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.

Cross Asset Strategy

The steepening US Treasury yield curve reflects expectations of a normalisation of economic activity, boosted by fiscal and monetary stimulus, as well as doubts that the Fed's current forward guidance can be maintained. Media concerns about the impact of rising Treasury bond yields on risky assets appear to overlook the fact that the yield curve typically steepens at this stage of the economic cycle.
The relationship between the yield curve slope and equities is complex: expectations of stronger growth should produce higher corporate profit estimates that can offset the impact of rising yields if the interest rate term structure steepens. Increases in secular corporate profit growth estimates can also help to support higher valuations in the wake of higher bond yields, as testified by events in the late-1990s. Current profit forecasts for the next year remain in firm uptrend and should support equity prices.
This early stage of the current economic expansion makes comparisons of Fed policy concerns with the late-1990s inappropriate, whereas the events of 1994 demonstrate the damage that a sudden change in Fed policy can inflict on financial markets. Prior to February 1994, the Fed had not commenced a tightening cycle for six years and, consequently, investors were complacent about the risks of a change in policy course. There are, however, some notable differences between the current environment and 1994, notably less dogmatic adherence by the Fed to the predictions of the Phillips Curve and greater awareness of the pitfalls of tighter financial conditions on the real economy due to the rapid growth of the capital markets.
<div>History and current forward guidance by the Fed suggest further steepening of the yield curve, an outcome still consistent with positive equity returns. Since 2001, rising yields commencing below 3% have not prevented higher equity prices, whereas starting points above this level have presented headwinds.  </div>

The steepening US Treasury yield curve reflects expectations of a normalisation of economic activity, boosted by fiscal and monetary stimulus, as well as doubts that the Fed's current forward guidance can be maintained. Media concerns about the impact of rising Treasury bond yields on risky assets appear to overlook the fact that the yield curve typically steepens at this stage of the economic cycle.
The relationship between the yield curve slope and equities is complex: expectations of stronger growth should produce higher corporate profit estimates that can offset the impact of rising yields if the interest rate term structure steepens. Increases in secular corporate profit growth estimates can also help to support higher valuations in the wake of higher bond yields, as testified by events in the late-1990s. Current profit forecasts for the next year remain in firm uptrend and should support equity prices.
This early stage of the current economic expansion makes comparisons of Fed policy concerns with the late-1990s inappropriate, whereas the events of 1994 demonstrate the damage that a sudden change in Fed policy can inflict on financial markets. Prior to February 1994, the Fed had not commenced a tightening cycle for six years and, consequently, investors were complacent about the risks of a change in policy course. There are, however, some notable differences between the current environment and 1994, notably less dogmatic adherence by the Fed to the predictions of the Phillips Curve and greater awareness of the pitfalls of tighter financial conditions on the real economy due to the rapid growth of the capital markets.
History and current forward guidance by the Fed suggest further steepening of the yield curve, an outcome still consistent with positive equity returns. Since 2001, rising yields commencing below 3% have not prevented higher equity prices, whereas starting points above this level have presented headwinds.  

Steeper US Yield Curve: Equity Prices To Be Supported by Corporate Profits Unless Yields Breach 3%

Founder & Chief Market Strategist - SAV Markets, SAV Markets

Shyam Devani

Founder & Chief Market Strategist - SAV Markets

The past few weeks have raised many questions about what is driving what. As yields have risen aggressively due to higher inflation expectations, there have been some concerns about the potential knock-on impact on financial markets generally, including some corners of the stock markets and emerging markets. However recent developments in Oil and stocks suggest we may go back to a more basic relationship between the different financial markets and that Bonds may even outperforming in the short term.

The past few weeks have raised many questions about what is driving what. As yields have risen aggressively due to higher inflation expectations, there have been some concerns about the potential knock-on impact on financial markets generally, including some corners of the stock markets and emerging markets. However recent developments in Oil and stocks suggest we may go back to a more basic relationship between the different financial markets and that Bonds may even outperforming in the short term.

