, Heteronomics

• Higher employment taxes can entirely explain the fall in payrolls as the tax wedge hits its highest since 1987, raising our structural unemployment rate estimate by 0.48pp.
• That could understate the structural shift amid a substantial drop in the threshold, rise in the minimum wage (jobs ban) and benefit rates. Some will go ‘inactive’ on disability.
• The unemployment rate must rise more than its natural rate to deliver disinflationary pressure sustainably. Our structural estimates suggest it won’t break excess inflation.

2. UK Fiscal Slippage Rules

By Phil Rush, Heteronomics

• The UK’s de facto fiscal rule is slippage, with a £50bn to £100bn increase in borrowing between initial official forecasts and outcomes. 2025-26 made another slippery start.
• Politicians spend any space in the OBR forecasts, skewing surprises to higher spending. Yet tax hikes keep failing to raise the hoped revenue, motivating further increases.
• Investors should not be fooled by forecasts for consolidation when the failed strategy driving the fiscal slippage rule survives. Issuance may stay near £300bn in 2029-30.

3. US Politics: ‘As Ye Sow…’

By Alastair Newton, Heteronomics

• The Epstein files row has intensified deep splits in the MAGA movement and triggered persistent demands for accountability.
• Trump’s recent pivot towards supporting Ukraine and critical foreign policy shifts have fuelled further rifts among his traditional base.
• Despite controversies, the key midterm factor remains Trump’s economic agenda, as tariffs and fiscal changes may hit his core supporters hardest.

4. ECB: Watching the Good Place

By Phil Rush, Heteronomics

• The ECB kept its description of the policy setting as in a good place, and wants to watch the news in the next few months. Lagarde refused to emphasise September’s meeting.
• Euro strength is depressing inflation below target in the near-term forecasts, but the ECB remains relaxed about this. It sees the outlook as broadly unchanged since June.
• We still see rolling resilience in the economy and doubt US trade policy will break it. More rate cuts are inappropriate without demand destruction, so we don’t expect any.

5. The Trade War Is Dead! Long Live the Trade War!

By Cam Hui, Pennock Idea Hub

• Despite all of the dire headlines about tariffs on Canada, Mexico and the European Union, the only trade war that matters is effectively over. China has won.
• In the short run, economic policy uncertainty is receding but it’s not fully normalized. It’s time to adopt a risk-on posture.
• In the long run, equity investors should not expect the S&P 500, which trades at forward P/E of 22, to continue to outperform global stocks in the next expansion cycle.

6. New Barbarians Podcast | Episode #029 | Recap & Reset: Macro Shifts, Ethereum’s Spike, MicroStrat…

By William Mann, HarmoniQ Insights

• Podcast has been running for almost seven months with recent guest episodes
• Discussion on recent global asset trends and market news, including inflation, Fed rate cuts, and Trump’s tariff threats
• Mention of interns from CUNY City Tech helping with macro database analysis and highlighting Ethereum’s strong performance in the market.

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7. Potential Change in Capital Gains on Stocks & Securities Transaction Taxes: Impact on Korean Stocks

By Douglas Kim, Douglas Research Advisory

• The capital gains tax on stock sale gains and securities transaction taxes could be raised in 2H 2025, which could negatively impact the Korean stock market, especially small caps.
• Combination of higher securities transaction tax and capital gains on stock sales could result in local retail investors selling their shares in 4Q 2025, before these changes come into effect. 
• Although many small caps in Korea have performed well this year, the potential changes on these two important taxes could put some damper on the recent excellent share price performances.

8. HEW: Trade Deals & Fiscal Slippage

By Phil Rush, Heteronomics

• Market narratives were driven by US trade pacts, critically with Japan, the ECB watching data from a good place, and further evidence of UK fiscal problems.
• Tariff uncertainty eased slightly, but it is still fierce ahead of the 1 August deadline. PMIs remained resilient, and UK retail sales rebounded into growth again for Q2.
• Next week brings Fed, BoC and BoJ meetings (broadly on hold), US and euro-area GDP growth for Q2, US payrolls, euro-area unemployment and slower flash HICP data.

