1. The US Fed May Find It Hard NOT to Cut Rates in 2024
- Risk asset markets are driven by rising Global Liquidity and falling inflation. Low inflation in 2024 will be sufficient to justify a significant change in direction by the US Fed
- Cyclical analysis points to a further sizeable improvement in Global Liquidity conditions over the next 12-18 months
- Investment regime is heading towards its next phase of Calmwhich favors equities and sees steeper yield curves ahead
2. Steno Signals #75 – The 2007/2008 Playbook Is Useful Again
- Happy Sunday and welcome to our weekly flagship editorial.
- The soft landing narrative has seen material tailwinds over the past 6-8 weeks, while the recession narrative is fading fast.
- This is the first prerequisite for an actual recession as a recession never arrives when everyone plans for one.
3. Investment Opportunities From A Global Leadership Review
- Global equities are surging, led by growth stocks. Stay with the current leadership until year-end as hedge funds are likely to engage in a beta chase for performance.
- U.S. stocks are still the leaders, especially the megacap growth stocks.
- Set-Ups for a new leadership are emerging in Europe and EM ex-China. Wait until early 2024 to re-evaluate the evolution of leadership before making any decisions on rotation.
4. End of Mandatory Lock-Up Periods for 53 Companies in Korea in December 2023
- We discuss the end of the mandatory lock-up periods for 53 stocks in Korea in December 2023, among which 6 are in KOSPI and 47 are in KOSDAQ.
- These 53 stocks on average could be subject to further selling pressures in December and could underperform relative to the market.
- Among these 53 stocks, top five market cap stocks include Doosan Robotics, Studio Dragon, Asicland, Manyo Factory, and Curocell.
5. Positioning Watch – All About the Soft Landing Narrative
- Hello everyone, and welcome back to our weekly positioning watch, where we as always try to dig down into the latest positioning data and give you an overview of what’s moving narrative currently.
- Sentiment and positioning are still skewed towards hopes of a soft landing, with bets being placed on lower yields, a weaker dollar, booming equities and almost non-existent credit spreads – ironically a prime condition for an upcoming recession (which is still our base case for H1 2024).
- General media and story counts are also all about the soft landing vs recession, with the mentionings of “recession” back at pre-COVID levels, while soft landing counts are on the rise, although pulling a bit back from recent highs.
6. VIX Isn’t Broken. It Is Diluted by 0DTE Options That Have Shifted Target Risk Windows.
- Geo-Politics are tense. Monetary policies are in contraction. Rates are on hawkish pause. Inflation is far from tamed. Financial conditions remain tight. VIX should be anything but sanguine.
- Any misjudgment across politicians, central bankers or businesses could send equities tanking or soaring. Yet the VIX is sending a calming signal.
- VIX isn’t broken. It has been diluted by rise of Zero DTE (0DTE) options which have shifted risk pricing windows away from VIX target expiry range.
7. 5 Things We Watch: CBs, Eurflation, OPEC, Ifo, Dutch Politics
- We start off this week’s 5 Things We Watch by having a look at the reactions of CBs.
- This is followed by talking about EURflation and the upcoming OPEC meeting and we then move on to talking about the Ifo numbers released last week while lastly finishing off with Dutch politics.
- The Fed is the most plausible “pauser”.
8. 7 Reasons to Embrace the Melt-Up Into Year-End
- We wouldn’t go as far as to call the current circumstance a generational buying opportunity, but a rare “fat pitch” that comes along only once or twice per decade.
- The current episode of strong breadth thrust off the market bottom in late October is a rare and clear, and extraordinary, trading signal of a major market bottom.
- We believe investors should, at a minimum, embrace the likely melt-up into year-end and re-evaluate market conditions in January.
9. Vietnam Poised to Be Winner in Global Competition for Investments
- Vietnam’s economy is regaining its footing after a difficult first half in 2023. Industrial activity and trade picking up, complementing still-healthy growth in the services sector. y.
- Despite the cyclical difficulties, foreign investments into Vietnam are on the up. Advantageous economic geography and diplomacy are powerful pull factors.
- However, defective infrastructure, including in transport and utilities, limits the scope of Hanoi’s economic ambitions. These must be fixed if investments are to remain in Vietnam.
10. G3 Central Bank Watch: More Fuel to the 2007 = 2023 Analogy
- We have used the 2007 = 2023 analogy a few times already this year and we continue to find coincidental evidence that looks a lot like the emerging pressures built up in the quarters preceding the financial crisis.
- The outcome of 2024 is still up in the air, but credit indicators do not look pretty ahead of next year when we combine the impulse in China, the US and the Euro area in an aggregate model and judging from the central bank behavior, we see a lot of similarities to 2007 across the BoJ, the Fed and the ECB.
- Let’s briefly explain why in this central bank watch piece!
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