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

Dividend yields for the S&amp;P 500 are 1.5%; the only time they were lower in the past 150 years was in 2000 (1% before the "dot-com crash" of 2000). We expect the S&amp;P 500 earnings yield to rebound from its low of 2.5% through a combination of stronger EPS growth and falling stock prices. The 14% of GDP fiscal stimulus will strengthen the recovery; already the end of the SLR-relaxation amounts to a slight tightening of monetary conditions from April 2021. The pledge of US$120 billion of monthly bond purchases will need to be relaxed after May 2021, and further tightening is likely at the FOMC meeting at the end of June, via either a 12.5bp rise in Fed Funds rate or an increase in the 0.1% interest rate paid on banks' reserves. The US$ will strengthen.Over the past 3 months (starting 27 December 2020), the US has legislated an aggregate fiscal stimulus of US$2.8 trillion (14% of GDP), of which the first part (US$0.9 trillion) has been almost entirely disbursed in the current quarter. Unsurprisingly, FOMC members expect US real GDP to rebound to a spectacular 6.5% growth in 2021. The unemployment rate has already declined to 6.2% in February 2021 (from 6.7% in Nov-Dec 2020, and 10.2% in July 2020); although much higher than February 2020 (3.5%), the current unemployment rate is not far above the traditional 5-6% rate considered the non-accelerating-inflation rate of unemployment (NAIRU), which is estimated to have fallen to 4-5% for the 2005-30 period. Given that jobs in the pandemic-hit hospitality sector are unlikely to come back for awhile, we estimate that NAIRU this year is close to 5%, a level of unemployment that is likely to be reached before 4Q 2021. Manufacturing is leading the US recovery: the ISM's manufacturing PMI was equal to a 3-year high (last exceeded 17 years ago) in February 2021 despite inclement weather. The Philadelphia Fed's manufacturing outlook reached a 48-year high this month. Inflation is likely to edge up as unemployment declines toward the NAIRU, making it untenable for the Fed to keep to its pledge of buying US$120 billion of bonds monthly without countervailing actions to reduce the money-multiplier. The first such step removes the SLR relaxations from the beginning of next month. The second is likely to be an increase in the interest rate paid on banks' reserves (from their 0.1% current level) or an outright increase in the Fed Funds rate (to 0.25%) at the June FOMC meeting. We are bearish on risk assets (equities and EMs) over the next half year, and would recommend continuing to rotate away from technology stocks to cyclicals, consumer cyclicals and banks.

Dividend yields for the S&amp;P 500 are 1.5%; the only time they were lower in the past 150 years was in 2000 (1% before the "dot-com crash" of 2000). We expect the S&amp;P 500 earnings yield to rebound from its low of 2.5% through a combination of stronger EPS growth and falling stock prices. The 14% of GDP fiscal stimulus will strengthen the recovery; already the end of the SLR-relaxation amounts to a slight tightening of monetary conditions from April 2021. The pledge of US$120 billion of monthly bond purchases will need to be relaxed after May 2021, and further tightening is likely at the FOMC meeting at the end of June, via either a 12.5bp rise in Fed Funds rate or an increase in the 0.1% interest rate paid on banks' reserves. The US$ will strengthen.Over the past 3 months (starting 27 December 2020), the US has legislated an aggregate fiscal stimulus of US$2.8 trillion (14% of GDP), of which the first part (US$0.9 trillion) has been almost entirely disbursed in the current quarter. Unsurprisingly, FOMC members expect US real GDP to rebound to a spectacular 6.5% growth in 2021. The unemployment rate has already declined to 6.2% in February 2021 (from 6.7% in Nov-Dec 2020, and 10.2% in July 2020); although much higher than February 2020 (3.5%), the current unemployment rate is not far above the traditional 5-6% rate considered the non-accelerating-inflation rate of unemployment (NAIRU), which is estimated to have fallen to 4-5% for the 2005-30 period. Given that jobs in the pandemic-hit hospitality sector are unlikely to come back for awhile, we estimate that NAIRU this year is close to 5%, a level of unemployment that is likely to be reached before 4Q 2021. Manufacturing is leading the US recovery: the ISM's manufacturing PMI was equal to a 3-year high (last exceeded 17 years ago) in February 2021 despite inclement weather. The Philadelphia Fed's manufacturing outlook reached a 48-year high this month. Inflation is likely to edge up as unemployment declines toward the NAIRU, making it untenable for the Fed to keep to its pledge of buying US$120 billion of bonds monthly without countervailing actions to reduce the money-multiplier. The first such step removes the SLR relaxations from the beginning of next month. The second is likely to be an increase in the interest rate paid on banks' reserves (from their 0.1% current level) or an outright increase in the Fed Funds rate (to 0.25%) at the June FOMC meeting. We are bearish on risk assets (equities and EMs) over the next half year, and would recommend continuing to rotate away from technology stocks to cyclicals, consumer cyclicals and banks. 

