Weekly Top Ten Macro and Cross Asset Strategy – Aug 17, 2025

1. BoE: Policy Mistake Diagnosis

By Phil Rush, Heteronomics

• Inflation expectations have been persistently too high, while productivity trends poorly, driving wage and price inflation forecasts to grind higher in recent years.
• The BoE’s cutting cycle contributed to reversing the trend decline in expectations, and in turning a slight overshoot into a massive one, with a 3.2pp revision since Feb-23.
• We forecasted this excess for these reasons, so it was predictable and therefore a policy mistake to cut so soon. Further surprise should prevent the MPC from cutting again.

2. US Inflation Skips Several Months

By Phil Rush, Heteronomics

• July’s US inflation print reversed all of the increase built in from tariffs over the past several months, despite matching expectations prevailing into the release.
• Core goods inflation eased slightly, suggesting ongoing corporate success in avoiding the tariff shock. But service inflation is stuck too high to be consistent with the target.
• Anti-avoidance measures and belated pass-through will drive further rises. We doubt they will be as severe as many fear, yet still not create much space to cut rates.

3. UK: Slowdown Softened In Q2

By Phil Rush, Heteronomics

• June’s remarkable rebound compounded the resilience revealed by April’s upwards revision, which also broke flimsy fundamental stories blaming tariffs for a slowdown.
• IP no longer declined in April, but the broader growth profile still matches the residual seasonality that spuriously drives GDP dynamics in our forecast. H2 will be weaker.
• The BoE discounts headline GDP volatility without blaming seasonality, so another surprisingly strong quarter will be hard for hawks to ignore, reducing the rate cut risk.

4. US/Taiwan: Xi Calls The Shots

By Alastair Newton, Heteronomics

• In stark contrast to its dealings with other trade partners, Washington is firmly in the position of supplicant in its dealings with Beijing.
• This reflects not only Xi Jinping’s carefully prepared and strong hand but also Donald Trump’s seeming determination to strike a deal with China at more or less any cost.
• Increasingly, therefore, Taiwan stands to be “a pawn in a bigger game”.

5. UK Jobs Suggest Summer Stabilisation

By Phil Rush, Heteronomics

• Unemployment broke a four-month streak of increases at 4.66%, with favourable cohort effects risking a fall soon. Payrolls may also be revised to grow again from July.
• The structural hit from tax increases is matched by the cumulative fall in payrolls so far. Fundamental explanations for its divergence from the LFS aren’t supported yet.
• Ongoing resilience in wage growth stokes unit labour cost pressures alongside taxes that are beyond the target. We still expect the MPC to resist cutting rates again.

6. Tradesmen’s Collective: Fixing the Trades with Tech, Transparency & Boots-on-the-Ground

By William Mann, HarmoniQ Insights

• Discussion between Jonathan, CEO of Tradesmen Collective, and Ed, Director of Investor Relations, on tech startups and market trends
• TTC USA’s integrated platform addresses industry inefficiencies with cutting edge software, escrow services, and legal support
• Insight on leading assets like gold, Bitcoin, and Nvidia; mentions of success stories like MicroStrategy integrating Bitcoin and Nvidia integrating software for business growth

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7. Poised for a Volatility Spike

By Cam Hui, Pennock Idea Hub

• We remain long-term bullish on equities. In the short run, realized volatility declined since the “Liberation Day” panic, but conditions are setting up for a near-term volatility spike.
• Uncertainty over Fed policy and government credibility are possible catalysts for a disorderly increase in volatility and market correction.
• As well, the signs of narrow leadership, weak breadth and stretched risk sentiment elevates the risks of a pullback.

8. Another View of American Exceptionalism

By Cam Hui, Pennock Idea Hub

• We believe global equity investors should adopt a barbell strategy of overweighting U.S. large cap growth and non-U.S. value stocks in their global equity portfolios
• The trend is your friend: Both are undergoing multi-year uptrends in relative performance.
• The key question is the length and sustainability of U.S. AI leadership. 

9. HONG KONG ALPHA PORTFOLIO (July 2025)

By David Mudd

• The Hong Kong Alpha portfolio outperformed its benchmark and all Hong Kong indexes in July.  The portfolio achieved these results while increasing its Sharpe ratio and reducing beta and volatility.
• The shift to the healthcare and materials sectors since Liberation Day in April has aided the portfolio’s performance.  The consumer staples sector lost momentum, and we exited some positions there.
• The HSI now trades above its long-term resistance levels for the first time since 2022.  This signals a good time to rotate back into market leaders in tech.

10. HEW: Wrong Policy Turnings

By Phil Rush, Heteronomics

• As soon as a data point calms nerves around a theme, a hawkish challenge seems to appear. This week, that was US CPI into PPI and UK unemployment into GDP.
• A bias to ease, triggered by a one-touch round of bad news, has consequences when not sustained. The BoE’s early start to its easing cycle has proved to be a policy mistake.
• Next week is a prime opportunity for Chair Powell to calm dovish excitement about Fed easing. UK inflation seems set to rise by another tenth, while the EA rate sticks at 2%.