Macro and Cross Asset Strategy

Weekly Top Ten Macro and Cross Asset Strategy – Mar 24, 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. What Really Matters Is Global Liquidity…But It Looks Set to Zag Before It Zigs Higher

By Michael J. Howell, CrossBorder Capital

  • The main driver of asset prices looks set to stall, albeit temporarily. Global Liquidity is at a new all-time peak, but it is flat-lining
  • Global Liquidity compromised by a stumbling US Fed as it copes with the errant RRP and TGA, and by an erratic People’s Bank of China. Q2 could prove tricky
  • Look to diversify elsewhere. Commodity markets are on the move. But strong economies do not always have strong financial markets

2. Korean Government Announces Tax Incentives for Shares Cancellation and Dividends

By Douglas Kim

  • On 19 March, Choi Sang-Mok announced that the Korean government plans to provide corporate tax reduction benefits to companies that cancel their treasury shares. 
  • The separate taxation of dividend income is also expected to be promoted. All of these are law amendment issues and must go through the legislative process of the National Assembly. 
  • At this time, the Korean government did not provide the entire details about the exact amount of corporate tax reductions from share cancellation and separate taxation of dividend income. 

3. Back-Testing the Impact of National Assembly Elections on the Korean Stock Market

By Douglas Kim

  • In this insight, we provide a back-testing analysis of the impact of the National Assembly Elections on the Korean stock market. 
  • KOSPI tends to display positive price performance one month and three months prior to the election date leading up to the election date. 
  • On the other hand, KOSPI tends to decline one month and three months post the election date. We believe that post National Assembly Election, KOSPI could face greater headwinds.

4. Hong Kong: A Tale of Two Markets and When to Re-Enter

By David Mudd

  • The bad news is that Hong Kong will not have a V-Shaped recovery which will keep market sentiment subdued
  • The good news is that Hong Kong will not have a V-Shaped recovery which will contribute to a reduction in overall market volatility
  • After an epic bear market, Hong Kong will enter a secular bull market this year

5. Japan Removes Negative Interest Rate Policy – The End of an Era and Long Yen?

By Jeroen Blokland, True Insights

  • Zooming out reveals that the Bank of Japan has not shifted to a different monetary policy regime.
  • The negative relationship between total debt-to-GDP and interest rates has been confirmed once again.
  • With the Federal Reserve poised to cut rates more than three times this year, the case for a short yen position is thin.

6. Federal Reserve Signals “Victory” over Inflation Setting the Stage for the Next Round of Inflation

By Rikki Malik

  • Three 25 bps rate cuts signaled for the remainder of 2024 and 175bps by the end of 2025
  • Bank of Japan, despite a rate hike  keeps monetary policy extremely accommodative
  • Reported inflation will return making sector selection in equities key

7. Portfolio Watch: Markets sniffing out the Chinese resurgence case

By Elias Lisberg Glistrup, Steno Research

  • Macro Portfolio: Markets sniffing out the Chinese resurgence case. Our conviction in pro-cyclical trends have been confirmed in markets this week, and the case for a Chinese revitalisation is becoming increasingly stronger.
  • The continued surge in Copper this morning is noteworthy, particularly given the buildup of inventory by China in the past few months.
  • An increasing stockpile can be a positive indicator, especially if it results from a deliberate effort by China to restock in anticipation of an economic stimulus.

8. Steno Signals #91 – No more recessions ever!?

By Andreas Steno, Steno Research

  • Happy Sunday from Sunny Copenhagen and welcome to our flagship editorial! Is the business cycle dead?
  • It is a fair question to ask after what seems like years of recession chasing once again ending in tears for the macro bears.
  • This sublime graphic created by the great Lee Coppock is exceptionally telling.

9. Monday Macro – Asset allocation update, the Nvidia show, stubborn rates, and Gold

By Adventurous Investor, The Adventurous Investor

  • I’ve promised to keep updating my asset allocation tables every couple of months – and, on cue, here they are!
  • They come in two guises. The first, below, is my overall take on the range of asset classes. There aren’t any changes this time. I’m still wary of equities, especially US equities, though, paradoxically, if I must own US equities, I would rather own the really big mega-cap tech names.
  • I have a neutral position overall in equities, which implies a 60/40 equities/bonds balance, which hasn’t changed for a while – I wouldn’t be racing to put even more money to work in equities. 

10. Chinese Momentum: Driving Markets or a Crowded Consensus?

By Elias Lisberg Glistrup, Steno Research

  • China’s government is targeting an economic expansion of approximately 5% again this year.
  • A challenging objective considering the myriad of challenges facing the world’s second-largest economy.
  • These challenges include weak consumer spending, a real estate sector in turmoil, efforts by the US to limit its technological advancements, unprecedented youth unemployment rates, and significant debt levels among local governments.