Global Economist, DeSaque Macro Research

Said Desaque

Global Economist

Delivering Global Macro Investment Insights

DeSaque Macro Research

DeSaque Macro Research Limited was formed by Said DeSaque in April 2012 with the view to delivering global macro investment insights aimed at providing new ideas to clients.

Said DeSaque has over 26 years of experience working as a professional economist in financial services. Prior to establishing DeSaque Macro Research, Said held positions as Senior Economist at Robert W Baird and William Blair. He began his career as a graduate at PaineWebber in 1986, where he eventually became Head of the London Economics Department.

Said takes a very keen interest in international relations, along with their implications for economic development. His research interests include the economic transformation of China and its implications for global capital markets, particularly in the United States. He is a member of Chatham House in London.

The US economy and capital markets have historically been Said’s main focus of attention. He frequently presents his views to institutional investors in diverse geographic locations. In recent years, Said has also been carefully monitoring economic developments in Asia, particularly China and Japan.

Macroeconomics

The COVID-19 pandemic imparted a severe demand shock that significantly misaligned inventory levels with sales. US business inventory levels are, however, currently too low relative to sales, thereby creating an environment where higher precautionary stock balances could become the new normal.
US consumer spending on goods has been less affected compared to services during the pandemic and, consequently, the low inventory-to-sales ratio at retailers should underpin a re-stocking cycle. Imports from Asia account for a significant portion of US consumer products and rising levels in recent months are indicative of resilient demand, as well as the seasonal influence of Christmas on retailers' inventories.
Strong imports into the US from Asia have had a significant impact on spot trans-Pacific freight rates and have also created container capacity shortages in Asia for other routes. High spot freight rates for the Asia-US route could eventually impact contract rates if the US economy surpasses growth expectations in 2021.
The shortage of container capacity could be exacerbated in 2021 Q1 by new vessel supply failing to match demand, as well as a shortage of vessels in China's leasing market. Furthermore, strict quarantine measures at Chinese ports in Q1 will effectively stymie the operation of foreign carriers, thereby threatening to dislocate global supply chains, while rising shipping costs could force upward pressure on selling prices across a range of final products.

The COVID-19 pandemic imparted a severe demand shock that significantly misaligned inventory levels with sales. US business inventory levels are, however, currently too low relative to sales, thereby creating an environment where higher precautionary stock balances could become the new normal.
US consumer spending on goods has been less affected compared to services during the pandemic and, consequently, the low inventory-to-sales ratio at retailers should underpin a re-stocking cycle. Imports from Asia account for a significant portion of US consumer products and rising levels in recent months are indicative of resilient demand, as well as the seasonal influence of Christmas on retailers' inventories.
Strong imports into the US from Asia have had a significant impact on spot trans-Pacific freight rates and have also created container capacity shortages in Asia for other routes. High spot freight rates for the Asia-US route could eventually impact contract rates if the US economy surpasses growth expectations in 2021.
The shortage of container capacity could be exacerbated in 2021 Q1 by new vessel supply failing to match demand, as well as a shortage of vessels in China's leasing market. Furthermore, strict quarantine measures at Chinese ports in Q1 will effectively stymie the operation of foreign carriers, thereby threatening to dislocate global supply chains, while rising shipping costs could force upward pressure on selling prices across a range of final products. 

US Re-Stocking Cycle Produces Tight Freight Capacity and Supply-Chain Related Inflation Risks

