Macro and Cross Asset Strategy

1. The 2024 Liquidity BOOM?

By Michael J. Howell, CrossBorder Capital

• US policy makers signal the peak in Fed Funds rates and to imply rates cut cuts as soon as March 2024
• Fed Liquidity has risen by a whopping US$534 billion or 16.6% since the start of 2023
• These moves are consistent with our long held view that the Global Liquidity cycle bottomed in October 2022 and is expanding towards a new peak in 2025.

2. 2024 High Conviction Idea: The Case for a Rotation Out of Japan into Hong Kong – Part 2

By Rikki Malik

• Risk reward favours a shift in allocation between these markets.
• Hong Kong washed out from a sentiment, valuation and positioning perspective.
• Minimal investor expectations  and continual disappointment  have set the stage for a rally in 2024.

3. Five Things We Watch For In 2024

By Ulrik Simmelholt, Steno Research

• We’ll start today’s 5 things with a look at the central bank outlook for in 2024, then we’ll address the troubles for OPEC.
• We move over to talk about China and afterwards Ukraine for some geopolitics.
• Finally, we’ll end this year’s last 5 things with a crypto outlook.

4. Positioning Watch – Buy everything seems to be consensus

By Andreas Steno, Steno Research

• Hello everyone, and welcome back to our weekly positioning watch following the surprisingly dovish FOMC meeting last Wednesday, which smells of a slight policy mistake given what we have been writing about forward-looking price and wage indicators over the past weeks now starting to tick upwards again.
• Despite a couple of Fed members trying to retrace after the meeting, pushing back on rate-cut expectations, market positioning has turned VERY bullish over the past week, and oh boy has equity markets positioned themselves for a binary outcome.
• The USDs parked at money-market funds have taken the spotlight since the FOMC meeting, as inflows in MMFs have continued despite 3-month T-bill yields reaching what looks to be a top after Powell’s remarks Wednesday.

5. Steno Signals #78 – Santa Powell Handing Out Gifts Even to the Naughty!

By Andreas Steno, Steno Research

• Powell invited for a yuuuge risk asset party this week by allowing the market to continue to chase the narrative of material rate cuts in 2024.
• This is (again) reminiscent of the 2006-2007 pause when the Fed allowed financial conditions to ease materially in the run-up to the recession.
• During a hiking cycle, loads and loads of USDs are parked in cash-like setups due to a sudden better relative yield premium in almost risk-free structures.

6. Sentiment Nugget: Central Bank Divergence Into Year-End

By Andreas Steno, Steno Research

• Into year-end we have noted a number of key shifts in what Central Bank language is actually telling us from a quantitative point of view.
• We regularly track and update our measure of positivity/negativity of Bank language contained in statements, outlooks and speeches on a scale of -1 to +1 in our DataHub for premium subscribers.
• There you can access full histories and dig deeper into the underlying drivers.

7. Mint Macro Roundup: BoJ Maintains Loose Policy Yet Yen Remains Strong

By Pranay Yadav, Mint Finance

• BoJ stuck to its ultra-loose monetary policy at its policy meeting on 19/Dec. It continues to maintain an extremely dovish stance to encourage economic growth.
• Governor Ueda stated that the prospects of inflation declining sustainably to target and wages rising and propping up demand remain high.
• Yen initially weakened following continued easing however it has recovered losses and stands 1.7% stronger than its level before Fed’s dovish stance on 13/Dec.

8. Interest Rates and Oil: Crossroads Ahead

By Untying The Gordian Knot, Untying The Gordian Knot

• US retail sales and inflation rates are retreating, and industrial activity is slowing.
• Europe’s economic decline is accelerating compared to the US.
• Oil prices are dipping in anticipation of weaker demand amidst a slowing economy signal.

9. Avoiding a Lost Decade: China’s Real Estate Adjustment Reaches Critical Juncture in 2024

By Said Desaque, DeSaque Macro Research

• Japan endured years of economic stagnation due to an impaired banking system following the bursting its real estate bubble and some commentators currently fear a repeat experience in China.
• Despite the potential for debt swaps with local government, regional banks will bear the brunt of loan restructuring to local government financing vehicles via higher loan-loss provisions.
• The main of objective of central government in 2024 will be stabilising home sales in Tier-1 cities via easier policy measures. Bank lending to private property developers will remain tight.    

