Macro

In today’s briefing:

US CPI Update: If There Was Only Inflation, Things Would Still Look Complicated
CX Daily: As China’s Property Crisis Deepens, Sinking Shares Spark Delisting Threat
Portfolio Watch: From a bond bear bonanza to a stock rally
TPW Advisory Friday Musings: When Facts Rock Fiction

US CPI Update: If There Was Only Inflation, Things Would Still Look Complicated

US headline inflation dropped to 3.0%, reaching its lowest level since March 2021. Core inflation declined to 4.8%, falling below the 5% threshold for the first time since November 2021.
The average 1-month annualized CPI inflation in June was 1.1%, well below the Fed target. Prices barely rose in June.
Unlike headline inflation, Core CPI and Core Services ex Shelter CPI have ample room to decline further this year. Unfortunately, markets are already way ahead of this again.

CX Daily: As China’s Property Crisis Deepens, Sinking Shares Spark Delisting Threat

Delisting /In Depth: As China’s property crisis deepens, sinking shares spark delisting threat
Carbon /: Xi calls for adopting ‘dual control’ system for carbon emissions and intensity
Corruption /: Top Shanghai lawmaker under graft investigation

Portfolio Watch: From a bond bear bonanza to a stock rally

By Emil Moller

Good Friday everyone!We are back with our Portfolio Watch here as we embark on the week’s last trading day!We are not surprised by this week’s bounce nor are we unhappy with the profits we’ve made on the back of it.
As I wrote in last week’s Portfolio Watch: “(…)We have been taking in some water in our longs in bonds and equities and while we won’t be surprised by a rebound next week, we may be entering a phase where adding shorts is a prudent risk/reward option” and here we are with what looks like the best week for global stocks since NovemberChart 1: Global Equity PerformanceWe accurately anticipated and benefited from the release of the CPI data, as our long bonds and equity beta allocations proved fruitful.
Our models indicated a CPI reading below market consensus, leading us to maintain our long exposure and anticipate potential difficulties for bond shorts.

TPW Advisory Friday Musings: When Facts Rock Fiction

By TPW Advisory

Excited to finally get to use this title – it’s been in the back pocket for quite some time but after this week’s global, cross asset, market moves its time.
We had the opportunity to try it out on BTV’s The Open show this morning; today’s Musings come straight from my notes for the hit.
The full line is “When Facts Rock Fiction, Always Cause Friction” (any guesses as to band or song? LMK).

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Jul 14

Daily Brief Macro: Residential Real Estate: From Real to Scarce Asset? and more

In today’s briefing:

Residential Real Estate: From Real to Scarce Asset?
Inflation Watch: Why Norway and the UK are the odd ones out on inflation
5-Year Yields Pivoting

Residential Real Estate: From Real to Scarce Asset?

The 30-year mortgage rate and monthly home supply are excellent forecasters of changes in US home prices. They reveal that the brunt of the price decline is yet to come.
However, cyclical and structural supply issues combined with stellar growth in US household formations mean residential real estate is increasingly behaving like a scarce asset.
As a result, cyclically-caused home price declines will likely become more shallow as recoveries arrive more swiftly and forcefully.

Inflation Watch: Why Norway and the UK are the odd ones out on inflation

We have been banging the drum on soft inflation data in the US and in the Euro area for a while and we are currently seeing the very signs of that in the data.
Core inflation momentum (MoM annualized) is below target in several large economies including the US, France and Brazil, but there are a few odd ones out with substantially increasing core inflation momentum such as Norway and the UK.
What makes Norway and the UK stand out?

5-Year Yields Pivoting

By Untying The Gordian Knot

European yields were already under pressure before the US ADP data release.
However, the market suddenly paid attention to a private data point previously ignored in favour of the NFP report.
Rather than the headline number, the positioning and break of key resistance levels significantly impacted yields.