9. BUY/SELL/HOLD: Hong Kong Market Update (JULY 21)

By David Mudd

• HSI poised to break 25k for first time since 2022.  Next resistance 27100.  Hong Kong market outperforming global markets by wide margin since our BUY was initiated in March 2024.
• Financial, materials and healthcare sectors leading the market higher as tech sector consolidates.  China shares still offer the best valuation metrics in Asia.
• Alibaba Pictures (1060 HK) , renamed Damai Entertainment has seen increased analyst attention as the company becomes the Live Nation Entertainment, Inc (LYV US) of China.

10. Stay Overweight Japanese Equities

By Sharmila Whelan, Westbourne Research Services

• Despite the Upper House election result we are overweight Japanese equities and a buyer of the yen. 
• Business cycle indicators are positive; the profit and investment cycles in upswing. Companies are highly diversified – foreign sales account for 40% of  sales and 37% of production is abroad. 
• They are hedging their bets by expanding in the US and India while scaling back in China. These factors contribute to the resilience of corporate earnings growth.

1. UK CPI Lifts Hawkish Case in June

By Phil Rush, Heteronomics

• UK inflation surged 0.2pp beyond the consensus again in June, with underlying inflation measures broadly inconsistent with the target and headlines moving the wrong way.
• The consensus is failing to learn the lesson of intense underlying pressures. The CPI rate rose 0.6pp since Jan instead of falling 0.4pp and is 1.4pp higher than called a year ago.
• Policymakers seem infected with dovish fear about the labour market ahead of August’s meeting. CPI is 0.9pp higher in our year-ahead forecast, and we were right a year ago.

2. UK Jobs Data And The Muddled MPC

By Phil Rush, Heteronomics

• UK payroll revisions removed most of May’s weakness, while wage and price inflation is too fast, yet the BoE probably won’t back down from an August cut as the UR rises.
• Fewer payroll inflows explain its downtrend, with <24yo suffering sustained pain, but the 25-64yo endure the taxation hit, structurally raising unemployment by ~0.5pp.
• Wage growth isn’t showing signs of new disinflationary demand pressures, so we expect excessive underlying wage and price trends to persist, not helped by an August BoE cut.

3. Asia Cross Asset: Liberation Day 2.0 and Asia

By At Any Rate, At Any Rate

• Not surprised by recent events in the equity market, as it aligns with forecasted growth trends in Asia
• Transitory factors such as front loading and transshipment contributing to expected decline in H2 growth
• Expectation for central banks in the region to potentially ease rates in response to current economic conditions

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4. US Inflation Creeps In Quietly

By Phil Rush, Heteronomics

• Rebounding headline and core US inflation in June understated the underlying growth, with shelter rising at its slowest pace since August 2021. Tariff pain crept in belatedly.
• Commodities, less food, energy and car prices grew by 0.3% m-o-m, the fastest since Feb-23, and services (ex-shelter) hit 0.4% m-o-m, both inconsistent with the target.
• Less than half of the post-election surge in expectations has survived so far. Further rises remain likely, even if sustained avoidance smooths and reduces the full impact.

5. HEW: Inflation Persists, But Cuts Loom

By Phil Rush, Heteronomics

• Persistent upside inflation surprises and sticky wage growth are lifting hawkish market narratives, defying central bank and consensus hopes for a quick return to target.
• UK inflation jumped well above forecast in June, strengthening the hawkish case, while US core inflation shows tariffs adding to excessive underlying price pressures.
• Next week, attention turns to the ECB decision, July flash PMIs, and UK public finances, as markets weigh central banks’ willingness to ignore resurgent inflation.

6. The Bullish Elephant in the Room

By Cam Hui, Pennock Idea Hub

• We have been fairly cautious on equities in the past, but that’s changing. There is a bullish elephant in the room that is becoming evident and can’t be ignored.
• Market psychology had panicked and became overly concerned about left-tail risk. . Better, or less bad, news emerged and price momentum became dominant.
• Our base case scenario calls for the rally to continue into the August–September time frame.

