In today’s briefing:
- Brent Crude at a New Near-Term Equilibrium?
- A Fragile Bull
- EM Active Funds: What’s Driving Performance in 2025?
- It’s Not Over Until the Iron Lady Sings
Brent Crude at a New Near-Term Equilibrium?
- Despite underlying bearish fundamentals, crude oil prices are currently finding a floor due to persistent geopolitical risks, creating a unique, range-bound market environment.
- We suggest a strategic approach to navigate this market, focusing on capitalizing on premium capture rather than new strong directional risks amidst conflicting market forces.
- While diplomatic efforts offer potential for de-escalation, the immediate outlook points to stabilized volatility, making specific non-directional strategies particularly attractive.
A Fragile Bull
- The narrow U.S. market leadership presents fragility challenges for investors.
- The economy is becoming increasingly dependent on the top 20% of consumers, and the market is dependent on Magnificent Seven and AI stocks to lead the market.
- While there are no signs that these trends are about to break, the market is overextended in the short run and can correct at any time.
EM Active Funds: What’s Driving Performance in 2025?
- Active EM funds average +26.0% YTD, their strongest year since 2017, though still underperforming the benchmark by -1.8%. Fewer than 40% have outpaced the iShares MSCI EM ETF.
- Style and regional positioning drove dispersion. Value managers and South Korea exposure supported gains, while Aggressive Growth styles and India-heavy allocations weighed on returns. High Active Share strategies also trailed.
- Active EM outperformance remains consistent long-term. Active funds have beaten the benchmark in 14 of the past 22 years, with the ETF often ranking near the peer group median.
It’s Not Over Until the Iron Lady Sings
- The financial markets are not discounting the possibility of continued tensions in the Sino-American trade war.
- Both sides believe they have the upper hand, and each is growing more hawkish in its negotiation tactics.
- In addition, the election of Sanae Takaichi as Japan’s Prime Minister (Japan’s Iron Lady) opens the door to a renegotiation of the recently concluded U.S.-Japan trade deal.
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