This weekly newsletter pulls together summaries of the top ten most-read Insights across Macro and Cross Asset Strategy on Smartkarma.
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1. Gold’s Next Leg Up And Why It Matters
- Gold price is a reflection of underlying global stress in currency markets
- Gold price is a reflection of actual not reported real rates of interest
- Gold price is a reflection of global increased demand from central banks and consumers
2. Steno Signals #93 – Material Stealth QT Upcoming During a War Economy
- Happy Easter and welcome to our flagship editorial! The tide is turning on USD liquidity and the four most recent bills auctions have seen net negative issuance, which is a harbinger for the trend into April, which is typically strongly net issuance negative due to tax seasonality (see chart 1).
- Only during the first lockdown in 2020, did the net amount of outstanding bills increase through this period, which makes for a solid hit ratio in predicting (much) weaker USD liquidity in Q2 this year.
- We wrote on New Years eve of 2023 that “USD liquidity is likely going to increase massively in Q1 due to a series of technicalities surrounding the BTFP, ON RRP and TGA facilities, which makes us set for a material rally (or a blow off top) in Q1.”, which I guess was as precise as it could be.
3. March Themes and Thematic Portfolio Review
- A monthly review at how the markets and our themes are currently performing
- Analysing what went wrong and what went right in stocks and sectors
- Highlighting positions added or removed from the thematic investment portfolio
4. Macro Regime Indicator: From Stealth QE to Stealth QT
- Welcome to our Monthly Macro Regime monitor.
- Coming into March, we wrote that “We see little change to the optimistic and risk-favoring sentiment for March, and we thus remain in the goldilocks ‘Gung Ho’ regime.
- With tailwinds from both liquidity and growth, we continue to see a great case for continuing to move/stay further out of the risk curve when it comes to allocation.
5. Is a Major RMB Depreciation on the Cards?
- Further weakness in the JPY poses a risk to RMB stability
- If major stimulus is unleashed in China, it is likely the RMB will weaken
- Continued incremental easing will benefit the economy in the long term but may disapoint equity investors looking for a quick fix despite Chinese data improving
6. Technically Speaking: Japan Meets Resistance and Hong Kong Finally Breaks Downtrend
- With the BOJ’s struggle to support the yen gaining traction, the NKY and TPX both hit major resistance
- Hong Kong finally breaches resistance with a potential move to 20k in the near term
- Diversification opportunities are abundant with potential negative correlation between China/HK markets and US
7. 5 Things We Watch – EUR-Inflation, Central Banks, The Business Cycle, Positioning & Commodities
- Welcome to our weekly ‘5 Things We Watch’, where we take you through 5 of the things we look out for in global macro.
- With markets hawking up Fed expectations, Euro Area inflation surprising on the downside, and commodities breaking out technically, there are plenty of things to shed some light on!
- This week we are watching out for the following 5 topics within global macro:
- EUR-Inflation
- Central Banks pricing
- The Business Cycle
- Fixed Income Positioning
- Commodities
8. Out of the Box: 6 Reasons the Fed Will Be Hiking Rates in 2024
- Even though the Santa rally in US STIRS has largely been reversed, markets are still pricing in 2.5 full cuts by the end of this year or so with the first to come around summer time.
- Currently, one of the most unappreciated risks by markets would be the Fed actually hiking rates in 2024 and thus we thought we would present 6 compelling and thought provoking arguments for why the Fed hiking in 2024 might not be impossible after all (our base case is a hold).
- The first argument has to do with year-on-year inflation seemingly having reached its equilibrium at 3%, a range in which it has found itself for the last year or so.
9. The Stock Market’s Q2 Challenges
- The S&P 500 ended the quarter exhibiting a series of “good overbought” conditions which are signals of strong momentum. Can the bullish momentum continue?
- Equity price momentum in Q2 is dependent on continued rising EPS estimates, a tame bond market response to higher Treasury coupon issuance, and a possible liquidity squeeze.
- The market is vulnerable to a setback. A lot has to go right.
10. Positioning Watch – Steepener bets back on?
- Hello everyone, and welcome back to our weekly positioning watch! Hope you all had a great time off during the Easter break.
- The market narrative has remained more or less intact after the break, with equity sentiment still going strong until today despite a bit of a hiccup delivered from the Fed, with especially Waller but also to a certain extent Powell pushing back on the 3 rate cuts priced in just a couple of weeks ago.
- The scenario with 0 Fed cuts in 2024 is looking to come into play, right as European central banks have likely received the final evidence for them to start cutting rates, with German CPI surprising on the dovish side, and UK Retail Prices collapsed, paving the way for both BoE and ECB to cut rates before the Fed, which admittedly has a more difficult time battling inflation.
