Macro and Cross Asset Strategy

Weekly Top Ten Macro and Cross Asset Strategy – Jun 9, 2024

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. Positioning Watch – Turmoil in Markets Is Returning

By Andreas Steno, Steno Research

  • Hello everyone, and welcome back to our weekly positioning watch.
  • The divergence between market-cap weighted and and non market-cap weighted indices is slowly normalizing, but the impact that NVIDIA (and some of the other big tech firms) has on both broad equity returns is notable with the 5 largest companies in the S&P 500 accounting for roughly 30% of the index by now.
  • This does not only have implications for the distribution of returns between bigger indices (Nasdaq vs Dow Jones for instance), but also on indices option volatility, with the VIX ex NVIDIA hitting lows of around 9 in May (2017/2018 lows).

2. EM Watch: The China bet and the copper story are both old hat by now

By Andreas Steno, Steno Research

  • Welcome to our weekly EM editorial where we travel across the liquid EM markets in the context of recent developments in USD markets.
  • ISM Services jumped back to 53.8—time to put that recession chatter to bed for a few months again?
  • Bloomberg’s latest alarmist piece on “business employment dynamics” showing a net job loss in Q3 of last year is probably the worst analysis I have read in a while.

3. Steno Signals #102 – Bad inflation news everywhere

By Andreas Steno, Steno Research

  • Happy Sunday and welcome to our weekly flagship editorial.
  • The inflation progress has stalled, and it is not just a US phenomenon.
  • It is spread to Europe and with freight rates rapidly on the rise, we are likely no longer getting any help from goods inflation in coming quarters.

4. The Week at A Glance: The comeback of the (growth and inflation) cycle

By Andreas Steno, Steno Research

  • Welcome to our short and sweet weekly overview of key events, our expectations and how we position for them.
  • On ISM Manufacturing (Monday). Our forecast at Steno Research is 50.2 for the ISM Manufacturing Index, slightly above the consensus of 49.9.
  • April’s activity was notably weak due to several factors: tax seasonality which withdrew liquidity, a hawkish build-up of expectations ahead of the early May FOMC press conference, and weak international impulses.

5. Is that It? Commodity Bull Market Over?

By Rikki Malik

  • Recent signs of economic weakness in the US is a believable narrative for the current weakness
  • OPEC +  announcement on increasing production adds to the noise
  • Weakness spreads from the energy sector to other commodity sectors

6. Market Trends and Strategy: Hong Kong Bull Market Broadens

By David Mudd

  • High dividend yield  names continue to outperform the broader market.  Energy and Materials sectors are best performers over the last year.
  • Mainland buying has continued to buoy the Hong Kong market even through the pullback in May.
  • Short selling is declining and market breadth is increasing supporting rotational buying between sectors.

7. ETFs Are Reaching Way Beyond Passive Investing

By Srinidhi Raghavendra, Mint Finance

  • ETFs are synonymous with passive investing. It passive investing and beyond. ETFs have been stealing breakfast, lunch and dinner away from mutual funds.
  • Active ETFs have jumped from obscurity to ubiquity. >70% of new ETF launches in the US over the last seven years have been active ETFs.
  • Active ETFs in the cheapest quintile command AUM of USD 325 billion while those in the most expensive quintile hold merely USD 35 billion.

8. May Themes and Thematic Portfolio Review

By Rikki Malik

  • A monthly review of how the markets and our themes are currently performing
  • Analysing what went wrong and what went right in stocks and sectors
  • Highlighting positions added or removed from the thematic investment portfolio

9. Impact of China’s Economic Deceleration on EM Economies

By Alex Ng, Fortress Hill Advisors

  • China’s economic growth is expected to decelerate from the previous high-growth period in the 2000s and early 2010s. This will have an impact on other EMs. 
  • We track the impact from the angles of China’s commodity imports, supply-chain position, and foreign investment.
  • Commodity producer countries can be more heavily impacted. The impact on Asia will be mixed, suffering from regional trade, but some supply chains could be diverted away from China.

10. India Politics: Setback for Modi Heralds Era of Uncertain Coalition Politics

By Manu Bhaskaran, Centennial Asia Advisors

  • The ruling BJP suffered major losses in the recent elections. It fell short of an overall majority and will have to rely on regional partners to form the next government. 
  • Consolidation of the anti-BJP vote under the aegis of the INDIA coalition delivered dividends, but voters also were not enthused by Modi’s economic and social campaign rhetoric. 
  • Expect short-term uncertainty as the major blocs attempt to cobble together parliamentary majorities. But more political checks and balances would be good for India.