10. Keep Buying the Japanese Yen

By Rikki Malik

• While the Bank of Japan didn’t change monetary policy -it just delays the inevitable.
• Rate differentials have only one way to go and will benefit the JPY.
• Position now for a strong JPY as the market anticipates the change.

1. 2024 High Conviction Idea: The Case for a Rotation Out of Japan into Hong Kong – Part 1

By Rikki Malik

• Risk reward favours this shift in allocation between these markets.
• Japan will suffer from base effects on economic data and earnings this year as JPY move reverses.
• Year end Positioning could provide attractive entry points for both legs.

2. The Psychology of Money: A Book Review

By Douglas Kim

• In this insight, I review a fantastic book written by Morgan Housel called The Psychology of Money (published in 2020). 
• “The most important part of every plan is planning on your plan not going according to the plan.” 
• Three parts of the book were particularly outstanding including letter to author’s son, the story of Rick Guerin, and how mice helped the Russians to defeat the mighty German army. 

3. Foreign Investors Allowed to Begin Buying Korean Stocks Without Prior Authorization on 14 December

By Douglas Kim

• On 13 December, the FSS announced that foreign investors will be allowed to start purchasing Korean stocks without prior authorization starting this week. 
• The revised Capital Market Act will start to be implemented on 14 December repealing the time consuming and inconvenient pre-registration system for foreign investors.  
• As a result of the Korean government making this change regulatory change, one of the beneficiaries is likely to be Interactive Brokers Group, Inc (IBKR US).

4. Steno Signals #77 – Oil Demand Is ALL TIME HIGH

By Andreas Steno, Steno Research

• Happy Sunday and welcome to our weekly flagship editorial from Steno Research.
• It has been an incredibly odd week in the economic calendar and our thesis of a strong year-end for USD key figures has so far been proven right, which especially after the NFP report re-ignited the USD and front-end USD rates, which has been our bet against especially European peers.
• Most recent economic key figures from the US have not surprised positively to the extent we saw through the autumn, while Chinese key figures have woken up and made a decent comeback relative to expectations over the past months.

5. 5 (+1) Central Banks We Watch – Fed, ECB, BoE, Norge’s Bank, BoJ & BCB

By Andreas Steno, Steno Research

• It’s central bank week once again, and that of course calls for us to share our thoughts ahead of the biggest meeting over the next week with Powell being the first to take the stage on Wednesday, expecting to hawk up the rhetoric a bit whilst keeping the Fed funds upper band steady at 5.5%.
• The ECB has recently claimed the title as the most dovish central bank in G10 after markets have added roughly 20 bps of cuts in 2024 to market pricing, and markets now price in approx.
• 115 bps of cuts in 2024.

6. Central Bank Review: Powell, a Genius or a Madman? 2024 Looks like a Year of Fat Tails

By Andreas Steno, Steno Research

• USD markets felt almost EM like for a couple of hours after Jay Powell and the committee allowed markets to chase the cutting narrative by communicating three expected cuts in the dot plot for 2024.
• I am not always convinced that the dot plot is a wise guidance tool as policy makers likely judge that a dot signaling three cuts relative to market pricing (ahead of the meeting) hinting of more than four cuts net/net should lead to a hawkish surprise.
• The opposite of course happened since narrative chasers in markets rather look at the sequential move than the nominal forecast.

7. Great Game – Climate, Chips and Corruption!

By Mikkel Rosenvold, Steno Research

• Welcome to your weekly geopolitical update from the Great Game! With a relatively quiet week in global affairs, we have time to dive into a couple of issues that we’ve been looking at over the past weeks.
• But let’s start at the main stage with the current COP28 summit that’s about to wrap up.
• Will “majlis” sit-downs save the climate?

8. In A Bitcoin Frenzy; Long BTC Miners & Short BTC

By Pranay Yadav, Mint Finance

• BTC’s phenomenal +57% surge since September is propelled by key forces—ETF euphoria, a robust “Risk On” asset bull run, regulatory clarity, and the imminent BTC halving.
• While BTC maintains resilience, mining firms, exemplified by Valkyrie Bitcoin Miners ETF (WGMI), have seen a 30% underperformance over the last 3 months.
• Mining firms that have scaled up hash-rate over the past year and built up BTC holdings to support outperformance to BTC. However, ample cash reserves are vital.

