Daily Brief Macro: Portfolio Watch: We Dare to Say the Bottom Is In for Risk Assets and more

• We have successfully navigated our macro portfolio through yet another week of high volatility, especially following Monday’s (in hindsight) outlier event.
• Risk sentiment has turned, and recession fears are muted for now.
• With position squaring largely completed, equities have regained momentum.

• Happy Sunday, folks!I hope you’ve enjoyed the weekend.
• After a bizarre week, starting with the rug-pulling in Japan on Monday morning, it was time for a well-deserved break over the past two days.
• We’ve encountered tons of questions about the size of the USDJPY carry trade, and here’s what we’ll say on the topic: Those claiming that the carry trade is 10-20 trillion USD have very little understanding of the netting of derivatives and/or the FX hedging policies of international investors.

• Volatility surged in financial markets due to events like the Bank of Japan meeting, Fed meeting, Bank of England rate cut, and disappointing US jobs numbers
• Macro data and economic indicators will play a key role in stabilizing or further destabilizing the markets
• Safe haven currencies like the yen and dollar are expected to perform well, while currencies tied to global growth like the Australian and New Zealand dollar may struggle

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only.

• US oil and gas rig count increased by two to 588 for the week ending 09/Aug, following a decline the week prior.
• US oil rig count rose by three to 485, after remaining flat the previous week. Gas rigs decreased by one to 97, marking a third consecutive weekly decline.
• For the week ending 02/Aug, US crude oil production hit a record 13.4 mbpd, following four weeks of steady output at 13.3 mbpd.

• The presidential race has tightened since VP Harris replaced President Biden at the top of the Democratic ticket. Harris leads popular vote, but Trump is ahead in the Electoral College. 
• Both VP candidates are ideological clones of the presidential candidates. Unless Harris moves to the centre at her convention and debates, Trump’s Electoral College lead is likely to persist.  
• The energized Democratic base is likely to ensure that either House, Senate or both will be won by Democrats. Divided government is positive for markets, limiting scope for policy extremism. 

• The past week saw insights on Astra International (ASII IJ), Aspirasi Hidup Indonesia (ACES IJ), Multi Bintang Indonesia (MLBI IJ) and DFI Retail Group Holdings (DFI SP).
• There was also an insight from Sameer Taneja looking at high-conviction ideas in the Philippines and a separate insight looking at ETFs that benefit from. ASEAN’S long-term positive prospects. 
• 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.

• The escalation in international trade tensions is expected to be more severe under a second Trump administration.
• Despite the outcome of the US election, protectionism is predicted to persist globally.
• The rise of protectionism is a global concern, not solely dependent on US politics.

• Hurricane Debby caused 300,000 electricity customers to lose power in Florida and Georgia, reducing electricity demand, which led to natural gas prices declining.
• Since the 2006 shale boom, the share of US natural gas production from the offshore Gulf of Mexico has dropped from 15% to 1.8% by 2023.
• The Gulf of Mexico area accounted for 14.4% of US crude oil production in 2023. Although still a significant share, it has declined from 25.4% in 2006. 

• While the 2023-24 cocoa crop in West Africa declined, growth in other global regions and actions in West Africa should improve supply, Hershey’s CEO Michele Buck, one of the largest chocolate producers in the world, said in the Q2 earnings call last week.
• “Today’s operating environment remains dynamic, with consumers pulling back on discretionary spending,” Buck stated.
• Meanwhile it seems like the chocolate maker is really focusing on the cocoa harvest detail in West Africa this fall before making any new major decisions in terms of their cocoa price hedging strategy for next year.

• Financial crisis causing extreme volatility in EM fixed income assets
• Three factors driving market moves: concerns of US and global recession, unwind of carry positions, concerns of escalation in Middle East
• Not currently positioning for a US recession as labor market softens but job growth remains positive.

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only.