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Jul 13

Daily Brief Macro: 5 Things We Watch – US CPI and more

In today’s briefing:

5 Things We Watch – US CPI, Japan, Positioning, Fed Borrowing and Oil
Brief Inflation Watch: Smack dab at our soft forecast!
Spending Watch: Short note on Eurozone savings
Sri Lanka’s Stock Market Rallies on an Improving Outlook – June 2023 Update

5 Things We Watch – US CPI, Japan, Positioning, Fed Borrowing and Oil

Another Wednesday, another edition of 5 Things We Watch, where we run through 5 topics in global macro that we think are essential in order to determine your allocation and stay on top of the moves we are currently observing in global markets.
The big thing today is of course the CPI report, where markets expect headline inflation to drop to 3.1% since last year (mainly due to basis effects).
We see an increasing chance that we will get a print BELOW the median survey expectations, which would send both equities and bonds further north.

Brief Inflation Watch: Smack dab at our soft forecast!

Moments ago we had June CPI printing almost spot on our forecasts! 3.0% and 4.8% YoY for headline and core respectively.
Let’s briefly touch down upon some of the figures.
Here is a full overview of the developments in subcomponents of the report.

Spending Watch: Short note on Eurozone savings

Spending Watch: Short note on Eurozone savingsTake aways: Just as in the US European households left the pandemic resilient due to savings.
Instead of a spending bonanza coming out of the pandemic it seems like 2023 has made Spain, France and Germany continue their trend of saving with Italy being the odd one out Households’ propensity to save is very strong according to our model and taking the illiquidity of households’ assets into account, don’t expect cash to splash around.
Welcome back to another Spending Watch – our consumer-centered article series – where we keep you updated on the state of the consumer and what to expect next.

Sri Lanka’s Stock Market Rallies on an Improving Outlook – June 2023 Update

By Asia Frontier Capital

We have added Sri Lanka to our top country picks after our recent visit to the country in June 2023.
The country’s macroeconomic position has stabilised, and this is a turnaround story as extremely cheap valuations get re-rated by declining interest rates which we expect will fall significantly as inflation drops.
Furthermore, a strong rebound in tourism and remittance earnings will support an improving macroeconomic position and, more importantly, help build foreign exchange reserves.

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Jul 12

Daily Brief Macro: Malaysia’s State Polls an Acid Test for Anwar’s Government and more

In today’s briefing:

Malaysia’s State Polls an Acid Test for Anwar’s Government
Philippines’ Marcos Has Surprised on the Upside
Markets Better Not Focus on Valuation
The Energy Cable #28 Is There Life in Energy After All? – Watch Series
EM by EM #12 – Is the surging Peso a prelude for a longer Mexico bull case ? – Steno Signals
The Great Game – Erdogan’s Historic Flip-Flop – The Great Game
CX Daily: China Looks to Saudi Arabia Amid Shifting Sands in U.S. Economic Ties
UK: Slackening Too Slowly for the BoE
Oh, Canada!
CX Daily: Xiaomi to Stay the Course on Chip Design After Rival Bails

Malaysia’s State Polls an Acid Test for Anwar’s Government

The forthcoming state legislative assembly elections in six states will be the first major electoral test for premier Anwar Ibrahim and his coalition government.
Baseline expectations are modest for both Anwar and his opponents in the Perikatan Nasional bloc. Trends among Malay voters will be key in determining the results.
Structural factors point to the headline status quo being maintained but watch for socio-religious issues and the parties’ ability to appeal to younger first-time voters.

Philippines’ Marcos Has Surprised on the Upside

The Macros Jr. Administration is in good standing after its first year: its economic agenda of fiscal consolidation, infrastructure spending, and liberalization strikes us as sound.
Some positive political signs are also emerging: investigations into previous extrajudicial killings and a relaxation of restrictions on the media are encouraging.
The foreign policy shift is significant: Marcos has abandoned the Sinophilia of his predecessor Duterte, taking a more hawkish stance on maritime disputes vis-à-vis China.