7. Tuning Tariff Impact Estimates

By Phil Rush, Heteronomics

• President Trump’s tariff policy seemingly follows a random walk with a drift towards deals. Path dependency raises risks and uncertainty around his volatile whims.
• Corporate avoidance measures have spared their customers from most of the pain, but Vietnam’s deal as a template could belatedly bring more of the pain to bear.
• We assume most countries stay at 10%. The impact of others rising to 20% may be smaller than the anti-avoidance hit, with the total now worth less than 0.4% to UK GDP.

8. Hong Kong Alpha Portfolio (June 2025)

By David Mudd

• The Hong Kong Alpha portfolio has significantly outperformed the Hong Kong indexes in June and since inception. Outperformance range is 17% to 23% since inception.
• At the end of June, we sold positions in the tech sector after substantial gains. The portfolio’s exposure to the consumption sector was also trimmed, both discretionary and staples.
• The portfolio added exposure to the metals refining sector and initiated positions in conglomerates Shanghai Industrial Holdings (363 HK) and Citic Ltd (267 HK) .

9. Korea: Short Selling Data Analysis: 3Q 2025

By Douglas Kim, Douglas Research Advisory

• We are introducing a new regular series called “Korea: Short Selling Data Analysis.” We will try to provide this insight on a quarterly basis.
• Net short balance ratio for top 20 stocks in KOSPI averaged about 1.7% three months ago, much lower than current levels (3%).
• The average short interest ratio of these top 20 stocks in KOSPI with the highest short balance ratio was 2.6x as of 10 July 2025. 

10. Korean Government’s New Task Force for Inclusion in a Major Global Index + IBKR Korea Trading Signal

By Douglas Kim, Douglas Research Advisory

• In this insight, we discuss Korean government’s new task force for Korea to be included in a major global index. 
• Prior to this major market moving event, there will be some important signals. 
• One of the most important signals could be major global securities companies (such as IBKR/TD Ameritrade) allowing trading of Korean stocks to customers world-wide. 

1. Inconsistently Dovish Pricing

By Phil Rush, Heteronomics

• Dovish market fears from April have unwound for the Fed, yet deepened for the BoE, despite broadly resilient data and cautious guidance from policymakers reluctant to cut.
• Equity prices have relied on this resilience to recover, yet expectations for extended rate-cutting cycles imply it breaks. Payrolls only forced half of the gap to close.
• We expect ongoing resilience to keep rolling market pricing for rate cuts later, with the unnecessary easing ultimately never being delivered by the BoE, Fed, or ECB.

2. Labour’s Collapsing Credibility

By Phil Rush, Heteronomics

• Labour failed to campaign on a platform up to the UK’s structural problems, depriving it of the support to deliver change in its first year. Reform UK now lead most polls.
• Spending cut U-turns compound the fiscal hole exposed by the slippage of optimistic assumptions, making further tax hikes and more persistent deficits seem inevitable.
• Far-centrism has been rejected, but challenges to Labour’s right and left break its ability to triangulate back towards success. Investors may not stay so forgiving.

3. Can a New Bull Begin at a Forward P/E of 22?

By Cam Hui, Pennock Idea Hub

• It’s official, our long-term market timing model has confirmed a buy signal at the end of June.
• The S&P 500 is trading at a forward P/E of 22. Can a new bull truly begin at such elevated valuations?
• We interpret the buy signal from our long-term market timing model as a buy signal for global equities, and not just the U.S. market.

4. HEM: Rolling Resilience

By Phil Rush, Heteronomics

• Economic activity is robust with a tight labour market.
• Price and wage inflation are generally above 2%.
• Despite predictions of a downturn, the current economic regime remains stable.

5. Why America’s Manufacturing Dreams Might Be Economic Nightmares

By Viral Kishorchandra Shah, Exencial Research

• Germany’s GDP declined 0.2% in 2024, Japan’s industrial production contracted 1.1%. Meanwhile, America’s service-focused economy outperforms manufacturing-heavy competitors consistently.
• Tooling costs are 10x higher in America than China. Even 145% tariffs insufficient—need 350% tariffs to make domestic manufacturing viable.
• US services exports surpass lost manufacturing profits. Services employ 84% of private sector, pay more than manufacturing ($36 vs $35/hour).

