In today’s briefing:
- 2025 High Conviction Idea: The Case for a Rotation Out of India into Hong Kong – Part 1
- The Public Embraces the Trump Honeymoon
- Could A Hawkish Rate Cut Rattle Markets?
- US Equity Outlook: Leadership Concentration Has Been Higher and Valuations Still Matter
- Copper Tracker 16th Dec 2024: New Loan Growth In China Uninspiring
2025 High Conviction Idea: The Case for a Rotation Out of India into Hong Kong – Part 1
- Risk reward favours this shift in allocation between these markets.
- Short to mid-term concerns on the Indian market warrant this strategic change
- Slowing revenue growth and less government spending leading to decelerating profits which is not yet reflected in market multiples
The Public Embraces the Trump Honeymoon
- In the wake of Trump’s electoral win, market participants have given him the benefit of the doubt and embraced a honeymoon.
- Expectations for equity returns are high and sentiment is becoming frothy.
- Risks are rising, but we would tactically monitor if market technical and sentiment conditions progress in January.
Could A Hawkish Rate Cut Rattle Markets?
- The continued lack of disinflationary progress in the November CPI and PPI reports is setting up conditions for a hawkish rate cut at the December meeting.
- The big question is how this affects overall risk appetite. Elections of new presidents often set up a honeymoon period characterized by small-cap outperformance, which has been lacking this year.
- Our base case is a rally into year-end, but we would like to see confirmation from better relative performance of high-beta small-cap stocks
US Equity Outlook: Leadership Concentration Has Been Higher and Valuations Still Matter
- Narrow leadership in the S&P500 has evoked memories of the conditions that prevailed in the late-1990s. US history is littered with periods of even greater concentration of equity market leadership.
- Narrow leadership of the S&P500 reflects the shift in the distribution of corporate profits in favour of larger companies as important sectors within the US economy have become more concentrated.
- Current valuations of the top 10 S&P500 stocks are lower than the 2000 peak. Exuberant profit expectations present the biggest threat to US equities as opposed to narrow leadership.
Copper Tracker 16th Dec 2024: New Loan Growth In China Uninspiring
- China TSF disappointed expectations, coming in at 2.34 trillion RMB (down 5% YoY), compared to the median forecast of 2.7 trillion RMB by the street.
- Comex premiums significantly strengthened, with alot of market participants turning bullish with the imminent return of Donald Trump to power on the 20th of January 2025.
- We initiated on First Quantum Minerals (FM CN). For more details, read our insight: First Quantum Minerals (FM CN): Call Option on Cobre Panama?
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