9. Rate Cuts: How Much? How Quick? How Real?

By Srinidhi Raghavendra, Mint Finance

• Western central bankers have made it amply clear that rate cuts are not a given. They remain data dependent. And the data is sending mixed signals.
• Meanwhile markets are opting for selective hearing and are pricing sharp rate cuts soon. Inflation is hard to tackle in general. The last mile gets nasty. Are markets ready?
• Base effects have contributed to the rapid slowdown in inflation. When these base effects fade, the false sense of safety could crater leading to a very different inflation narrative.

10. Positioning Watch – Are markets ready for Powell Wednesday?

By Andreas Steno, Steno Research

• With Powell taking the stage on Wednesday, likely turning more hawkish in his rhetoric after weeks of financial conditions easing, we have had a look at if we are starting to see signs of markets reversing their ultra-bullish positioning.
• In general markets have taken a bit of a breather from a positioning perspective after the historically bullish sentiment seen throughout November, and people are now starting to hedge their longs based on recent option volumes, with the aggregate US intraday put-call ratio now back solidly above 1.
• Looks like traders are starting to hedge their equity bets going into the central bank bonanza this week.

1. Global Liquidity On The Rise: Is This Gold’s (And BitCoin’s) Breakout Moment?

By Michael J. Howell, CrossBorder Capital

• High street inflation could fall in 2024 and real interest rates stay high, but the gold price and BitCoin (BTC$) may still break higher
• Gold has a 1.5-1.6 times sensitivity factor to the growth in Global Liquidity. BitCoin is a whopping 5 times this! It is ‘exponential gold’
• Global Liquidity looks set to double in size over the next decade driven by soaring World debts. Alongside, the US dollar has been eclipsed as the marginal World reserve asset

2. FSS Provides Further Details of Korean Companies That Plan to Change Dividend Payout System in 2024

By Douglas Kim

• FSS provided further details as to the number of Korean companies that plan to change their dividend payout system to their shareholders in 2024.
• There are 636 companies out of a total 2,267 listed companies in Korea (28%) that have confirmed that they will change their dividend payout system starting 2024.
• As listed companies set different voting rights and dividend record dates from the end of the year, investors need to check the dividend record date and dividend amount before investing.

3. The Fate of Quantitative Tightening: Not Solely in the Hands of the Fed

By Said Desaque, DeSaque Macro Research

• The twin pillars that underpinned US monetary policy since the global financial crisis made policy normalisation difficult. Investors believe quantitative tightening (QT) ceases once the federal funds rate is lowered.
• Contrary to the fears encountered during the taper tantrum in 2013, QT has not dramatically tightened US financial conditions since 2017, thereby raising questions about whether any cessation is required.
• High levels of bank reserves do not guarantee financial stability, but elevated Treasury borrowing and lower repo market liquidity pose threats that could ultimately force the Fed to end QT.

4. Positioning Watch – Everything better turn out the way markets want it

By Andreas Steno, Steno Research

• Hello everyone, and welcome back to our weekly positioning watch, where we dig into everything positioning and sentiment-related.
• This week will be all about equities and fixed income, which seems to be running the show at current junctures – just give the gold chart a look, which jumped some 2% on the back of pivot hopes and strong buying activity this morning during Asian hours, while sellers were nowhere to be seen, but fast-forwarding 10-11 hours, gold is now down somewhere near 0.2%.
• A huge turnaround in markets which smells a lot like a short-squeeze or tight liquidity in the Asian markets today.

5. Steno Signals #76: The Fed Has Lost Control of Liquidity Trends

By Andreas Steno, Steno Research

• Happy Sunday from frosty Copenhagen and welcome to our flagship editorial! The underlying demand trends are not strong.
• Running credit card data has been weak in October/November, the credit impulse is worsening and there are signs of actual labour market softening around the otherwise sticky service sectors in the West, yet markets are partying like there is no tomorrow.
• What is causing this disconnect and could it continue into the year-end?

6. 5 Things We Watch – Liquidity, Bond positioning, Oil, Consumer spending & Rates

By Andreas Steno, Steno Research

• We’ve spent the past 2 days in London, meeting clients and hedge funds, and there was a lot of support for the idea/notion that SOFR-Fed Funds spreads reveal that USD Liquidity is not ample and that the Fed will have to end QT early.
• The spread widening in SOFR – Fed Funds, caught a lot of attention over the past few days and it is interesting how swiftly the market jumps to the conclusion that it will lead to the Fed panic-ending QT already in Dec or January.
• Why are SOFR – Fed Funds spreads widening and how do we deal with it?