6. De-Dollarisation Debate : Unmasking USD Over-Valuation

By Kok Peng Chan

• Despite headlines about BRICS alternatives, gold hoarding, and China’s reduced U.S. Treasury holdings, the data shows no structural shift away from the dollar.
• A 10% decline in the DXY under six months is not an uncommon  occurence from a longer term perspective.  
• The dollar’s weakness is driven by a historically overvalued real effective exchange rate (REER)  and falling oil prices, not a structural decline.

7. HEW: Kicked Can Lands Steady

By Phil Rush, Heteronomics

• Trump kicked the tariff can a few weeks to 1 August, leaving other policymakers and markets in a wait-and-see mode. Pricing was little changed amid little news elsewhere.
• We thematically explored the market implications of resilience rolling cuts later, how healthy the US labour market data is, and dug into the UK’s political problems.
• Next week’s UK labour market and inflation data are critical ahead of an August BoE decision we believe remains finely balanced. US and EA inflation are other highlights.

8. US Claims Continue To Cruise Calmly

By Phil Rush, Heteronomics

• Rising continuing claims in recent months have been heralded as a canary warning of belated suffering in the labour market. But the problem is ending before it ever began.
• US employment growth is still aligned with its long-run average, and the unemployment rate is unchanged on the year. Openings and quits are also steady with averages.
• The Fed needs excess disinflation to cut, and we believe this won’t materialise. That also avoids demand and policy pressure on the BoE and ECB, helping them hold rates.

9. Barbarians with Bandwidth: Why Christina Qi Left the Hedge Fund World to Reinvent Data

By William Mann, HarmoniQ Insights

• Recap of last week’s events including good inflation news, pressure on Fed to cut interest rates, tensions between Israel and Iran escalating, and market outcomes
• Factors showing risk-on sentiment with sales growth up, EPS growth strong, volatility and quality return on equity fluctuating
• Discussion on factors influencing return on equity and quality, with insights into market trends and data analysis techniques

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10. Systematic Global Macro: Data, AI, and Models Are Reshaping Investing | New Barbarians AI Agent #05

By William Mann, HarmoniQ Insights

• The podcast episode discusses the shift towards systematic global macro investing and the advantages of using quantitative models and algorithms.
• The sources highlight the importance of technology and data in driving this shift, but also emphasize the value of human judgment in certain situations.
• Listeners are encouraged to explore the freely available Google Colab Jupyter notebook for replicating sector performance analysis discussed in the episode.

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

1. UK Course-Corrected CPI Stays High

By Phil Rush, Heteronomics

• UK inflation unsurprisingly slowed in May as a correction to vehicle excise duty knocked 0.1pp from the rate, reversing all the upside to our above-consensus April forecast.
• Services inflation aligns with the BoE’s forecast from its May forecast, where MPC members were biased towards slowing their easing. Underlying rates remain too high.
• Inflation keeps trending above the consensus, cumulating a 1pp error since rate cuts began, but aligning with our forecast from 1yr and 2yrs ago. We remain hawkish.

2. BoE Still Seeking Evidence

By Phil Rush, Heteronomics

• Guidance around an unsurprisingly unchanged BoE rate preserved the necessary uncertainty about when it might ease again, albeit with a broad bias to do more later.
• Dave Ramsden joined the dovish dissent, taking it to three for a 25bp cut, but none of them are in the MPC majority revealed in May as leaning towards a slower pace of cuts.
• We believe the August decision remains finely balanced for the majority. Ongoing data resilience, discouraging the Fed and ECB from easing, should also keep the BoE on hold.

3. US/China: Sprint vs Stamina

By Alastair Newton, Heteronomics

• The recent US/China trade talks highlighted Beijing’s superior leverage and determination.
• Beijing is in a stronger position in terms of both leverage and willingness to persist.
• Avoiding a re-escalation after the current 90-day truce relies on Washington making more concessions.

4. HEW: Playing For Time

By Phil Rush, Heteronomics

• US diplomacy with Iran has been given two weeks, bringing it close to the reciprocal tariff deferral date. Both may roll later, while central bankers wait to see the impact.
• Unsurprising UK and EA inflation data offered little direction, nor did the BoE or Fed. Brazil and Norway delivered opposite surprises outside a flood of cautious statements.
• Next week is much quieter for data and decisions (TH and MX). The flash PMIs are the main global highlight, although some HICP and PCE data are notable on Friday.

