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. EM Fixed Income: ‘Tis the Season for Volatility
- The discussion focused on the importance of politics over economics for emerging markets in 2025, with a specific emphasis on fiscal trajectories.
- Lessons learned include the need to expand imagination of possible scenarios, the impact of specific country situations on returns, and the caution against following consensus trades.
- Market outlook for early 2025 is expected to be choppy and driven by policy announcements, with a key event being the US Inauguration Day on January 20th leading to potential market adjustments.
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2. San Francisco Fed President Mary Daly Explains the ‘Hawkish Cut’
- The Federal Reserve recently cut interest rates by 25 basis points, unveiling new year expectations for inflation and economic growth.
- San Francisco Fed President Mary Daly discusses the current state of the labor market, the impact of AI on productivity, and the importance of data and evidence in making policy decisions.
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3. Infrastructure mini-series Ep 2: The Low-Carbon Transition: A $100 Trillion Infrastructure Opport…
- Global transition to low carbon economy discussed in the second episode of the Infrastructure miniseries
- Key areas of investment include electrification, renewable power plants, electric vehicle charging stations, and clean fuels
- Importance of public and private investment in infrastructure to enable energy transition and decarbonization, with a focus on long-term growth opportunities like data centers and mining infrastructure
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4. NPS: Portfolio Rebalance Could Lead to Buying At Least 25 Trillion Won in Korean Stocks in 2025
- In 2025, the NPS could purchase significant amounts of Korean stocks (at least 25 trillion won) which could act as support in the domestic stock market.
- At the end of September 2024, NPS’s domestic stock portfolio was 12.7% of its total assets, a 2.2% lower than NPS’s domestic stocks target at the end of 2025 (14.9%).
- The top five net purchases by the NPS and local pension funds of Korean stocks in the past one month include Samsung Electronics, Kakao, SK Innovation, Hyundai Motor, and SEMCO.
5. Global Monetary Easing Cycle Becomes More Idiosyncratic
- The Swiss and Canadian central banks cut their respective policy rates by 50 basis points. The former faces currency appreciation and deflationary risks. Canada faces higher unemployment and deteriorating growth.
- The European Central Bank is taking a gradual policy easing path in 2025. Policy outlooks for the Reserve Bank of Australia and Bank of England are more data dependent.
- The Fed cut its policy rate by 25 basis points as expected, but fewer reductions are now expected in 2025 due to a more robust economic outlook compared to September.
6. Steno Signals #177 – Another ill-timed flip-flop from Jay Powell?
- Happy Sunday from me! This will be the last update before the festive season, and I hope you will have a relaxed and enjoyable time with your loved ones.
- It has been a big year for me personally with the launch of Asgard-Steno Global Macro.
- Despite Powell pulling the rug from under the Christmas rally, we are off to a decent start and expect to deliver strong returns in choppy markets in 2025, where the macro direction will be challenged by several factors.
7. The Darker Side of the Hindenburg Omen
- Current market conditions are characterized by a strong S&P 500 that’s near its all-time high and weak breadth.
- The closest template to these circumstances is August 1972, which is just before the final Nifty Fifty top.
- As the market undergoes its inevitable bounce due to oversold conditions, investors should monitor technical conditions for negative divergences, which could be the signal for a long-term cyclical top.
8. Equity Return Expectations Under An Alien Invasion
- We are subscribers to Occam’s Razor, or the simplest explanation is the most satisfactory, and recent UFOs sightings are of terrestrial origin.
- It’s nevertheless a worthwhile exercise to consider asset return expectations under the scenario of an extra-terrestrial alien invasion.
- Our study of an alien invasion opens the door to discussing return studies. Standard assumptions about returns to bonds and equity risk premiums are useful only up to a point.
9. Here is 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 each Friday, we’re bringing them directly to you.
- While the macro landscape can be complex, we believe it doesn’t have to be intimidating.
10. Three Presidents in One Month in South Korea – What’s Next?
- The acting South Korean President Han Duck-Soo was impeached by the South Korea’s Parliament on 27 December. Choi Sang-Mok (finance minister) is now the new, acting President of South Korea.
- There could be multiple impeachments of acting Presidents in the next several weeks which would be unprecedented and raise further concerns about the lack of political stability in South Korea.
- Amid all this political uncertainty, Yoon Suk-Yeol’s approval rating has been improving sharply to more than 30%.