7. Mint Macro Roundup: Dissecting The Recent Jobs Data

By Pranay Yadav, Mint Finance

• Nonfarm payrolls showed 199k jobs added, higher than October and above expectations; Unemployment fell to 3.7% but wage growth strong at 4% YoY.
• Earlier this week, JOLTs survey showed job opening slide 6.7% to 8.73 million, lowest in 2.5 years with jobs declining across industries.
• Job market observed to be loosening and on-track to achieving soft-landing. going forward, it’s vital to watch for job losses.

8. The Week That Was in ASEAN@Smartkarma – Indofood’s On Track, ROTI’s Rising, and BliBli’s Omnichannel

By Angus Mackintosh, CrossASEAN Research

• The past week has seen insights on Indofood CBP Sukses (ICBP IJ), PT Nippon Indosari Corpindo (ROTI IJ), Global Digital Niaga (BELI IJ), OCBC (OCBC SP) and Vinfast (VFS US).
• There were also macro insights on the Philippines and Vietnam from Manu Bhaskaran and insights on Leader Energy IPO, Mkh Bhd, Vale Indonesia, Aneka Tambang, Bank Tabungan, and Medco Energi.
• 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 Southeast Asia.

9. India Politics: State Elections Show Favourable Political Winds for Modi

By Manu Bhaskaran, Centennial Asia Advisors

• Premier Modi’s BJP outperformed expectations by winning three state assembly elections, putting it in prime position for re-election in the 2024 general election. 
• Modi’s personal appeal and welfarist policies will likely deliver dividends in the next elections. But a landslide win is far from guaranteed given the political dynamics. 
• The government will thus avoid rocking the boat in terms of economic policy.  

10. The Market Meaning of a Gold Breakout

By Cam Hui, Pennock Idea Hub

• Gold bulls became very excited when gold tested resistance at the 2000–2100 level. We have been more interested in the drivers of gold strength than trying to forecast gold itself.
• Our analysis indicates that gold is rising on expectations of falling real rates, which also depresses the USD.
• These factors should be bullish for the price of risky assets. Specifically, we would focus on financials and other early market cycle groups.

1. Steno Signals #74 – Did King USD Just Break?

By Andreas Steno, Steno Research

• The sharp move in USDJPY and other USD pairs towards the end of last week has caught our attention and it arrives on the back of Powell letting go of the steering wheel on USD real rates.
• The weekly credit data from the US economy keeps weakening and we are en route for a credit contraction in the US during Q1/Q2 next year.
• Powell is probably right to let go of the tightness in USD real rates, but the question is whether he could be tempted to take back control in December in a final policy error?

2. KOSPI 200 and KOSDAQ 150 Rebalance Additions and Deletions Announced (December 2023)

By Douglas Kim

• Korea Exchange announced KOSPI 200 rebalance additions and deletions today. There were 14 new additions and deletions (7 each).
• Some surprises in KOSPI 200 rebalance included addition of Seah Besteel and deletion of HDC Hyundai Development. 
• There were a lot more additions and deletions in KOSDAQ 150 (34 total additions and deletions). Among the KOSDAQ 150 additions included Neowiz, JNTC, Lunit, and Jeio.

3. The Land of Swaying Yen: Will The BoJ Intervene? How Will Yen Respond?

By Pranay Yadav, Mint Finance

• Japan faces a raft of economic headwinds which shows up in Yen’s underperformance. BoJ’s job is not one to be envied given near-term issues plus structural challenges.
• Since the start of Sep, the Yen has underperformed the most among currency majors declining to a 33-year low relative to the USD.
• A frail outlook warrants continued loose monetary policy. However, that creates other problems forcing BoJ intervention to support the Yen.

4. Charting Beyond the Euro Area Headlines

By Thomas Lam

• Available data through October implies that prevailing GDP growth is possibly tracking weaker than the prior quarter
• A proxy of household saving propensity seems to be hovering around elevated levels partly because of greater uncertainty
• Notwithstanding the recent disinflationary prints, the most persistent category of HICP inflation appears to be sticky at roughly twice the pre-pandemic average level

5. Fed’s Policy Rate Benchmark Under Scrutiny: Goodbye to the Federal Funds Rate?

By Said Desaque, DeSaque Macro Research

• The poor results from the US Treasury’s latest 30-year bond auction highlights limited private investor appetite. Pressure on the Treasury to persist with high levels of short-term borrowing has increased.
• Aggressive quantitative easing and interest on reserves have significantly lowered trading in the federal funds market by US banks, while Federal Home Loan Banks currently dominate lending.
• The Fed’s policy rate could shift to the Secured Overnight Funding Rate. Functionality could be impacted by shifting perceptions about the collateral quality of Treasury securities due to high borrowing.   