5. Euro Area Wage Costs Closer To Target

By Phil Rush, Heteronomics

• Non-wage labour costs rebounded in Q1, damping the overall slowdown to a surprisingly modest extent after the crash in negotiated wage growth revealed in May.
• Unit labour cost growth has encouragingly slowed below 3%, with the latest impulse only 0.6% q-o-q. Any further easing here could encourage monetary easing to resume.
• Stability at a low unemployment rate still suggests the policy setting is close to neutral, so we doubt disinflationary pressures will mount further and forecast no more rate cuts.

6. EA Inflation Predictably Near The Target

By Phil Rush, Heteronomics

• Disinflationary news from May’s flash inflation release was confirmed in the final print, although a rebound in some underlying inflation measures damped the initial signal.
• Resurgent oil prices could rapidly reverse the dovish space expanded by past falls. Our forecast bumps around the target through 2026 and 2027, settling at 2%.
• Other forecasts are a little lower and only suffer a slight bias to be exceeded. The ECB can remain reassured by an outlook close to 2% without cuts, and not deliver any more.

7. China – Where To Invest?

By Sharmila Whelan, Westbourne Research Services

• Overweight AI, high tech, robotics, renewables and bio-tech. Underweight on consumer discretionary, property and export cyclicals.
• China has become even more vital to its green transition.  At the same time the shift in government mindset means that domestic innovation is advancing at a breathtaking pace.    
• That said the economy is yet bottom. The profit cycle downturn is worsening;  As of April 30% of manufacturing companies were loss making, up from 25% in November

8. Steno Signals #201 – The Mullahs Are Toast – Re-Inflation Is Back!

By Andreas Steno, Steno Research

• Happy Monday from Copenhagen.
• What a comeback by JJ Spaun at Oakmont yesterday (sorry to the non-golfers), and what a comeback risk is about to make this week.
• Iran’s mullah-tocracy is on the brink, and it could be a catalyst for a big bounce in risk appetite.

9. Walker’s Weekly: Dr. Jim’s Summary of Key Global Macro Developments – 20 June 2025

By Dr. Jim Walker, Aletheia Capital

• US interest rate cuts expected soon as economic data deteriorates across sectors.

• Indonesia delays rate cuts; Philippines eases but risks peso weakness.

• China retail sales rise, but property sector continues to underperform.

10. Cancellation of Existing Treasury Shares in Korea – Government Likely to Provide a GRACE PERIOD

By Douglas Kim, Douglas Research Advisory

• The Korean government may not force the listed companies to suddenly cancel all their treasury shares all at once. 
• Rather, a GRACE PERIOD is likely to be given for companies with existing treasury shares by which they need to cancel them.
• Going forward, the Korean government is likely to decide to allow acquisition new of treasury stocks only when the purpose is to cancel them, excluding bonus payments or stock compensation.

1. UK: Some Workshy Start Looking

By Phil Rush, Heteronomics

• A broadly softer labour market report could easily be used to overstate the fundamental significance. Unemployment’s rise was expected and only 0.2pp on the year.
• Employment is growing and redundancies are low, but when the inactive look for work, long-term unemployment rises. Yet the workshy will struggle to compete for jobs.
• Wage growth slowed despite a 0.5% m-o-m impulse. Costs are rising excessively fast, so the BoE still doesn’t have space to keep easing, and we expect no more rate cuts.

2. UK: Retreating To Trend Again

By Phil Rush, Heteronomics

• Residual seasonality shocked the consensus again, this time on the downside, as the spurious surge is replaced with stagnation for the rest of the year in our view.
• The 0.3% m-o-m decline dragged GDP back toward its trend, wiping out the highly supportive statistical carryover effect for Q2, which we now forecast at 0.1% q-o-q.
• BoE forecasts are on track, allowing the MPC’s bias to slow easing to materialise with a pause. We expect cuts to keep being rolled later, with no more delivered in this cycle.