Chief Economist & Political Strategist, CrossASEAN Research

Prasenjit K. Basu

Chief Economist & Political Strategist

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

Cross Asset Strategy

With the output gap closing, and a big US$900 billion fiscal stimulus on the way, the 24% YoY pace of M2 growth is bound to push core PCE inflation above 2% YoY by March 2021. The FOMC will be obliged to cut back on its promise of US$120 billion of monthly asset purchases by April, and to actually raise the Fed Funds rate by mid-2021. We consequently expect a dollar rally in 2021, and a sell-off in risk assets (including equities) by 2Q 2021. US money supply (M2) has plateaued at 23-25% YoY growth in the past half year (far faster than the peak in M2 growth at 10.4% YoY in Jan 2009 during the GFC). Despite a wide output gap (10% of potential GDP in 2Q 2020, and 3.5% in 3Q 2020), core PCE inflation was only slightly lower in July-November 2020 (1.3-1.6% YoY) than in the last two pre-Covid months (1.7-1.8% YoY in Jan-Feb 2020). With the output gap set to close in the current quarter, as indicated by the current strength of ISM's PMIs for both manufacturing and services, the surging pace of M2 growth is likely to begin generating over 2% core PCE inflation by March 2021.The FOMC has repeated that it will allow core PCE inflation to "moderately" exceed 2% for a time (to offset the long periods below 2% YoY) before raising the Fed Funds rate. However, its latest statement also says the FOMC is "prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee's goals". With ISM new orders pointing to a stronger US economy in 1H 2021, Congress has just approved a US$900 billion fiscal stimulus to further turbo-charge the economy (and provide support to individuals' and SMEs' ability to consume and invest). Although the unemployment rate will still be 5.5% in March 2021, employment is unlikely to rise substantially more (given the productivity-enhancing impact of work-from-home, which will permanently reduce resource use across the economy). Consequently, it will be impossible for the FOMC to keep its promise to purchase US$120 billion of assets monthly after March 2021, by which time core PCE inflation will be pushing past 2% YoY.By April 2021, we expect the Fed to be obliged to considerably reduce the size of its monthly purchases of Treasury and mortgage-backed securities, and to raise the Fed Funds rate by June 2021. The failure to do so will cause inflation to rise past 3% YoY amid a closed output gap and surging economy. In the intervening period, the yield curve will steepen further, but equities will sell-off by March 2021 as markets turn increasingly risk-averse amid rising signs of inflation (and higher inflationary expectations). We would recommend taking profits on global equities by end-2020, and switching to a more defensive asset allocation in 1Q 2021. Banks, however, will be an exception worth holding onto amid a steepening yield curve.

With the output gap closing, and a big US$900 billion fiscal stimulus on the way, the 24% YoY pace of M2 growth is bound to push core PCE inflation above 2% YoY by March 2021. The FOMC will be obliged to cut back on its promise of US$120 billion of monthly asset purchases by April, and to actually raise the Fed Funds rate by mid-2021. We consequently expect a dollar rally in 2021, and a sell-off in risk assets (including equities) by 2Q 2021. US money supply (M2) has plateaued at 23-25% YoY growth in the past half year (far faster than the peak in M2 growth at 10.4% YoY in Jan 2009 during the GFC). Despite a wide output gap (10% of potential GDP in 2Q 2020, and 3.5% in 3Q 2020), core PCE inflation was only slightly lower in July-November 2020 (1.3-1.6% YoY) than in the last two pre-Covid months (1.7-1.8% YoY in Jan-Feb 2020). With the output gap set to close in the current quarter, as indicated by the current strength of ISM's PMIs for both manufacturing and services, the surging pace of M2 growth is likely to begin generating over 2% core PCE inflation by March 2021.The FOMC has repeated that it will allow core PCE inflation to "moderately" exceed 2% for a time (to offset the long periods below 2% YoY) before raising the Fed Funds rate. However, its latest statement also says the FOMC is "prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee's goals". With ISM new orders pointing to a stronger US economy in 1H 2021, Congress has just approved a US$900 billion fiscal stimulus to further turbo-charge the economy (and provide support to individuals' and SMEs' ability to consume and invest). Although the unemployment rate will still be 5.5% in March 2021, employment is unlikely to rise substantially more (given the productivity-enhancing impact of work-from-home, which will permanently reduce resource use across the economy). Consequently, it will be impossible for the FOMC to keep its promise to purchase US$120 billion of assets monthly after March 2021, by which time core PCE inflation will be pushing past 2% YoY.By April 2021, we expect the Fed to be obliged to considerably reduce the size of its monthly purchases of Treasury and mortgage-backed securities, and to raise the Fed Funds rate by June 2021. The failure to do so will cause inflation to rise past 3% YoY amid a closed output gap and surging economy. In the intervening period, the yield curve will steepen further, but equities will sell-off by March 2021 as markets turn increasingly risk-averse amid rising signs of inflation (and higher inflationary expectations). We would recommend taking profits on global equities by end-2020, and switching to a more defensive asset allocation in 1Q 2021. Banks, however, will be an exception worth holding onto amid a steepening yield curve. 

