Macro and Cross Asset Strategy

Weekly Top Ten Macro and Cross Asset Strategy – Mar 31, 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. 5 Things We Watch – Cyclicals, Baltimore Bridge, ECB, USDJPY & Sentiment

By Andreas Steno, Steno Research

  • Loads of stuff are going on in Global Macro, with global equities on the rise yet again, the JPY struggling a bit after unsuccessful attempts from policymakers, including the verbal FX intervention from MoF and BoJ today, and the Spanish HICP numbers, which we hit right on the mark! The benign base effects and dovish outlook has potentially paved the way for a cut in June, but what should you look out for in the meantime?
  • We give you 5 topics from our watchlist.
  • This week we are watching out for the following 5 topics within global macro.

2. Great Game – Moscow terror, Netanyahu Furious and Biden climbing polls

By Mikkel Rosenvold, Steno Research

  • Welcome to this week’s Great Game.
  • We’re going to try out a slightly new format this time.
  • Instead of unfolding one major topic, we will cover a couple stories more briefly, so you are covered on the most important stories in geopolitics right now.

3. Positioning Watch – Time to get out of the cyclical trade?

By Andreas Steno, Steno Research

  • Hello everyone, and welcome back to our weekly positioning watch! The weather in Copenhagen is sunny, and so is the mood in markets, with aggregate equity fund flows in the US reaching 2-year highs this week.
  • Markets are certainly back into full risk-on mode, with the Fed promising rate cuts amidst reflationary trends in the US, which is a trend that is slowly but surely spreading to the rest of the world.
  • The cyclical rebound is not truly there yet in Europe, which means that European indices are starting to get flagged as overpriced in our quant-models.

4. Energy Cable #62: Biden is selling crude straddles, while something is cooking in China

By Andreas Steno, Steno Research

  • Last week we took healthy profits in some of our global reflation bets.
  • We got out of silver and copper, but remain in the broad materials ETF.
  • Data out of China is a bit unclear with some prints being bullish and others bearish and then ambiguous data points such as the BOOMING copper stock. 

5. Are Chair Powell and I on the Same Page?

By Thomas Lam

  • The ongoing Fed pause puts emphasis on the interactions between financial conditions and headline growth  
  • My proprietary measure of financial market conditions seems to be broadly consistent with the Fed Board’s indicator of financial conditions   
  • Chair Powell alluded to the prospect that financial conditions are currently “weighing on economic activity”    

6. Explainer: the 3 faces of Chinese consumer pessimism

By Anne Sandager, Steno Research

  • Cautious but promising signs emerge from China’s consumer demand landscape.
  • According to China’s statistics bureau, consumer prices saw a 0.7% increase year-on-year in February, marking the first rise since August.
  • The extended Lunar New Year holiday period, spanning 8 days instead of the usual 7, nearly matched pre-pandemic domestic spending levels.

7. Steno Signals #92 – The head fake reflation?

By Andreas Steno, Steno Research

  • It is always lovely to get back on the road and meet a load of fund managers, and it is nice to see that a few reflation skepticals are still found out there.
  • I went to London to meet with a bunch of the big funds in town, hot on the heels of Powell’s reflationary Fed meeting on Wednesday.
  • It almost annoyed me how “vanilla” my analysis had to be on the back of it, as the Fed is moving the needle lower and lower and lower on the implied Real Fed Funds rate every meeting currently, no matter the underlying developments in inflation and/or growth.

8. Whither the Yen?

By Rikki Malik

  • The Bank of Japan is caught between a rock and a hard place
  • The JPY’s only hope is a US recession and lower US interest rates
  • Japan’s inflation problem to resume as imported inflation bites into purchasing power once again

9. India Deep Dive: Record Allocations Mask Growing Underweight

By Steven Holden, Copley Fund Research

  • Record Allocations Mask Caution: Record investments in India contrast with a rising underweight, as selected managers pare back exposure.
  • Valuations Prompt Strategic Pause: Record underweights among Value funds reflect valuation concerns, with growth funds also seeing overweights decline.
  • India vs. China: Allocation Shifts: The stark contrast in allocation trends underscores a strategic pivot within EM, highlighting record divergences between the two.

10. Ifo Nugget: What reflation in Germany?

By Ulrik Simmelholt, Steno Research

  • Price expectations in services ex. real estate continued its downtrend and we now find ourselves at 2018-19 levels in what is pointing towards lower core inflation readings in the second half of the year. 

  • Meanwhile price expectations in manufacturing climbed and looks like they have bottomed out at levels consistent with the price mandate of the ECB.

  • The drop in input prices, the global reflation story and expectations of ECB rate cuts seem to have had an effect and the question now becomes which of the two manufacturing and service price expectations will impact inflation come Summer and Fall the most.