Markets Better Not Focus on Valuation

The risk premium of equity asset classes has further declined. The risk premium on US Equities is now just 3.1%, which is very unattractive.
The risk premium of equity asset classes has further declined. The risk premium on US Equities is now just 3.1%, which is very unattractive.
Our ‘Bellwether EPS indicator’ points to a year-on-year earnings-per-share decline of nearly 22%, leaving little room for earnings growth to remain positive.

The Energy Cable #28 Is There Life in Energy After All? – Watch Series

Rates are moving on the back of strong numbers in the labor market, but energy is not finding a bid… yet? This week we wonder if there is life in energy after all.

Below are some of the important curves in the energy space with their current price and price 1 month ago. Notice something? All have shifted upwards and we thus wonder if there is life in energy space after all?
If you are looking for arguments for strength in the curves below we find the Fed’s failure to tighten monetary conditions properly obvious, but that same reason might be why investors should tread lightly. Maybe that’s why energy stocks haven’t outperformed the market over the last month.

EM by EM #12 – Is the surging Peso a prelude for a longer Mexico bull case ? – Steno Signals

By Emil Moller

Many have profited from MXN carry in the first half of 2023.
But is there more left to squeeze out or is it running on fumes?
We give our take here and assess the structural patterns at play in Mexico in relation to recent performance and the geopolitical climate.

The Great Game – Erdogan’s Historic Flip-Flop – The Great Game

3 main takeaways from the historic summit in Lithuania
The recent NATO summit held in Lithuania had an array of impactful moments that are set to shape the course of global politics in the coming years.
The event will be dissected from a multitude of perspectives, but there are a few major developments that stand out, demonstrating the complex tapestry of global alliances, negotiations, and unexpected twists.

CX Daily: China Looks to Saudi Arabia Amid Shifting Sands in U.S. Economic Ties

Saudi Arabia /Cover Story: China looks to Saudi Arabia amid shifting sands in U.S. economic ties
China-U.S. /: In talks with Yellen, China demands removal of U.S. economic sanctions
Funds /: New rules for China’s $3 trillion private fund industry have more teeth, experts say

UK: Slackening Too Slowly for the BoE

By Phil Rush

The UK unemployment rate surprisingly jumped by 0.2pp to 3.98%, its highest level since Dec-21. This time the rise looks genuine rather than being a sampling issue.
Wage growth was surprisingly strong owing to revisions again, while the monthly impulse matched our view. It will probably peak in the next month’s release.
The BoE may await slower wages and CPI inflation’s step down before reverting to 25bp increments as the Governor didn’t resist pricing. We now expect 50bps in August.

Oh, Canada!

By Untying The Gordian Knot

The yield patterns for the 2-year and 10-year in Canada differ significantly from those in the US.
In particular, the 2-year Canadian yield charts are better-defined patterns than the US yields and provide more clarity.
In the short term, the Canadian 10-year yields are expected to increase more quickly than the US as it catches up.

CX Daily: Xiaomi to Stay the Course on Chip Design After Rival Bails

Xiaomi /In Depth: Xiaomi to stay the course on chip design after rival bails
Personnel /: China’s new office for Hong Kong and Macao affairs has its first head
Property /: China extends policy to take pressure off ailing property market

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Jul 11

Daily Brief Macro: Steno Signals #56 – The Business Cycle that Everyone Misunderstood! Here Is Why.. and more

In today’s briefing:

Steno Signals #56 – The Business Cycle that Everyone Misunderstood! Here Is Why..,
Inflation Watch: Last Chance Saloon for the Easy Disinflation – Watch Series
The Week That Was in ASEAN@Smartkarma – TOA’s Troubles, Indonesian Brewing, and Sido Muncul
Why isn’t Gold starting to sell off? // The Big Sugar Rush

Steno Signals #56 – The Business Cycle that Everyone Misunderstood! Here Is Why..,

Positioning and price patterns reveal that the pain trade is higher rates- and higher equities, while the recession is slowly but surely being called off by the consensus. Here are four reasons why everyone misunderstood the recession risk and why it is still alive…
The pain trade is higher rates AND equities now
It’s been a tough week for those hoping for an actual summer lull in markets as the pain trade has shifted from being equities moving higher to rates moving higher.

