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. Monetary Policy Tide Is Turning Up
- Markets are already pricing the return of rate hikes in 2026 for Canada, Australia and New Zealand, while policymakers elsewhere are starting to warn of the possibility.
- Transitional support to structural adjustments needs unwinding, as Canada signals most prominently. Broader activity resilience and inflation reveal the risk of overstimulation.
- The BoE already committed a policy mistake by easing too early, and is split by those recognising the persistent danger. Market pricing remains too dovish for 2026.
2. 2026 Politics: Nine Guesses & A Certainty
- In what promises to be another year fraught with uncertainty, politics and markets will again be dominated by the United States in general and Donald Trump in particular.
- Widely differing views of equity market prospects demonstrate this, i.e. the ‘bubble is about to burst’ doomsayers versus the bullish seeming consensus on Wall Street.
- However, the biggest challenge facing investors is focusing on what really matters amid the continuing ‘noise’ emanating from the Trump Administration in particular.
3. China Re-rooting Rather Than Dumping
- China’s rising export growth to Europe in November demonstrates base effects around a steady trend that predates US tariff increases. It isn’t about dumping.
- Avoidance measures remain rife, with transhipping through Vietnam not dented by the provisions in their US trade deal. Effective tariff rates aren’t rising belatedly.
- Profit-maximising companies still seem to be working around US measures, keeping the impact on inflation and growth smaller than many other economists feared.
4. HEW: Packing Festive Presents
- Another hawkish repricing occurred, despite little support from the Fed, although the six members favouring higher rates reveal hawkish discomfort beyond current voters.
- Trade with China is still avoiding the trade war well enough to prevent a massive shock, and UK GDP data kept following its residual seasonality rather than fundamental stories.
- It’s all happening next week as central banks and statistical authorities ram releases in before Christmas. Bailey’s bias to pivot should deliver a BoE cut while the ECB holds.
5. The Art of the Trade War: MUTUALLY ASSURED DISRUPTION
- The U.S. Administration has retreated from the heated rhetoric and trade initiatives at the beginning of its trade war. U.S. officials’ conciliatory approach to China starkly contrasts to earlier policies.
- Going into next year’s midterm elections, the Trump Administration will seek to maintain stable markets and downplay its global trade war, benefiting China.
- Taiwan will continue to present headline risks for markets as the influential neocons use the issue to stoke tensions toward a cold war against China.
6. Asian Equities: Valuation Leaderboard Reshuffle Driven by Market Reforms and Earnings Boost.
- Asia’s forward PE and P/BV peaked in late October and are moderating now. Korea, Taiwan, China rerated the most. But viewed against ROE, Korea looks cheaper than 6 months ago.
- Going by PE viewed against forward EPS growth and P/BV against forward ROE, the well-known conclusion – Korea cheap, India expensive – remains unaltered. Onshore China appears slightly overvalued now.
- Persistent initiatives to improve corporate governance are boosting Korea’s and Taiwan’s valuation. Upward revisions in earnings estimates are getting broad-based, indicating the commencement of improving earnings momentum.
7. US: Inflation Is Dead, Long Live Inflation!
- Without warning, the Fed announced it is restarting a substantial QE program under the pseudonym “Liquidity Management”. Starting immediately, it will purchase $40 billion in Treasuries per month.
- The Fed is using its concept of “ample reserves” to begin its monetary easing policy. Initiated following the 2008 GFC, the ample reserves monetary policy was formally adopted in 2019.
- This new QE program will increase already rising global inflation. Commodity prices are reflecting the anticipated higher inflation rates as the pace of declines in real rates is increasing.
8. A Healing Bull
- While the charts are signaling bull-bear indecision on the surface, technical signals favour a short-term bullish resolution for a rally into year-end and beyond.
- However, the Fed rate decision could be the source of market volatility next week.
- This is consistent with the seasonality pattern of a choppy first half of December, followed by a rally into year-end starting in mid-December.
9. Walker’s Weekly: Dr. Jim’s Summary of Key Global Macro Developments -12 Dec 2025
Central banks in the United States, the Philippines, and India delivered rate cuts amid rising inflation pressures and mixed currency responses.
China’s exports rebounded, Japan’s household spending weakened, and Taiwan recorded exceptional AI driven trade growth.
Diverging economic trajectories highlighted inflation risks, export volatility, and the influence of technology related demand on regional performance.
10. Un-Tethered from reality?
The ‘year-end’ book squaring ahead of Thanksgiving caused a mid-month wobble around the November options expiry, which in turn caused some panic among leveraged traders, albeit not of the April variety.
The FOMO trades of unprofitable tech and everything Crypto related were hit particularly hard and while the $ briefly moved back above 100 on the trade weighted index, the pain trade at the broader market level appeared to have gone by end month.
A Rip Van Winkle analysis of November would have concluded that nothing much happened, but a lot did.
