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. US Lands Some Disinflation In Feb-25
- The upwards trend in monthly US inflation of the past several months broke in February with a surprisingly steep slowing to 0.2% m-o-m, although airfares drove the downside.
- Drift in consensus expectations is not yet obviously broken, with this outcome 0.2pp above forecasts from a month ago. A rebound after Easter remains likely.
- Disinflation is unlikely to dissuade the Fed from holding rates in March. We doubt soft surveys will translate to recessionary conditions, so we still see no more Fed cuts.
2. HEW: Payback In Trade And Pricing
- Equities are facing difficulties due to unpredictable trade policies and retaliations, which are affecting profit forecasts. Despite this, hard data remains strong, although low airfares are impacting the US CPI. There has been a decrease in optimism about Europe.
- The Federal Reserve and the Bank of England are likely to maintain current interest rates in the coming week as there are no clear signs of a downturn. Two MPC members are expected to dissent for a 25bp cut to avoid acknowledging a previous error.
- Other upcoming announcements include those from the Bank of Japan, the Swiss National Bank, and the Riksbank.
3. The Week Ahead – Tariffs Kick In; Europe Kicks Off With Fiscal Easing
- German fiscal announcement leads to increase in bond yields and euro rally
- US implements 25% tariffs on Canada and Mexico, additional tariffs on China
- China retaliates with tariffs on US energy products and adding American firms to unreliable entity list
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4. Asian Equities: Preserving Capital in 2025 – Parallels and Contrasts from 2018
- As the trade war unfolds, more market volatility seems likely. In the 2018 episode China and Korea drove Asian drawdown. But today, China exports far less to America than earlier.
- The 2025 trade war is more expansive, with larger tariffs being imposed. In 2018, the defensives and non-tradables outperformed. Similar sectors, but not the same markets could do well now.
- Our Capital Preservation Basket presents eight cheap stocks with domestic revenue exposure and earnings estimate increases over past six months. They are from HK/China (5), Philippines (2) and Korea (1).
5. Volatility, Tariffs, and a Potential Recession: Breaking Down Macro Chaos | The New Barbarians #011
- Market volatility continues, with futures down across the board
- Atlanta Fed’s GDP nowcast turns negative for the first time since 2022
- Winners in the market so far this year include gold, European stocks, and bonds
This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only.
6. Investors Run and Hide
- Investors are scrambling for safety as tariffs reshape the global financial order.
- Capital is flowing into short-term Treasuries at an increasing pace.
- Gold has been a steady haven, but will bitcoin also emerge as a safe haven.
7. ASIA: Portfolio Positioning During US Bear Market
- The US has entered the first leg of its bear market. Administration officials have taken a “no pain, no gain” stance, with policy priorities taking precedence over market moves.
- Sequencing problems start as tariffs and DOGE policies are enacted first, which negatively affect inflation and economic growth. Atlanta Fed GDPNow forecasts a recession within a year.
- Asian markets will be pulled down as part of the US risk-off trade. Regarding relative performance, HK/China will benefit from the underweight exposure of foreign funds and better valuations.
8. 2025 Global Investment Recommendations
- From a business cycle perspective, Trading Post is overweight global equities, and underweight sovereign bonds. Within global equities the bias is towards growth and momentum stocks.
- In favour are industrials, energy, European & US defence, tech hardware companies and consumer discretionary in the second half of the year, along with export cyclicals.
- Expect the Fed to cut interest rates once this year and the ECB by 125bp in total and for the BoJ to raise by 75bp.
9. The Sky Is Falling!?
- The recent decline in US equities only smells like a recession, might not taste like one yet
- Broader and timelier measures of the economy do not seem to be as soggy as the early indications from headline GDP at this time
- My weekly Recession Odds indicator, which takes into account a range of indicators with diversified coverage, offers another angle on the ongoing recession debate
10. Heavy Metal Trade War
- Volatility in US trade policy continues a cleaner tightening trend against China in the well-established tech war. Tariffs are a tool, but so are export restrictions.
- China expanded restrictions on rare earth mineral exports to license critical materials like tungsten. The West lacks friendly suppliers and struggles to develop alternatives.
- European defence investments may flounder. Japan and Korea may also suffer, so they can indirectly frustrate the US. Aggressive trade policy hits volumes as well as prices.
