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. Korea M&A Reforms: Considering on Adopting Poison Pill in 2024
- On 4 February, numerous local media mentioned that there is an increasing probability of the Korean financial authorities introducing poison pill in order to improve corporate governance and M&A reforms.
- The main purpose of the poison pill would be to increase shareholder value, encourage the management to focus on investment and employment, and effectively defend itself against M&A attempts.
- Poison pill could have positive impact on companies with high levels of treasury shares and preferred shares. The uncertain outcome of National Assembly election in April remains a key risk.
2. Further Cracks Appearing in the US Economy
- Commercial Real Estate issues, the dog that didn’t bark in 2023, is back.
- Unlike March 2023, this cannot be fixed by liquidity injections alone.
- US employment data surprises on the upside. Further Government manipulation?
3. Where Are We In the Global Liquidity Cycle?
- January 2024 another strong month for Global Liquidity which hits US$171.7 trillion
- US Fed and China’s PBoC are in the forefront of adding liquidity
- Global Liquidity Cycle trough in October 2022. Next peak late-2025
4. Macro Regime Indicator: Time to Embrace a New Economic Dawn?
- The recent performance of the US economy prompts a reassessment of long-held market sentiments.
- As we witness an intersection of sturdy growth, moderating inflation, and evolving liquidity dynamics, investors and policymakers alike stand at a crossroads.
- This month’s ‘Macro Regime Indicator’ questions the endurance of the current (US) economic strength and its implications for inflation and asset allocation.
5. SLOOS Survey: The US Economy Is Re-Accelerating and Money Growth Is Back!
- The demand- and supply for money has bottomed out! That is the overwhelming conclusion from the quarterly survey on banking standards released by the Fed.
- The SLOOS improves further from Q4 to Q1, and especially the supply side has eased quite a bit and is almost back in neutral territory.
- The rebound in demand is underwhelming, but it also typically lags supply/financial conditions by another quarter, meaning that Q2 is the likely big rebound in loan demand.
6. Get Ready to Buy in May…
- The U.S. equity market is setting up for a price surge that begins in May, supported by positive election year seasonality and the rising likelihood of a May rate cut.
- We reiterate our belief that stock prices are likely to be choppy and trade sideways until May.
- The historical record shows that breadth thrusts, such as the one experienced off the October bottom, are long-term bullish, but need a period of consolidation and correction.
7. Positioning Watch – Spread-trades are the way to play the current environment
- Very interesting dynamics in markets lately, with the NFP report Friday shocking markets at first glance before sending them back into rally-mode, likely a signal that asset pricing will be more about underlying fundamentals and economic data rather than interest rates alone.
- Despite rate cuts being pushed back a bit by both data and central bankers, the US economy is going strong, and the “interest rates work with a lag” arguments have been swept away for now, which leaves us with good news actually being good news.
- This week’s positioning watch is chart-packed with short and concise text – Enjoy!EquitiesRetail Investors’ allocation towards stocks has remained fairly stable since 2022 and has retracted after the boom in late 2023, but despite having a high correlation with the performance in small vs big equities (Russell 2000 vs S&P 500), Large Cap has outperformed Russell 2000 and other small cap indices by MILES since 2022.
8. The Weekly Market Monitor – How China Is Pushing Stocks Higher Except at Home
- China is injecting liquidity into the markets, but ironically, with investors sick and tired of negative returns, much of this liquidity is finding its way everywhere except China.
- The downturn in commercial real estate is becoming a global phenomenon. A growing number of companies is grappling with bad real estate loans, leading to a sharp increase in provisions.
- The most recent Senior Loan Officer Opinion Survey on Bank Lending Practices (SLOOS) reveals yet another trend that the recession is already behind us.
9. Portfolio Watch: NVDA or Bust?
- Hello everyone and welcome back to yet another assessment of our macro book- and as per usual accompanied by our current macro outlook!We knock on the door to a week with yet another US CPI release- this time revised:The revision we received today proved not to be the unpleasant surprise everyone feared given the 2023 revision and Waller & Powell both having flagged it and as a result, our expectations of a soft print remain unchanged- for elaboration see here.
- While it might feel like we’re repeating ourselves, our belief in the USD and US risk assets being the best options out there hasn’t budged.
- That said, we’ve been tossing around a few ideas and topics internally over the last week: Markets haven’t continued the dramatic price movements since last Friday’s (some might label it as “fake”, see here) NFP blowout, but it’s noteworthy that short-term expectations are significantly outstripping those further along the curve.
10. Steno Signals #85 – NFP Report Full of FAKE News?
- A week of bizarre front-end volatility has come to an end.
- From “higher for longer” to banking crisis 2.0 to inflation crisis 2.0 in a matter of five trading days.
What’s up and down? It’s time to cut through the BS.
