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. Here’s What We Told Hedge Funds This Week – and How We’re Trading It!
- Happy Friday! Every week, we dive deep into macro trends, analyze asset movements, and uncover the best value plays in the world of macro.
- These insights are shared with hedge funds and institutional clients, and today, we’re bringing them directly to you.
- While the macro landscape can be complex, we believe it doesn’t have to be intimidating.
2. Flash Liquidity Update: A USD liquidity PUT is now in place
- We just received the meeting minutes from the November FOMC meeting, which include two important takeaways on liquidity—both of which are positive.
- We have been highlighting for some time that markets are trading close to pain thresholds in USD liquidity (and below them in EUR liquidity).
- The Fed is now acknowledging the need for a “put” on liquidity levels.
3. The Next Four Years…
- The Republican sweep, both in Congress and the White House, seems to have sparked a risk-on attitude across financial markets of late
- But Republican presidencies have coincided more regularly with periods of post-war economic downturns
- And the disparate US equity market performance enveloping presidential cycles is a nagging puzzle
4. EM Fixed Income: Emerging Markets Outlook & Strategy for 2025
- US election outcome and policy proposals causing challenges for emerging markets in 2025
- Expectations for US exceptionalism and potential insularity affecting global trade and growth
- Potential impacts on inflation, monetary policy, fiscal dynamics, and investment environment for EM fixed income in 2025, with short-term opportunities amidst uncertainties.
This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only.
5. Asian Equities: Be Selective – Focus on The “ROE Winners”
- Asia is cheap relative to the US – trading at less than 40% of US’s P/BV – but that’s because Asia’s ROE has consistently declined relative to US’s.
- Over the next couple of years Asian ROEs are forecast to revive relative to the US’s but all Asian markets are not forecast to participate in this recovery.
- The “ROE Winners” (rising forecast ROEs) are Korea, Taiwan, India, Malaysia. Indonesia to stay flat but solidly higher than Asian average. We are skeptical of HK/China and Thailand’s ROE recovery.
6. Japan Funds: Extreme Stocks
- We screen for Japanese companies at the extreme ends of their positioning or momentum ranges among active Japan equity funds.
- Low Positioning coupled with Negative Momentum: Nissan Motor Corp and Misumi Group
- High Positioning coupled with High Momentum: ASICS Corp and Kyushu Railway
7. CHINA TARIFFS: Fact and Fiction
- The US has ramped up its tariff threats months before Trump even takes office. The newly appointed trade representative is a China hawk with some questionable policies ideas.
- China has reduced its dependency on US exports by half over the last several years and is better prepared to handle trade negotiations.
- Although previous trade negotiations during Trump’s first term lasted more than a year, most of the tariffs were never imposed.
8. Steno Signals #127 – We need a bit of bad news for liquidity to improve
- Hope you had a great weekend! Here’s this week’s sneak peek into my thoughts on liquidity trends and how they influence my approach to risk-taking.
- Watching the alt-season unfold from an incredibly wet and windy Copenhagen this weekend has been quite bizarre.
- The weather outside certainly doesn’t bring out my animal spirits, but there’s a certain smell of 2021 in the air in financial markets—especially if central banks decide to print more into this scenario.
9. Positioning Watch – The US Exceptionalism Story Is Back in Play!
- Main point: The current positioning picture is becoming increasingly uniform across asset classes: higher US growth, higher USD rates versus EUR/GBP rates, higher USD vs. peers, and higher US equity returns compared to Europe/Asia.
- The risk/reward of taking the opposite bet is starting to look appetizing.
We have been looking at the explosive increase in US equity positioning for a while, as multiple indicators show that equities are reaching stretched points positioning-wise — CFTC positioning among asset managers skyrocketing, our own data showing increased positioning in US vs. the rest of the world, and surveys starting to indicate that everyone is expecting equities to crawl higher.
10. Deciphering Trumponomics 2.0
- Looking to 2025, market returns are likely to be more uncertain than in the past. The degree of dispersion in the range of forecasts is wider than usual.
- There will be winners and losers. Deregulation should benefit the energy, AI-related technology, and financials.
- Losers include bonds, and construction stocks because of their sensitivity to both rising rates and heightened labour costs from deportation.