3. US Consumer Pricing Still Ignores Tariffs

By Phil Rush, Heteronomics

• Another downside surprise in headline US inflation reflected the lack of pass-through from tariff increases, with headline and core rates of only 0.1% m-o-m in May.
• Commodities, less food, energy and car prices stalled as airfares and apparel fell again. But services (ex-shelter) inflation stayed too high to be consistent with the target.
• Low headline rates raise dovish political pressure and the risk of a cut, but the tight labour market should encourage the Fed to keep rolling potential cuts later.

4. HEW: Geopolitics Blow Hot And Warm

By Phil Rush, Heteronomics

• Israel’s attack on Iran squeezes supply in an unwelcome shock that is harder for central bankers to look through post-pandemic. Warming US-China relations had less impact.
• Avoidance measures have helped mitigate the tariff shock so far, with US CPI holding steady. The importance of recent disappointing UK demand data is easy to overstate.
• The BoE is set to hold rates, probably with two dovish dissents and no commitment to August. UK inflation should slow with airfares normalising and a vehicle tax correction.

5. Why “Sell America” Isn’t Equity Bearish

By Cam Hui, Pennock Idea Hub

• We have been fairly cautious in our U.S. equity outlook in these pages, but that doesn’t mean we are equity bearish.
• We are embracing the “Sell America” trade because of a combination of deteriorating U.S. fiscal position and the trade war policy pivot that’s contributing to falling confidence in USD assets.
• The key risk to our “Sell America” thesis is whether the U.S. can sustain its technology dominance in the next investment cycle.

6. US Treasuries: YOU BREAK IT YOU BOUGHT IT!

By David Mudd

• The US Administration is undermining foreign demand for dollar assets at the same time, supply for US treasury debt is rapidly expanding.
• The Fed is constrained from lowering the Fed Funds rate due to rising yields in the long end of the treasury market. 
• The long end of the US Treasury market is feeling the effects of Trump’s tariff policies.  The US equity market will follow as risk premiums rise.

7. Asian Equities: Southbound Flows Turning to Dividends and Beaten Down Sectors

By Manishi Raychaudhuri, Emmer Capital Partners Limited

• In May, onshore Chinese investors bought US$5.85bn of HK-listed stocks, down sharply from the $19-21 bn net buying range of the past three months. The favorite stocks also changed sharply.
• The hitherto Southbound favorites, Tencent, Alibaba and Xiaomi were sold down. Onshore investors’ current favorites seem to be the high dividend yield stocks, particularly China Mobile, CNOOC, China Construction Bank.
• Competitive pressures crashed food delivery and EV share prices. But Southbound investors seem to see these share price drawdowns as buying opportunities. Meituan, Li Auto were bought in significant measure.

8. Walker’s Weekly: Dr. Jim’s Summary of Key Global Macro Developments – 13 June 2025

By Dr. Jim Walker, Aletheia Capital

• India cuts interest rates as currency pressure eases, aiming to boost private investment without triggering inflation concerns.

• China’s exports rise overall despite a sharp drop to the US, showing strength through trade diversification.

• Regional trade flows shift sharply, with Taiwan and Vietnam surging ahead of potential tariffs, while uncertainty clouds second-half investment outlook.

9. Inflation Concerns Overdone

By Sharmila Whelan, Westbourne Research Services

• For Trading Post a global recession has never been on the cards, nor a resurgence in inflation.
• If mainstream economists continue to raise alarms about a tariff induced inflation surge, it reflects a fundamental misunderstanding of how inflation works and what drives it.   
• Current trends in broad money growth, credit cycles and monetary policy settings simply don’t support the prevailing inflation narrative.

10. Trade Avoidance Easing Shocks

By Phil Rush, Heteronomics

• China’s crashing exports to the US partly reflect avoidance measures, including rerouting through other countries and marking down import prices to subsidiaries.
• Exports to the EU and UK are only trending slightly higher, making little difference to disinflation. ASEAN countries, and especially Vietnam, are seeing trade surge again.
• The US may clamp down on avoidance measures that have eased the shock so far. It could make a painful example of one to encourage concessions from all trade partners.