2021 to Mark the Return of Inflation: Fed Hike by Mid-Year Implies Risk-Off by 2Q/21

Chart based progressive global trading strategies, Chart Partners

Thomas Schroeder

Chart based progressive global trading strategies

Chart Partners

Chart Partners objective is to discover medium-term cycle turns and profit opportunities before they unfold, within structural trends while preserving capital with clear degrees of risk. We have real return ideas. 

Markets are dynamic and trading systems must reflect this. It is crucial to determine underlying correlations and lead-lag relationships within global markets and the impact on linked instruments. Our weekly Chartonics product gives you short-term trading strategies that can be applied within the medium and longer term macro trends that are mapped out in our strategy updates. 

Our methodology fuses global market variables and isolates drivers in trends. We specialize in FX, index trade in NY and Asia with a focus on Asian stocks. 

Technical Analysis

SPX is meeting our 3,720 target within our micro peak in risk timeline on December 21 as markets face the reality of selling the stimulus deal fact. We do have an overshoot range toward the top of the rising wedge noted in the daily cycle chart with lower wedge support the pivot level. We have touted putting on short protection in Europe and weaker parts of Asia as well as top picking in the Russell 2000 (rising bear wedge).Our sequence calls for a near term peak in risk, low in the USD inducing an equity pullback into late December (risk of snowballing) to set up a buy for a rise into late January where another risk event is expected.

SPX is meeting our 3,720 target within our micro peak in risk timeline on December 21 as markets face the reality of selling the stimulus deal fact. We do have an overshoot range toward the top of the rising wedge noted in the daily cycle chart with lower wedge support the pivot level. We have touted putting on short protection in Europe and weaker parts of Asia as well as top picking in the Russell 2000 (rising bear wedge).Our sequence calls for a near term peak in risk, low in the USD inducing an equity pullback into late December (risk of snowballing) to set up a buy for a rise into late January where another risk event is expected.

The Federal Open Market Committee (FOMC) provided further guidance to their asset purchase programme after their final  meeting for 2020, while current policy settings were left unchanged. Despite an upgraded economic outlook, prospective policy has become more dovish following nuanced changes to the FOMC's economic objectives, notably for inflation and the unemployment rate.
It is impossible for the FOMC to counter near-term economic weakness due to new COVID-19 shutdowns, courtesy of transmission mechanism lags, but if the recovery falters in the spring then policy settings will be eased further. US consumers have bought into the idea that economic headwinds from the second wave of shutdowns will be short-lived and that conditions will improve to facilitate higher spending, particularly in 2021 H2.
Household balance sheets remain robust and aggregate net worth has reached new all-time highs, thereby suggesting that consumer spending headwinds from the COVID-19 pandemic are likely to be short-lived. The strength of the housing market would indicate that additional asset purchases by the Fed are unnecessary in stark contrast to the experience of the Great Recession.
Financial conditions are already accommodative, and, consequently, any  unnecessary monetary policy easing in the near-term could raise threats to stability, an outcome the FOMC seeks to avoid.

