In today’s briefing:
- Cross Asset Watch – Bye Bye Inflation, Hello Lay-Offs? Here Is What to Trade..
- A Global Market Review: Risks and Opportunities
- A Different Kind of Fed Pivot?
- ISM Down, Rates Up, Valuation Ballooning; What Could Go Wrong?
- Oil Watch: MBS Vs. Biden Intensifies
- Securing the Future: Managing and Regulating AI Risk
- AFC Uzbekistan Fund May 2023 Update: Uzmetkombinat Advances Rights Offering
- The British Pound Flirts with a 6-Year High
- TPW Advisory June Monthly: The Birth Of The New
Cross Asset Watch – Bye Bye Inflation, Hello Lay-Offs? Here Is What to Trade..
- Inflation is now waning fast in headline terms in both the US and Europe
- Could lower inflation prove to be a trigger for lay-offs?
- And which sectors and geographies are likely to perform in such an environment?
A Global Market Review: Risks and Opportunities
- It’s time to take a quick trip around the world to review the state of global equity leadership. U.S. equities have surged, but the leadership is narrow.
- Japan appears to be on the verge of a relative breakout that could become a global leader. The weakness in China may not be as dire as the headlines indicate.
- Europe has pulled back, but it remains the global leaders and should be bought.
A Different Kind of Fed Pivot?
- After a series of staccato rate hikes, the Fed hinted that it was ready to pause.
- However, the recent stronger-than-expected April PCE may have changed the narrative from a pause to another rate hike.
- We believe that incoming data indicates a further quarter-point rate hike in the near future, either at the June or July FOMC meeting.
ISM Down, Rates Up, Valuation Ballooning; What Could Go Wrong?
- The ISM Manufacturing Index fell to 46.9 and reveals clear downside for equities based on the historical relationship.
- The US labor market remains way too hot for the Fed and significantly increases the odds of another rate hike even as a massive drop in inflation materializes.
- The P/E ratio of Big Tech stocks equals 56, while earnings growth has turned negative in recent quarters. Not the best starting point with the MOVE/VIX ratio >8.
Oil Watch: MBS Vs. Biden Intensifies
- Mohammed Bin Salman seems increasingly keen on hitting Bidens chances of getting re-elected
- The OPEC+ meeting concluded with a messy deal and the price response is not given
- The short-term reaction may likely be even lower oil price before a medium-term rebound
Securing the Future: Managing and Regulating AI Risk
- Artificial Intelligence (AI) has made incredible progress in various industries, providing opportunities for business growth and innovation while introducing new risks.
- AI risk encompasses categories such as cyber risk and operational risk, along with unique dimensions like ethical risk, bias risk, transparency risk, autonomy risk, and long-term existential risk.
- While new AI regulations are still being discussed, managing AI risk requires a comprehensive approach, including defining risk, establishing tolerance, conducting assessments, implementing mitigation strategies, establishing governance, and monitoring processes.
AFC Uzbekistan Fund May 2023 Update: Uzmetkombinat Advances Rights Offering
- May saw the final announcement for the long-delayed rights offering of Uzbekistan’s largest steel company, Uzmetkombinat (TSE:UZMK), as well as continued broad buying in the stock market, which led the May 2023 fund NAV to rise to an estimated USD 1,804 (+1.6%) or +80.4% since inception on 29th March 2019.
- While historical precedent in Uzbekistan’s capital markets has been for state-owned enterprises (“SOEs”) to increase equity capital by selling all new shares to the government at par value, thereby drastically diluting minority investors, since Uzbekistan back in 2018 “re-opened to the world”, this has become a figure largely relegated to the past.
- In recent years, SOEs in financial services, consumer goods, and the industrial sectors have been providing pre-emptive rights for minority investors, which is a very basic, but nonetheless positive development in Uzbekistan’s capital markets development as it reinforces the governments focus on improving minority shareholder rights.
The British Pound Flirts with a 6-Year High
- Who’d have thought that the pound, universally ridiculed by the FT’ies (lefties who read the Financial Times), would be on the verge of a 6-year high? Only the Swiss Franc and the Singapore Dollar, both financial safe havens, are ahead of the pound over this post-Brexit period.
- The pound has also been doing well against emerging market currencies, with just the Mexican Peso ahead.
- With consistently high real interest rates (rates above inflation), the Mex has been a standout performer, even ahead of the Swiss Franc.
TPW Advisory June Monthly: The Birth Of The New
- The past few years have felt very sped up – dealing with the 3Cs of Covid, Climate & Conflict in an Age of Speed will do that.
- Now we are thru Covid & past the energy shock and attendant inflation spike, its time to focus on what comes next – the birth of the new.
- Birthing something takes time, is often messy and can mess with one’s head.
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