In today’s briefing:
- Last Major Currency Peg: Hong Kong’s Fate Could Be Determined by the Fed and Geopolitics
- Washed Out Enough?
- From FOMO to GIDOT (Glad I Don’t Own That)
Last Major Currency Peg: Hong Kong’s Fate Could Be Determined by the Fed and Geopolitics
- Prior to 1983, Hong Kong experienced economic overheating and high inflation. The currency peg’s inception coincided with the rising anti-inflationary credibility of Fed policy conduct.
- Hong Kong is, however, now totally exposed to any draconian attempts by the Fed to recoup lost credibility via tighter policy settings.
- China needs its own sovereign-controlled financial hub. Hong Kong could be China’s financial centre, but recent currency weaponisation implies tenability of the currency board becomes increasingly driven by geopolitics.
Washed Out Enough?
- A review of different sentiment metrics indicates an atmosphere of heightened fear.
- The intermediate path of least resistance for U.S. equity prices is still down.
- We continue to believe the risk/reward is tilted to the upside in the short run.
From FOMO to GIDOT (Glad I Don’t Own That)
- The U.S. equity outlook is highly dependent on an uncertain economic outlook.
- P/E multiples are adequate if the economy sidesteps a recession, but the risks are skewed to the downside.
- If the Fed becomes more hawkish, the economy collapses into recession, or if further supply chain disruptions pressure inflation, downside risk could be considerably higher.
Before it’s here, it’s on Smartkarma