Inflation Watch: Last Chance Saloon for the Easy Disinflation – Watch Series

The June CPI report (released on Wednesday) is the final easily disinflationary report before base-effects start working against the trend for almost a quarter. Here is our chart-package on how things are going to play out..
Welcome to our chart-pack on US inflation ahead of the all-important release of the June CPI report on Wednesday.
It is last chance saloon for the disinflationistas as the base effects will turn harder to beat in the coming months but we see a good chance of an inflation surprise below the 3% handle in headline terms, which should provide us with a decent exit liquidity in long duration proxies in both bonds and equities in case.

The Week That Was in ASEAN@Smartkarma – TOA’s Troubles, Indonesian Brewing, and Sido Muncul

By Angus Mackintosh

The Week That Was in ASEAN@Smartkarma is filled with an eclectic mix of differentiated, substantive, and actionable insights, macro and equity bottom-up, from across South East Asia.
The past week saw insights on TOA Paint (Thailand), Sido Muncul,Multi Bintang Indonesia, Delta Djakarta, Metro Pacific Investments Co, Amman Mineral Internasional, V.S. Industry, and Top Glove Corp.
There was also a thematic insight looking at Indonesian Consumers post the Jakarta Fair plus an insight looking at the ASEAN EV ecosystem.

Why isn’t Gold starting to sell off? // The Big Sugar Rush

By The Commodity Report

Why isn’t Gold starting to sell off? In last week’s report, we already highlighted that the golden metal stays unattractive – as the Fed will likely do more rate hikes.
The, in some parts, stronger-than-expected job market data we received last week confirmed that view once again.
We find it interesting that gold hasn’t shown more weakness yet – even as rates continue to rise again.

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Jul 10

Daily Brief Macro: Global Credit Outlook: Tightness at Banks and Speculative Grade Issuers to Persist and more

In today’s briefing:

Global Credit Outlook: Tightness at Banks and Speculative Grade Issuers to Persist
Portfolio Watch: The Summer Volatility Razor
Positioning Watch – The 60/40 Portfolio in Reverse
Bond Rout = Stock Rout?
Why Our “Ultimate Market Timing Model” Is Cautious
US Bond Market Signalling Higher Yields

Global Credit Outlook: Tightness at Banks and Speculative Grade Issuers to Persist

By Said Desaque

Credit markets have finally accepted the view that central bank policy rates will remain higher for longer. Despite the resilience of global demand, conditions vary considerably on a cross-border basis.
Conditions in credit markets have not deteriorated as badly as envisaged. Investors are wary about speculative grade borrowers. Banks continue to be much more risk averse than credit markets.
US borrowers will wait before refinancing due to the higher for longer policy of the Fed. Asia Pacific speculative grade borrowers face refinancing risks if market conditions fail to improve.

Portfolio Watch: The Summer Volatility Razor

By Emil Moller

Usually, July is a bit of a zombie month with traders locked in or taking chips off the table to enjoy the beach instead.
But with VIX up some 13% on the week and treasury yields at 15-year highs after a massive rout on the back of a massive beat on the ADP report which today seems to be undermined by a Non-farm payroll report as of writing.
It would seem that the general modus operandi in this point is whether your book can tackle a peak in volatility or not

Positioning Watch – The 60/40 Portfolio in Reverse

The reverse 60/40 portfolio seems to be THE allocation of the average trader with equity positioning slightly underweight and bond positioning massively overweight.
Being underweight equities is not doing any good for your portfolio at the moment, and the long bond trade doesn’t have positive returns in sight if everything that’s unfolding right now continues.
Macro-wise and market-wise we are currently at a big crossroad, as traders and PMs are trying to figure out the state of the global economy, and how central banks are going to respond to recent data releases.