Biden's Huge Stimulus Is Obliging the Fed to Edge Away from Unlimited QE

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.

Technical Analysis

<div>Ongoing market dynamics remain largely positive and there continues to be an absence of major breakdowns across all Sectors and the major averages. As a result, we expect higher prices ahead and recommend adding exposure on pullbacks. In today’s report we highlight attractive Groups and stocks within Consumer Discretionary and Health Care.</div>

Ongoing market dynamics remain largely positive and there continues to be an absence of major breakdowns across all Sectors and the major averages. As a result, we expect higher prices ahead and recommend adding exposure on pullbacks. In today’s report we highlight attractive Groups and stocks within Consumer Discretionary and Health Care.

S&P 500, Russell 2000 Testing Short-Term Support

On the one year anniversary of the Covid-19 stock market low, we revisit the path taken on the S&amp;P 500.Remarkably, as global economic activity stopped, borders closed, and the virus spread, the stock market saw one of its most aggressive rallies, thanks largely to the Federal Reserve. A year later the S&amp;P 500 has made it 82% above that March 2020 panic low.Is this number important? Have we seen this before? If so, when? And what clues might it give as we approach the second quarter of 2021?

On the one year anniversary of the Covid-19 stock market low, we revisit the path taken on the S&amp;P 500.Remarkably, as global economic activity stopped, borders closed, and the virus spread, the stock market saw one of its most aggressive rallies, thanks largely to the Federal Reserve. A year later the S&amp;P 500 has made it 82% above that March 2020 panic low.Is this number important? Have we seen this before? If so, when? And what clues might it give as we approach the second quarter of 2021?

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)

Steeper US Yield Curve: Equity Prices To Be Supported by Corporate Profits Unless Yields Breach 3%

A steeper yield curve due to rising bond yields is not always disastrous for US equities. Rising corporate profit estimates and bond yields staying...

DeSaque Macro Research

Oil, Stocks, Bonds - Back to Basics

The recent weakness in Oil coupled with the bearish indication in equities may create a near term bid for Bonds as a more 'traditional'...

Shyam Devani

Biden's Huge Stimulus Is Obliging the Fed to Edge Away from Unlimited QE

The 14% of GDP stimulus will oblige the Fed to tighten policy by mid-year, strengthening the US$.S&P500 dividend yield (1.5%) has been lower only...

Prasenjit K. Basu

S&P 500, Russell 2000 Testing Short-Term Support

Ongoing market dynamics remain largely positive across all Sectors and the major averages. As a result, we expect higher prices ahead and recommend...

Vermilion Research

SPX: One Year Later...What Next?

An historical and behavioural look at the S&P 500 exactly a year from the Covid-panic low of March 2020 reveals that one should be more defensive...

Shyam Devani