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>The U.S. stock market is poised for a period of continued strength.</li>
<li>Four reasons to be tactically bullish on stocks: price momentum; a sentiment reset from bullish to caution; the historical bullish record of VIX spikes; and positive  internals.</li>
<li>We continue to favour non-Magnificent Seven leadership for the next bull phase.</li>
</ul>


The U.S. stock market is poised for a period of continued strength.
Four reasons to be tactically bullish on stocks: price momentum; a sentiment reset from bullish to caution; the historical bullish record of VIX spikes; and positive  internals.
We continue to favour non-Magnificent Seven leadership for the next bull phase.


<ul>
<li>Our assessment of the U.S. economy is a “not too hot, not too cold” Goldilocks scenario that’s supportive of risk assets.</li>
<li>We have an economy that’s showing decelerating, but not recessionary, growth and the start of a rate cutting cycle.</li>
<li>Even though forward P/E valuations are somewhat elevated compared to historical norms, this should not be a concern as interest rates fall and EPS growth continues.</li>
</ul>


Our assessment of the U.S. economy is a “not too hot, not too cold” Goldilocks scenario that’s supportive of risk assets.
We have an economy that’s showing decelerating, but not recessionary, growth and the start of a rate cutting cycle.
Even though forward P/E valuations are somewhat elevated compared to historical norms, this should not be a concern as interest rates fall and EPS growth continues.


<ul>
<li>Numerous historical studies of volatility spikes indicate that the stock market is poised for renewed strength.</li>
<li>A review of market leadership shows weakness by technology and other large-cap growth stocks.</li>
<li>We believe the rotation from growth to value and from large caps to small caps will continue and these stocks will be the new leadership in the next leg up.</li>
</ul>


Numerous historical studies of volatility spikes indicate that the stock market is poised for renewed strength.
A review of market leadership shows weakness by technology and other large-cap growth stocks.
We believe the rotation from growth to value and from large caps to small caps will continue and these stocks will be the new leadership in the next leg up.


What Will Lead the Anticipated Market Rebound?

<ul>
<li>The recent disorderly risk-off episode can be attributed to the unwind of a series of trades that depend on a low-volatility and complacent environment.</li>
<li>Historically, such unwinds have resolved in volatility spikes and higher equity returns soon afterwards</li>
<li>The current environment is supportive of a quick market recovery, though the risk of a LTCM-style blowup could see a longer and more complex market bottom.</li>
</ul>


The recent disorderly risk-off episode can be attributed to the unwind of a series of trades that depend on a low-volatility and complacent environment.
Historically, such unwinds have resolved in volatility spikes and higher equity returns soon afterwards
The current environment is supportive of a quick market recovery, though the risk of a LTCM-style blowup could see a longer and more complex market bottom.


Assessing the Damage: It's Not Just the Carry Trade

<ul>
<li>Risk appetite is undergoing a cross-asset carry trade-driven panic and a bottom is near. The equity market is sufficiently oversold and poised for a relief rally.</li>
<li>Barring some unexpected exogenous event, downside risk is limited at these levels.</li>
<li>Expect a short-term relief equity rally into August, led by small caps and value stocks.</li>
</ul>


Risk appetite is undergoing a cross-asset carry trade-driven panic and a bottom is near. The equity market is sufficiently oversold and poised for a relief rally.
Barring some unexpected exogenous event, downside risk is limited at these levels.
Expect a short-term relief equity rally into August, led by small caps and value stocks.