Bond Rout = Stock Rout?

By Cam Hui

The S&P 500 hit an air pocket last week and as it was rattled by the rout in bond prices.
As the index weakened, SPY formed a textbook island reversal with a measured objective of about 435, which represents a fairly shallow pullback.
Looking ahead over the next few weeks, current conditions argue for a corrective period or consolidation before equity bulls can regain their mojo.

Why Our “Ultimate Market Timing Model” Is Cautious

By Cam Hui

How would you like to take greater equity risk while reducing the worst of the downside risk? Our Ultimate Market Timing Model (UMTM) is designed to do that.
Our UMTM is cautious on equities based on two scenarios. The first is a mild recession, which is consistent with the Fed’s staff forecast.
The other more ominous scenario is the false soft landing which turns into stagflationary growth, which would be unfriendly to both stock and bond prices.

US Bond Market Signalling Higher Yields

By Untying The Gordian Knot

Late Economic cycle rate hikes are seen as a buying opportunity of duration as inflation expectations are expected to come under control.
For the first time, FED funds are not discounting rate cuts in 2023.
If inflation remains high over time, the strategies of reducing interest rates in 2024, investing in a long US duration and expecting lower breakeven views may face difficulties.

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Jul 08

Daily Brief Macro: The Weekly Market Monitor (27) – Will the Bull Survive? and more

In today’s briefing:

The Weekly Market Monitor (27) – Will the Bull Survive?
CX Daily: Historic China Heat Wave Takes Toll on Lives and Crops
AFC Iraq Fund June 2023 Update: “Construction Activity and Stability”
Capital Gearing Trust Interview
TPW Advisory Friday Musings: Digestion Time

The Weekly Market Monitor (27) – Will the Bull Survive?

Our Fear & Frenzy Sentiment Index has moved into Frenzy territory aggressively, suggesting a pullback in equity markets is upon us.
Based on the historical relationship between the ISM Manufacturing and the S&P 500 Index, the latest drop to 46 suggests an index level of 3,400.
This week, we highlight the chart showing the change in the number of bankruptcies and the spread on US high-yield bonds. Where did spreads go?

CX Daily: Historic China Heat Wave Takes Toll on Lives and Crops

Heat wave /: Historic China heat wave takes toll on lives and crops
Hong Kong /: Hong Kong may lower the bar for top talent visas
Funds /Chart of the Day: Chinese mutual funds reap rewards from AI, offshore investments

AFC Iraq Fund June 2023 Update: “Construction Activity and Stability”

By Asia Frontier Capital

The AFC Iraq Fund, and the market, rebounded strongly in June.
The AFC Iraq Fund was up 5.8%, outperforming its benchmark, the Rabee Securities RSISX USD Index, which was up 4.4%.
For the year, the AFC Iraq Fund is up 38.6%, outperforming its benchmark’s 30.4% increase.

Capital Gearing Trust Interview

By ByteTree Asset Management

In theory, government bonds are risk-free because they pay an income guaranteed by the government, but that doesn’t mean that prices can’t be volatile, as markets showed last year.
To demonstrate this, I show the synthetic prices of UK Government bonds, known as Gilts, since 1990.
The 2-year bond is relatively stable, with low “duration”, while the 30-year bond is a beast, with high duration.

TPW Advisory Friday Musings: Digestion Time

By TPW Advisory

There have been big moves a plenty in the 1st H of the year with Nasdaq having one of its best 1st Half’s ever, Japan & Brazil both gaining nearly 20% last Q while several of our favored Cyclical sectors enjoyed double digit gains last month.
Elsewhere, Global Sov bond yields have risen back to levels last seen in 2008 while record breaking Mexican Peso strength & Yen weakness finally reversed a bit.
Here’s one for the books – Brent crude oil has now declined for four quarters in a row, the longest such stretch in 35 years! We like energy for the 2ndH.

