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 assessment of the bull and bear debate is really a debate of differing time horizons.</li>
<li>The bullish factors are mainly short-term in nature, while bearish factors tend to be more intermediate term.</li>
<li>Our base-case scenario calls for a short-term bottom and a bear market rally of unknown magnitude, followed by a greater decline into an ultimate low in the coming months.</li>
</ul>


Our assessment of the bull and bear debate is really a debate of differing time horizons.
The bullish factors are mainly short-term in nature, while bearish factors tend to be more intermediate term.
Our base-case scenario calls for a short-term bottom and a bear market rally of unknown magnitude, followed by a greater decline into an ultimate low in the coming months.


<ul>
<li>We recently suggested a number of long/short pair trades, with inflation hedge vehicles forming the long portion of a number of pairs.</li>
<li>Inflation hedge factors have begun to underperform, and the subsequent performance of the pairs is revealing of the factors driving the current market environment.</li>
<li>We are inclined to give the long inflation hedge pairs the benefit of the doubt. They are being sold along in a panic liquidation where all correlations converge to 1.</li>
</ul>


We recently suggested a number of long/short pair trades, with inflation hedge vehicles forming the long portion of a number of pairs.
Inflation hedge factors have begun to underperform, and the subsequent performance of the pairs is revealing of the factors driving the current market environment.
We are inclined to give the long inflation hedge pairs the benefit of the doubt. They are being sold along in a panic liquidation where all correlations converge to 1.


Pairs Monitor: Are Correlations Converging to 1?

<ul>
<li>The U.S. equity market outlook is undergoing an unusual bifurcated condition.</li>
<li>Intermediate-Term technical indicators remain bearish but survey-based sentiment indicates crowded short conditions, which is contrarian bullish. </li>
<li>As long as our pairs trading factors remain in uptrends, we are inclined to remain cautious on the equity outlook.</li>
</ul>


The U.S. equity market outlook is undergoing an unusual bifurcated condition.
Intermediate-Term technical indicators remain bearish but survey-based sentiment indicates crowded short conditions, which is contrarian bullish. 
As long as our pairs trading factors remain in uptrends, we are inclined to remain cautious on the equity outlook.


The Canaries in the Bifurcated Market Coalmine

<ul>
<li>The S&amp;P 500 is facing the twin macro risks of a hawkish Fed and deteriorating fundamentals</li>
<li>Based on the current 10-year yield of 2.8% and the current earnings outlook, the historical downside risk is between -10% and -30%.</li>
<li>Arguably, the 10-year yield should be much higher in light of recent core CPI readings, which would have even greater dire consequences for equity valuation.</li>
</ul>


The S&amp;P 500 is facing the twin macro risks of a hawkish Fed and deteriorating fundamentals
Based on the current 10-year yield of 2.8% and the current earnings outlook, the historical downside risk is between -10% and -30%.
Arguably, the 10-year yield should be much higher in light of recent core CPI readings, which would have even greater dire consequences for equity valuation.


U.S. Equity Investors Are Playing With Fire

<ul>
<li>While we are intermediate term cautious, our working hypothesis for the near-term outlook is a choppy market, but the S&amp;P 500 is unlikely to breach its 2022 lows.  </li>
<li>It is with this chaotic environment in mind that we suggest pairs trading as a more risk-controlled way of finding better returns.</li>
<li>We will update all of the pairs periodically. Feedback and expressions of interest are appreciated so we know how much resources to devote to the regular update to this strategy.</li>
</ul>


While we are intermediate term cautious, our working hypothesis for the near-term outlook is a choppy market, but the S&amp;P 500 is unlikely to breach its 2022 lows.  
It is with this chaotic environment in mind that we suggest pairs trading as a more risk-controlled way of finding better returns.
We will update all of the pairs periodically. Feedback and expressions of interest are appreciated so we know how much resources to devote to the regular update to this strategy.


Achieving Stable Alpha in a Chaotic Bear Market

United States

SPDR S&P 500 ETF Trust is an exchange-traded fund incorporated in the USA. The ETF tracks the S&P 500 Index. The Trust consists of a portfolio representing all 500 stocks in the S&P 500 Index. It holds predominantly large-cap U.S. stocks. This ETF is structured as a Unit Investment Trust and pays dividends on a quarterly basis. The holdings are weighted by market capitalization.

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SPDR S&P 500 (SPY US)

Making Sense of the H&S Breakdown

Our base-case scenario calls for a short-term bottom and a bear market rally of unknown magnitude, followed by a greater decline into an ultimate...

Cam Hui

Pairs Monitor: Are Correlations Converging to 1?

Give long inflation hedge pairs the benefit of the doubt. In all likelihood, they are being sold along with other equity positions in a panic...

Cam Hui

The Canaries in the Bifurcated Market Coalmine

Intermediate technical indicators remain bearish but survey-based sentiment indicates crowded short conditions. Stay cautious as long as our pairs...

Cam Hui

U.S. Equity Investors Are Playing With Fire

Based on the current 10-year yield of 2.8% and the current earnings outlook, the historical downside risk for the S&P 500 is between -10% and -30%.

Cam Hui

Achieving Stable Alpha in a Chaotic Bear Market

It is with a chaotic bearish environment in mind that we suggest pairs trading as a more risk-controlled way of finding better returns.

Cam Hui

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