Cross-Asset Strategist & Quantitative Analyst, Pennock Idea Hub

Cam Hui

Cross-Asset Strategist & Quantitative Analyst

Pennock Idea Hub

We are creators of independent equity research. The Pennock Idea Hub team are veterans of the investment industry. Much of our team has spent their careers at Merrill Lynch, Deutsche Bank, RBC Capital Markets and Wood Gundy. We have taken every aspect of research back to the studs and returned to first principles. The Pennock Idea Hub marries the interests of the sell and buy side. 

We offer the best research for institutional investors by:

-Only publishing research from veteran analysts
-Eliminate the inherent conflicts of the traditional sell and buy side relationship
-Ensure our team is always accessible; collaboration with clients nurtures our collective success

Cross-Asset & Quantitative Research

Cross Asset Strategy

<ul>
<li>Stock prices have had to contend with a trifecta of woes: Fear of a hawkish pivot by the Fed; Strong USD; and Geopolitical risk and rising oil prices.</li>
<li>The stock market is very oversold and ripe for a relief rally. The key question is: does the bounce represent a durable bottom or is there more downside ahead?</li>
<li>As investors and traders wait for the inevitable bounce, here are what we are watching.</li>
</ul>


Stock prices have had to contend with a trifecta of woes: Fear of a hawkish pivot by the Fed; Strong USD; and Geopolitical risk and rising oil prices.
The stock market is very oversold and ripe for a relief rally. The key question is: does the bounce represent a durable bottom or is there more downside ahead?
As investors and traders wait for the inevitable bounce, here are what we are watching.


<ul>
<li>Fears of a repeat of the 1970s inflation cycle are overblown. Inflationary expectations are well anchored and the pace of wage increases are decelerating.</li>
<li>However, the IMF has warned of the risks of the deteriorating U.S. fiscal picture and investors have to acknowledge that we are in an age of fiscal dominance.</li>
<li>For investors, the evolution of risk appetite will depend on changes in inflationary expectations and term premium.</li>
</ul>


Fears of a repeat of the 1970s inflation cycle are overblown. Inflationary expectations are well anchored and the pace of wage increases are decelerating.
However, the IMF has warned of the risks of the deteriorating U.S. fiscal picture and investors have to acknowledge that we are in an age of fiscal dominance.
For investors, the evolution of risk appetite will depend on changes in inflationary expectations and term premium.


Are We In For A 1970s Style Inflation Revival?

<ul>
<li>The S&amp;P 500 violated an uptrend that began in November. The violation resolved with the index is testing initial support nearby at the 50 dma at about 5110. </li>
<li>Our analysis of market internals concludes that the decline is nearly done. Sentiment is not sufficiently panicked to be contrarian bullish. Technical conditions are oversold but can become more oversold.</li>
<li>We interpret these conditions as a stock market that’s undergoing final flush before an intermediate-term bottom is formed. We believe any pullback should be temporary and shallow in nature.</li>
</ul>


The S&amp;P 500 violated an uptrend that began in November. The violation resolved with the index is testing initial support nearby at the 50 dma at about 5110. 
Our analysis of market internals concludes that the decline is nearly done. Sentiment is not sufficiently panicked to be contrarian bullish. Technical conditions are oversold but can become more oversold.
We interpret these conditions as a stock market that’s undergoing final flush before an intermediate-term bottom is formed. We believe any pullback should be temporary and shallow in nature.


<ul>
<li>Should investors worry about the elevated levels of equity valuation? The equity valuation question is a tricky one because it is only useful for investors with long time horizons. </li>
<li>Equity returns depend on the evolution of other factors such as the evolution of inflationary expectations and the bond market’s term premium.</li>
<li>In the short term, stock prices are elevated because of P/E expansion, but as long as earnings estimates continue to rise, downside pressure should be limited.</li>
</ul>


Should investors worry about the elevated levels of equity valuation? The equity valuation question is a tricky one because it is only useful for investors with long time horizons. 
Equity returns depend on the evolution of other factors such as the evolution of inflationary expectations and the bond market’s term premium.
In the short term, stock prices are elevated because of P/E expansion, but as long as earnings estimates continue to rise, downside pressure should be limited.


<ul>
<li>Multiple breaks in rising trend lines are signs that a risk-off episode is under way.</li>
<li>We are long-term bullish and investment-oriented accounts should regard weakness as a buying opportunity.</li>
<li>We have outlined a number of bullish tripwires based on sentiment and technical indicators for investors to follow.</li>
</ul>


Multiple breaks in rising trend lines are signs that a risk-off episode is under way.
We are long-term bullish and investment-oriented accounts should regard weakness as a buying opportunity.
We have outlined a number of bullish tripwires based on sentiment and technical indicators for investors to follow.


Cam Hui has been professionally involved in the financial markets since 1985 in a variety of roles, both as a quantitative equity portfolio manager and as a sell-side analyst. He graduated with a degree in Computer Science from the University of British Columbia in 1980 and obtained his CFA Charter in 1989.

Cam Hui
Cross-Asset Strategist & Quantitative Analyst
• Pennock Idea Hub

What's Bothering the U.S. Stock Market?

Stock prices have had to contend with a trifecta of woes: Fear of a hawkish pivot by the Fed; Strong USD; and Geopolitical risk and rising oil prices.

Cam Hui

Are We In For A 1970s Style Inflation Revival?

Fears of a repeat of the 1970s inflation cycle are overblown. Inflationary expectations are well anchored and the pace of wage increases are...

Cam Hui

Here Comes the Sentiment Flush

Our analysis of market internals concludes that the decline is nearly done. We interpret these conditions as a stock market that’s undergoing final...

Cam Hui

How Expensive Are U.S. Equities?

Should investors worry about the elevated levels of equity valuation? The equity valuation question is a tricky one because it is only useful for...

Cam Hui

How Serious Is The Market's Trend Break?

Multiple breaks in rising trend lines are signs that a risk-off episode is under way. Initial S&P 500 support can be found at the 50 dma at about...

Cam Hui