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Jul 07

Daily Brief Macro: Chinese LGFVs Contribute to Lower Growth and Disinflation and more

In today’s briefing:

Chinese LGFVs Contribute to Lower Growth and Disinflation
Bank Funding Watch: The lender of ‘favorite’ resort? – Watch Series
UK: Pricing Slowing into Summer-23
CX Daily: How China Is Sharpening Ethics Rules for Scientific Research
Eurozone Economy – Quarterly Macro Note – June 26, 2023
Greek Economy – Quarterly Macro Note – June 12, 2023

Chinese LGFVs Contribute to Lower Growth and Disinflation

Chinese Local Government Financing Vehicles, representing roughly 50% of the total Chinese government debt, face a maturity wall of CNY 5.5 trillion this year.
We expect no official defaults, implying an ongoing accommodative stance of the PBoC, further diverging from monetary policy in the rest of the world.
A ‘kick the can down the road’ strategy, keeping insolvent LGFVs artificially alive results in misallocation of capital, lower GDP growth, lower inflation, and pressure on risk assets.

Bank Funding Watch: The lender of ‘favorite’ resort? – Watch Series

Emergency lending facilities provided by the Federal Reserve, and the BTFP in particular, relieved banks in distress and helped them stay afloat, but are the same risks still lurking or has the need for funding eased?
Welcome to this edition of the ‘Watch Series’ where we’ll have a closer look at the use of currently operational funding, credit, liquidity and loan facilities provided by the Fed to try and deduce the state of and outlook for the economy and financial markets – banks in particular.
To ensure the functioning of the treasury and MBS markets in the immediate aftermath of patient zero, the Fed implemented lax monetary policy and resumed its QE.

UK: Pricing Slowing into Summer-23

By Phil Rush

Persistently excessive inflation has startled the BoE into extending its hiking cycle. Though the median is sticky, it may welcome signs of softening mean expectations.
Wage settlements have risen to especially problematic levels in the UK, creating widespread cost growth. Firms still plan to pass this on and restore margins.
The BoE must still break the second-round effects from resistance in real wages and margins. At least moderated pricing plans don’t appear as internationally unfavourable.

CX Daily: How China Is Sharpening Ethics Rules for Scientific Research

By VRS (Valuation & Research Specialists)

Ethics /In Depth: How China is sharpening ethics rules for scientific research
SCO /: Iran becomes full member of Shanghai Cooperation Organization
PMI /: China’s services sector recovery downshifts, Caixin PMI shows

Eurozone Economy – Quarterly Macro Note – June 26, 2023

The revised figures on the Euro area’s GDP growth rates reveal that the economy has entered a mild technical recession amid an increasingly challenging environment.
Stubbornly high inflation rates, a tightening monetary cycle, and heightened geopolitical tensions are taking a toll on households’ balance sheets and business activity.
Against this backdrop, we expect that Euro area will only recover moderately in the near term and grow by 0.16% (q-o-q) in the second quarter of the year followed by 0.19% in the third quarter.

Greek Economy – Quarterly Macro Note – June 12, 2023

By VRS (Valuation & Research Specialists)

In 2022, the Greek economy witnessed a substantial boost in GDP growth, as Real GDP (2015 Prices) reached €192.06 billion, reflecting a 6% increase compared to the previous year.
Moving forward, the OECD, IMF, and EU have forecasted average growth rates of 2.2% for 2023 and 1.67% for 2024.
Despite the steady increase in nominal values of Public Debt, as indicated by both ELSTAT data and IMF-EU Commission projections, there is a positive aspect in the declining Debt-to-GDP ratio based on projections.