6. Asia Geopolitics: Following Biden-Xi Meeting, Asia Is a Safer Place For Now

By Manu Bhaskaran, Centennial Asia Advisors

• The Biden-Xi meeting signals a positive phase for lower geopolitical risks in the Asia Pacific. Beijing and Washington are prioritising handling its domestic challenges over ratcheting up competitive activity.
• Taiwan’s presidential polls also motivate China’s “wait-and-see” approach as the Sinoskeptic DPP faces headwinds in maintaining its grip on power. 
• Japan’s more nuanced strategy has gained it traction with Asian nations. It is why it is emerging as a real winner in the geo-political game in Asia.

7. How Far Can This Rally Run?

By Cam Hui, Pennock Idea Hub

• The U.S. equity rally off the bottom in late October is characterized by strong price momentum and shows a high degree of upside potential.
• Point and figure charting signifies measured objectives indicating percentage gains in the high teens or low 20s.
• We also offer a series of sell signal triggers that indicate possible inflection points in risk/reward potential.

8. 5 things we watch: IFO, US rates, Earnings revisions, USD & Gasoline

By Andreas Steno, Steno Research

• We start off this week’s 5 Things We Watch by having a look at the Ifo survey coming up this Friday in the midst of the Schwarze Null ruling.
• This is followed by talking about US rates and Nvidia earnings and we then move on to talking about the USD while lastly finishing off with gasoline demand.
• This week we are watching out for the following 5 topics within Global macro: IFO, US Rates, Earnings revisions, The USD, Gasoline.

9. Energy Cable #47: Price Always Leads Narrative

By Andreas Steno, Steno Research

• Happy Monday to everybody from a cold and rainy Copenhagen.
• We are now long crude oil again as we find the narrative too bearish given the fundamentals.
• Before we start to talk about our crude oil case, we would like to highlight the volatility in post covid energy markets and how these have benefitted sellers in the futures markets more than buyers keeping storage costs constant.

10. Taiwan: Underowned, Yet Gaining on Peers

By Steven Holden, Copley Fund Research

• The percentage of Global funds invested in Taiwan hits an all-time high of 57.8%.
• Taiwan has been a key beneficiary of manager rotation alongside India, Argentina and South Korea over the last 6-months.
• TSMC is the dominant stock holding, with 49.8% of funds holding a position and has hit record ownership among Global funds.

1. QT Dead…Risk On Again?

By Michael J. Howell, CrossBorder Capital

Risk asset markets are racing ahead. Is the bull back? We argue that not much has changed, except that QT (quantitative tightening) is effectively ‘dead’

• Three events have changed investors’ mood: US Quarterly Refunding (QRA), Fed FOMC Statement and H4.1 Release, and a downbeat October ISM Print
• Most important by far is the QFA. This effectively ‘added’ a net US$80 billion of liquidity to US markets. It confirm ‘fact’ that QT effectively dead
• Risk still remain in our view. These events underscore a flat market in risk assets. Equity bull market still requires positive Central Bank liquidity injections and a stable bond market

2. Korean Government Ready to Temporarily Suspend Short-Selling: A Move to Gain More Votes?

By Douglas Kim

On 3 November, numerous local media outlets reported that the Korean government is likely to temporarily suspend short selling in the Korean stock market for about six months.

• On 3 November, numerous local media outlets reported that the Korean government is likely to temporarily suspend short selling in the Korean stock market.
• According to a high level ruling party official, the Korean government plans to announce temporary ban on short selling stocks no later than on 15 November for about six months.
• There is a major legislative election in Korea in April 2024. If there is a temporary ban on short selling stocks, this could be viewed negatively by many foreign investors.

3. 5 Important Factors Impacting Shorting Korean Stocks Rules + Shorting the Dutch East India Company

By Douglas Kim

The Korean regulators are actively considering a plan to limit the short selling repayment period for foreign and institutional investors to 90 days (same as the individual retail investors).

• In this insight, we discuss the five important factors impacting potential regulations changes of shorting stocks in Korea.
• The Korean regulators are actively considering a plan to limit the short selling repayment period for foreign and institutional investors to 90 days (same as the individual retail investors).
• More than 400 years ago in 1609, a Dutch businessman called Issac Le Maire started to short shares in the Dutch East India Company.

