This weekly newsletter pulls together summaries of the top ten most-read Insights across Macro and Cross Asset Strategy on Smartkarma.
Receive this weekly newsletter keeping 45k+ investors in the loop
1. UK: Christmas CPI Present For Doves
- UK inflation’s 31bps slowing to 3.15% went far further than expected, with significance raised by the substantial extent and the breadth of downside across divisions.
- However, the news was more concentrated at a component level, leaving the median impulse annualising to 2.3%. We still see underlying pressures driving persistent excess.
- The Governor sought confirmation of disinflation before cutting rates again, so this surprise should secure that move in December, without any commitment to do more.
2. BoE: Three Camps, Two Votes, 1 Cut
- The MPC’s 5:4 vote split delivered another finely balanced rate cut, but the doves are divided, with only two likely to roll straight into supporting another cut in February.
- Most MPC members favour caution, or an explicitly slower path of rate cuts, which probably means they expect to wait until March or May before easing further.
- The disinflationary evidence may not arrive with pay settlement plans in the new year, or later, so we still see this as the last BoE rate cut. The global policy cycle is turning.
3. 2026 HIGH CONVICTION IDEA: Long Gold / Short Bitcoin
- 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.
4. 2026 High Conviction Idea: Our Most Reliable Timing Models
- Instead of giving you a fish for the day, we are offering to teach you how to fish.
- Our high conviction idea for 2026 and beyond consists of five U.S. equity market timing models with near 100% reliability and differing time horizons.
- In addition, investors can consider two timing models with strong success rates, but will need some degree of risk management.
5. 2026 High Conviction: Three Themes, Three Top Picks
- 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).
6. UK: LFS Strengthens Policy Division
- 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.
7. ECB: Wishfully Rolling Disinflation
- Stronger wage and service price inflation have shrunk the Q1 target undershoot to only 0.1pp, removing the space that doves hoped might free the ECB to cut again.
- Spending over half the year on hold and in a “good place” creates an inertia that will be hard to break towards another cut. We still see the ECB’s easing cycle as over.
- Rolling the disinflationary trend back a year helps soften hawkish pressures, but losing this amid ongoing strength seems more likely to push the ECB into a hawkish direction.
8. HEW: Dovish Data Dumps
- Inflation data broadly disappointed expectations over the past week. The labour market news was more mixed, but higher UK and US unemployment rates raise eyebrows.
- Policymakers behaved themselves, with no surprises and wide dispersion, including a BOJ hike, while the BoE delivered the finely balanced hawkish cut we expected.
- The release calendar adopts a holiday stance for the next few weeks, with only UK and US Q3 GDP data out before Christmas. This publication will be back on 9 January.
9. China’s Consumption Push: Will It Take Off?
- China’s low consumption ratio is driven by structural constraints—stagnant labour income, early and rapid household leverage, heavy debt burdens, declining workforce and persistent precautionary saving
- Such constraints on household consumption mean recent policy announcements to expand overall domestic demand will take longer than expected to deliver a durable consumption-driven Chinese economy
- China’s ten-year bond yield appears to recognise this reality, pricing in persistently weak nominal growth and subdued domestic demand rather than a consumption-driven reacceleration. It is now lower than Japan
10. BUY/SELL/HOLD: Hong Kong Market Update (December 17)
- Hong Kong’s market continues its consolidation in a Secular Bull Market. Technology and healthcare sectors have weakened, while utilities, telecom, and energy sectors have strengthened.
- Mainland investors have slowed net buying through the Southbound Connect platform. Dividend yield, value and low volatility are leading investment factors since October. Growth and momentum factors have lagged.
- Cosco Shipping Energy Transportation Co. Ltd. (H) (1138 HK) is initiated as BUY at Shenwan Hongyuan. VLCC rates to China are rising amid U.S. oil sanctions on Russia and Venezuela.