The Federal Open Market Committee (FOMC) provided further guidance to their asset purchase programme after their final  meeting for 2020, while current policy settings were left unchanged. Despite an upgraded economic outlook, prospective policy has become more dovish following nuanced changes to the FOMC's economic objectives, notably for inflation and the unemployment rate.
It is impossible for the FOMC to counter near-term economic weakness due to new COVID-19 shutdowns, courtesy of transmission mechanism lags, but if the recovery falters in the spring then policy settings will be eased further. US consumers have bought into the idea that economic headwinds from the second wave of shutdowns will be short-lived and that conditions will improve to facilitate higher spending, particularly in 2021 H2.
Household balance sheets remain robust and aggregate net worth has reached new all-time highs, thereby suggesting that consumer spending headwinds from the COVID-19 pandemic are likely to be short-lived. The strength of the housing market would indicate that additional asset purchases by the Fed are unnecessary in stark contrast to the experience of the Great Recession.
Financial conditions are already accommodative, and, consequently, any  unnecessary monetary policy easing in the near-term could raise threats to stability, an outcome the FOMC seeks to avoid.     

Another Merry Christmas from the Fed: Dovish Guidance on Policy Outlook

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Market dynamics remain positive and there continues to be an absence of breakdowns across the broad indexes and Sectors. As a result we remain bullish and we view any weakness as a buying opportunity. In today’s report we highlight attractive Groups and stocks within Materials and Technology.

Market dynamics remain positive and there continues to be an absence of breakdowns across the broad indexes and Sectors. As a result we remain bullish and we view any weakness as a buying opportunity. In today’s report we highlight attractive Groups and stocks within Materials and Technology.

U.S. Equity Strategy: Bullish Outlook Intact; Growth Vs. Value Stalemate Continues

United States

The S&P 500® is widely regarded as the best single gauge of large-cap U.S. equities and serves as the foundation for a wide range of investment products. The index includes 500 leading companies and captures approximately 80% coverage of available market capitalization.

S&P 500 INDEX (SPX INDEX)

2021 to Mark the Return of Inflation: Fed Hike by Mid-Year Implies Risk-Off by 2Q/21

A closing output gap coupled with $900bn fiscal stimulus will make 2%+ inflation inevitable if M2 keeps growing 24%YoY. US monetary tightening will...

Prasenjit K. Basu

Risk of a Pullback Snowballing

SPX is meeting our 3,720 target within our micro peak in risk timeline on December 21 as markets face the reality of selling the stimulus deal...

Thomas Schroeder

Another Merry Christmas from the Fed: Dovish Guidance on Policy Outlook

The Fed's new guidance on future asset purchases introduces a dovish bias to policy conduct. Settings will, however, only change materially if the...

DeSaque Macro Research

U.S. Equity Strategy: Bullish Outlook Intact; Growth Vs. Value Stalemate Continues

Market dynamics remain positive and there continues to be an absence of breakdowns across the broad indexes and Sectors. As a result we remain...

Vermilion Research

US Re-Stocking Cycle Produces Tight Freight Capacity and Supply-Chain Related Inflation Risks

Respectable US consumer spending on goods has significantly lowered inventories at retailers. Re-stocking has boosted Asia-US freight rates and...

DeSaque Macro Research

2021 to Mark the Return of Inflation: Fed Hike by Mid-Year Implies Risk-Off by 2Q/21

A closing output gap coupled with $900bn fiscal stimulus will make 2%+ inflation inevitable if M2 keeps growing 24%YoY. US monetary tightening will...

Prasenjit K. Basu

Risk of a Pullback Snowballing

SPX is meeting our 3,720 target within our micro peak in risk timeline on December 21 as markets face the reality of selling the stimulus deal...

Thomas Schroeder

Another Merry Christmas from the Fed: Dovish Guidance on Policy Outlook

The Fed's new guidance on future asset purchases introduces a dovish bias to policy conduct. Settings will, however, only change materially if the...

DeSaque Macro Research

U.S. Equity Strategy: Bullish Outlook Intact; Growth Vs. Value Stalemate Continues

Market dynamics remain positive and there continues to be an absence of breakdowns across the broad indexes and Sectors. As a result we remain...

Vermilion Research