Daily Brief Macro: 2026 High Conviction: Three Themes and more

• Three 2026 themes: (i) Continued AI spending boom, moats and monopolies to thrive, (ii) Recently commenced commodity super-cycle, especially in copper, (iii) Continued defense spending boom amid accelerating geopolitical tensions.
• These themes are well-discussed over the past year, but recent concerns about their longevity (especially AI spending) have derated the beneficiary stocks. We think it’s time to re-focus on them.
• Our top picks: TSMC (the monopoly AI enabler), Zijin Mining (the gold and copper giant, benefitting from two super cycles) and Hanwha Aerospace (the biggest beneficiary of defense spending boom).

• Doves and hawks on the MPC will find support for their views in the UK labour market data. It should strengthen divergent views in December, not resolve disagreement.
• Another rise in the unemployment rate and a shocking spike in redundancies can feed dovish fears that activity in the labour market is breaking into disinflationary weakness.
• Hawks can see another round of upwards revisions to wages, driving surprise persistence again. Total pay’s trend is stable in recent years, and regular pay is sticking too high.

• Whatever economic scenario unfolds in 2026, a long Gold/short Bitcoin investment should outperform. The position is up more than 50% since October.
• As one of the most leveraged and speculative parts of global asset markets, Bitcoin will struggle as the Fed ends its interest rate cuts by the end of 2026.
• Gold continues to benefit from the Fed’s pro-inflation policies, particularly with the restart of its $40 billion monthly QE program.  Continued currency debasement also supports a contnuation of gold’s rise.

Highlights

• MRF posts 11.7% YoY profit growth

•  JK Tyre clocks record revenue, profit surge

• Tire-makers benefit from GST-led demand rebound
• The top performer MRF posted an 11.7% year-on-year (YoY) rise in its consolidated net profit for the July-September quarter of FY 2026 at INR 525.64 crore (US$58.34 million). The company posted a profit of INR 500.47 crore (US$55.55 million) in the FY2026 April-June quarter.

• US private payroll growth stayed steady through the government shutdown. Statisticians failed to collect much data for November, yielding a noisy surge in unemployment.
• The employment-to-population ratio is steady, as are job openings and layoffs. Churn is still low, with few quits or hires, but broad resilience appears to remain unbroken.
• Jobless claims are also stable into December, when headline data should improve. The Fed pre-empted bad news with past cuts and is unlikely to keep going in January.

• Crude oil futures were sliding lower Monday as concerns over a massive oversupply in the new year again offset geopolitical events, leaving benchmarks floundering at around two-month lows.
• Front-month Feb26 ICE Brent  futures were trading at  $60.39/b (2055 GMT) versus Friday’s settle of $61.12/b, while Jan26 NYMEX WTI was at $56.67/b against a previous close of $57.44/b.
• While the market has been dogged by fears of a 2026 surplus, geopolitical uncertainty has injected some risk premium into prices and provided something of a floor, although benchmarks remain close to 2025 lows.

• Trading by Algorithm: Who is Responsible When AI Calls the Shots?                                         
• It was a battle unlike anything Wall Street had ever seen.                  
• No hedge fund managers.                

• Crude oil futures were under pressure again on Tuesday with the December retreat seeing prices challenge the lowest levels since 2021, as the glut narrative increasingly takes hold.
• Front-month Feb26 ICE Brent  futures were trading at  $58.86/b (2023 GMT) versus Monday’s settle of $60.56/b, while Jan26 NYMEX WTI  was at  $55.21/b against a previous close of $56.82/b.
• Sentiment has been decidedly downbeat since last week when the IEA flagged a surplus of 3.8 million bpd next year, despite it being a slight reduction from the record 4 million bpd projected in its previous report.

• Inflation lower. Trade deficit improving.       

• Next phase for privatisation pushed to Q1 2026. Markets all-in on Egypt.

• It seems we could be in the last stretch of negotiations for a ceasefire in Ukraine.