4. Credit Watch: The Worst Is Behind Us in the SLOOS, But…

By Andreas Steno, Steno Research

The quarterly SLOOS survey from the Fed was released a bit more than an hour ago and the results resemble the quarterly credit surveys from Japan…

• The quarterly SLOOS survey from the Fed was released a bit more than an hour ago and the results resemble the quarterly credit surveys from Japan and Europe released ahead of the US ditto.
• There is a sequential improvement in demand, while fewer banks tighten standards compared to Q3.
• So, is it good news or did the survey rather confirm the credit contraction?

5. Portfolio Watch: November Bear Market Rally?

By Emil Moller, Steno Research

As I am sure you are aware we have been awaiting the exact market move we have seen this week: The long end of the UST curve catching a breather fueling an inevitable risk-on rally.

• Hello Everybody and welcome back for our weekly Portfolio Watch! As I am sure you are aware we have been awaiting the exact market move we have seen this week: The long end of the UST curve catching a breather fueling an inevitable risk-on rally.
• That fear is essentially why we have abstained from going full-on short beta these past weeks.
• A decision we are content with this week.

6. Steno Signals #72 – When a Recession Meets a Melt-Up in Equities and Bonds

By Andreas Steno, Steno Research

The BoJ no longer has a firm guidance towards higher 10yr bond yields, the Fed accepted higher long bond yields as an excuse to pause and economic data has been abysmal.

• Happy Sunday and welcome to our flagship editorial! What a week.
• The BoJ no longer has a firm guidance towards higher 10yr bond yields, the Fed accepted higher long bond yields as an excuse to pause and economic data has been abysmal.
• That cocktail has so far allowed the everything rally to thrive in a way we haven’t seen in quarters, but the feedback loop introduced by the big central banks may limit the scope of the bear market rally.

7. Thailand: Government Shows Early Signs of Impotence

By Manu Bhaskaran, Centennial Asia Advisors

Bangkok’s haphazard planning of the digital wallet stimulus is a symptom of broader policy paralysis given the unwieldy coalition government.

• The cyclical outlook for Thailand remains mixed despite the formation of the government. Signs of policy impotence are emerging, limiting the administration’s ability to respond.
• The messy implementation of Pheu Thai’s flagship digital wallet is but one sign of policy paralysis. The pro-Thaksin party is stuck in myopic populism to prop up its support.
• The unwieldy composition of the coalition means that hopes for economic and political reform are unlikely to be met. Economic upsides from political stability are thus limited.

8. EIA Watch: Oil demand up, Fuel demand down..

By Andreas Steno, Steno Research

Welcome to our weekly EIA Watch where we use our sophisticated models to filter noise from actual trends in the EIA demand data for Energy…

• Welcome to our weekly EIA Watch where we use our sophisticated models to filter noise from actual trends in the EIA demand data for Energy products.
• Since a week ago, Oil has rebounded in the non-adjusted implied demand while transportation fuel demand weakness is seen across Gasoline and especially Diesel.
• We continue to find the Gasoline demand out of whack with reality, while the Oil demand looks to be closer to the actual demand.

9. Will Euro Shrink to Parity to the Dollar on Diverging Macro Economic Conditions?

By Srinidhi Raghavendra, Mint Finance

Euro-Dollar parity murmurs are creeping back into the market. Economic divergence will force euro to weaken but others believe that pessimism is already priced in.

• Since December 2002, the euro has traded above parity to the USD with the only exception being the last quarter of 2022.
• Following central banks rate decisions to pause hikes across both sides of the Atlantic, volatility in the Euro/USD pair is near 12-month lows.
• Low volatility equates to lower option premiums. Periods of low volatility offer best opportunity for going long options.

10. Macro Regime Indicator: Heavy Long in Cyclical FX

By Elias Lisberg Glistrup, Steno Research

We anticipate consistent QT in both USDs and EURs in the forthcoming month. On a 3-month time frame, and given the assumed conditions, our model suggests a substantial allocation towards gold.

• With the turn of October, it’s time for our monthly evaluation of both the present and coming month’s macroeconomic conditions, in which we weigh risks against rewards.
• In order to do so, we employ both our Macro Regime Indicator framework and the interactive Structural Asset Allocation Model.
• In combination, these tools provide an empirically rooted portfolio allocation, given the identified macro conditions and drivers in financial markets.