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>Our base-case intermediate outlook for equities is bullish, based on our base-case scenario of an orderly wind-up of the war.</li>
<li>Focus on a barbell portfolio of U.S. large-cap growth and non-U.S. value for equity portfolios, and make a greater allocation to commodities in the normal bond part of the portfolio.</li>
<li>The key risk is that the Gulf conflict spirals out of control and raises the risk of a global recession.</li>
</ul>


Our base-case intermediate outlook for equities is bullish, based on our base-case scenario of an orderly wind-up of the war.
Focus on a barbell portfolio of U.S. large-cap growth and non-U.S. value for equity portfolios, and make a greater allocation to commodities in the normal bond part of the portfolio.
The key risk is that the Gulf conflict spirals out of control and raises the risk of a global recession.


<ul>
<li>Global stock prices have weakened, and the S&amp;P 500 has suffered some technical damage by violating its 200 dma.</li>
<li>Stock market internals point to a bullish outcome led by small-cap and cyclical leadership. The bond market begs to differ as it is signaling slower growth and possible stagflation ahead.</li>
<li>We interpret these conditions as a time to be cautious in asset allocation, which is why we downgraded our Trend Model from bullish to neutral.</li>
</ul>


Global stock prices have weakened, and the S&amp;P 500 has suffered some technical damage by violating its 200 dma.
Stock market internals point to a bullish outcome led by small-cap and cyclical leadership. The bond market begs to differ as it is signaling slower growth and possible stagflation ahead.
We interpret these conditions as a time to be cautious in asset allocation, which is why we downgraded our Trend Model from bullish to neutral.


<ul>
<li>The equity market is sufficiently oversold that it is poised for a reflex rally, which Trump may have triggered when he wrote, “We are...consider[ing] winding down our great Military efforts…”</li>
<li>The jury is still out on whether the anticipation rebound will be V- or W-shaped.</li>
<li>In light of the elevated level of macro risk and uncertain technical backdrop, we are advising investors to reduce risk to a neutral level in their portfolios.</li>
</ul>


The equity market is sufficiently oversold that it is poised for a reflex rally, which Trump may have triggered when he wrote, “We are...consider[ing] winding down our great Military efforts…”
The jury is still out on whether the anticipation rebound will be V- or W-shaped.
In light of the elevated level of macro risk and uncertain technical backdrop, we are advising investors to reduce risk to a neutral level in their portfolios.


<ul>
<li>Cyclical stocks within the index have skidded, but they only comprise about 10% of index weight, while large-cap growth with about 50% have taken the leadership mantle.</li>
<li>The S&amp;P 500 also benefited from rotation from non-U.S. to U.S. stocks for their safe-haven status.</li>
<li>Longer term, much depends on the duration of the war. Supply chain effects are already set into motion.</li>
</ul>


Cyclical stocks within the index have skidded, but they only comprise about 10% of index weight, while large-cap growth with about 50% have taken the leadership mantle.
The S&amp;P 500 also benefited from rotation from non-U.S. to U.S. stocks for their safe-haven status.
Longer term, much depends on the duration of the war. Supply chain effects are already set into motion.


<ul>
<li>The fog of war makes it impossible to discern an intermediate trend for stock prices.</li>
<li>Tactically, the markets are sufficiently stretched to the downside that they are poised for a relief rally. After that, our crystal ball gets very cloudy.</li>
<li>In the short run, Investors can find alpha in the form of excessively bearish sentiment by taking advantage of excessively bearish option skew.</li>
</ul>


The fog of war makes it impossible to discern an intermediate trend for stock prices.
Tactically, the markets are sufficiently stretched to the downside that they are poised for a relief rally. After that, our crystal ball gets very cloudy.
In the short run, Investors can find alpha in the form of excessively bearish sentiment by taking advantage of excessively bearish option skew.


Important Questions for Both Bulls and Bears

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.