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Jul 06

Daily Brief Macro: 5 Things We Watch – The Equity Rally and more

In today’s briefing:

5 Things We Watch – The Equity Rally, the Chinese Consumption Problem, Consumers Vs Corporates
Credit Watch – Why European Housing is likely going further south
CX Daily: China Mulls Scrapping Fixed Household Gas Rates as Winter Shortages Loom

5 Things We Watch – The Equity Rally, the Chinese Consumption Problem, Consumers Vs Corporates

Happy Wednesday, and welcome back to our weekly ‘5 Things We Watch’ where we take you through some of the topics and events that we are looking out for currently.
The equity rally continues, Xi is in the middle of structural issues, house lending is falling off a cliff in EZ and inflation is waning fast.
Read more about the 5 things that we watch currently in this week’s edition of ‘5 Things We Watch’.

Credit Watch – Why European Housing is likely going further south

With the recent drop in house lending in the Eurozone, we take a closer look at how exposed European consumers and corporations actually are to further interest rate hikes. A teaser: It doesn’t look particularly great.
Everyone is starting to notice the EZ weakness that we have been pointing out recently, and it is probably the last place you would want to place excess capital currently.
But where does this weakness come from?

CX Daily: China Mulls Scrapping Fixed Household Gas Rates as Winter Shortages Loom

Natural gas /In Depth: China mulls scrapping fixed household gas rates as winter shortages loom
China-U.S. /: China, U.S. should prioritize setting up guiding principles for peaceful bilateral relationship, former Chinese ambassador says
Yellen /: Analysis: What does the market expect from Yellen’s China visit?

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Jul 05

Daily Brief Macro: ISM at 46: Recession Within Six Months and more

In today’s briefing:

ISM at 46: Recession Within Six Months, or This Time Is Different?
The Economic Impacts of De-Risking on Asia
Asset Allocation Watch: Macro Regime Indicator – Introducing Our Brand New Asset Allocation Model
China’s Policy Dilemma: Getting Used to Mediocre Growth
CX Daily: Metal Magnate’s Fall From China’s Rich List to Bankruptcy
The Great Game – A Drunk Uncle in the Metaverse

ISM at 46: Recession Within Six Months, or This Time Is Different?

US GDP growth has been negative on average in the six months following an ISM Manufacturing Index of 46 or lower.
The US unemployment rate rises significantly when the ISM Manufacturing drops to 46 or lower.
A in-depth analysis of the ISM pattern during major economic downturns reveals this time may still be different.

The Economic Impacts of De-Risking on Asia

Asia may be expected to suffer some loss in export demand due to emerging trends such as near-shoring that divert production activity away from China and Asia more broadly.
The process of undoing global trade interlinkages will also have negative spillovers on economic efficiency and the diffusion of knowledge and technology.
But emerging Asia need not be a hapless bystander; bolstering its internal adaptive capacity and promoting intra-regional trade will strengthen its position in this new world.

Asset Allocation Watch: Macro Regime Indicator – Introducing Our Brand New Asset Allocation Model

Each month we assess the macro environment based on liquidity, inflation and growth models. Our models were right that inflation, growth and liquidity would all drop in June, but for July we see a possible slight uptick in growth, while inflation and liquidity will continue down.
Welcome to our monthly Macro Regime Indicator update. We aim at updating you on our base-case projections for liquidity, inflation and growth and how to optimally allocate according to the regime based on our empirical beta studies in the brand new asset allocation model available in our data-hub.
We highlighted how liquidity, inflation and growth would all decline through June, which proved to be the correct projection. Liquidity shrank around $300bn through the month, inflation declined from from 4.9% to 4% and ISM declined from 46.9 to 46.0.

China’s Policy Dilemma: Getting Used to Mediocre Growth

Past super-charged investment rates funded by excessive leverage meant that China borrowed growth from the future. Now the bills are coming due in the form of lower growth.
A deepening psychological malaise is affecting economic agents. This malaise is rooted in worries about China’s structural problems such as weak demographics and high debt.
The government may step up policy responses but shy away from the needed structural reforms. The 5% growth objective may still be achieved but downside risks will remain.

CX Daily: Metal Magnate’s Fall From China’s Rich List to Bankruptcy