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. Gold: Fakeout or Generational Buying Opportunity?
- Gold has reached another all-time high at 2500, will history repeat itself? Is this another generational buying opportunity or a bull trap fakeout?
- We conclude that the upside breakout in gold prices has more room to run, though the market is extended and could pull back at any time.
- A long-term point and figure analysis of monthly prices using a 5% box and 3-box reversal shows a measured objective of 4406.
2. India to Become Next China?
- India’s rapid economic growth, coupled with China’s recent economic challenges, has fueled discussions about whether India can become the next global economic power, as China has done for decades.
- China and India, Asia’s two largest economies, have taken different economic paths in recent years.
- Analysts at UBS Global Research pointed out: “China’s post-epidemic economic recovery is weak, while India’s performance is strong.”
3. Steno Signals #114 – A Powell Put is Ueda’s Catastrophe
- Happy Sunday from Denmark!I’ve had a few days to digest Powell’s speech from Friday, and my takeaway is unequivocally dovish.
- Powell and the committee have signaled that they will not tolerate further cooling of the U.S. labor market without responding.
- This marks a full-blown shift in priorities, with inflation numbers now taking a backseat to labor market data going forward.
4. China Unlikely to Escape Middle-Income Trap Without Social or Political Reform
- As economic growth of China move to sub-5% level (a figure which may have been manipulated upward), the living standard of its lower-middle and lower class are hopeless to improve.
- Standing at USD12970 in 2023, the capita real GDP grows much slower than previous decade.
- This is the middle income trap which is experienced by other middle-income Asian countries as well, like Philippines, Thailand, and Malaysia.
5. EM Watch: 5 Charts on the Nosediving Chinese Indicators!
- China’s exports fired on all cylinders during the spring, but we are now starting to see signs of fading inventories in the US (and to some extent, Europe) again.
- We believe the front-loading of imports, with rising freight rates being a symptom of this, propelled the Chinese economy ahead of the feared tariffs implemented by the Biden administration and potentially increased under a Trump presidency.
- We know that Chinese exporters have front-loaded exports of cars and other goods ahead of the tariff deadlines in both the US and Europe, and we are now seeing freight rates moderating alongside some concerning nowcasts out of China.
6. The Week At A Glance: The slippery slope of data revisions
- Happy Monday from Europe.
- Powell is cutting, Ueda is hiking and USDJPY is heading lower.
- It sounds like a tune we have heard before, and while we are NOT on imminent recession watch, we need to be aware of the potential slippery slope once the revised cat is let out of the bag.
7. China Consumption Disappoints
- China consumption patterns are slowing and becoming more volatile at a sub sector level. There is also less certainty over new employment and wage growth.
- China’s consumption is vital to growth when production is transitioning from old economy dependency on residential investment, steel, cement and other industries.
- We forecast GDP to slow in H2 and be 4.0% in 2025
8. Energy Cable: On the inventory build-up due to China-tariffs
- The Chinese rebound story is losing momentum fast, which has important implications for Western economies and assets, while the impact from freight rates on inflation might not be as large as previously feared.
- Take aways Beta from freight rates to goods inflation is lower than usual due to inventory building in the USChinese retail and IP down some 10% from the pre-pandemic trend China’s export of disinflation will force policy makers in the West to introduce tariffs and subsidies Greetings from a sunny Copenhagen.
- This week we’ll discuss freight rates and what inventory data tells us to expect going forward and then we’ll dive into some more data points on the weak Chinese economic outlook.
9. Real Estate: India/China Rotation Sparks Sector Growth
- Uptick in Real Estate positioning driven by a shift towards Indian Real Estate stocks, which has outweighed reductions in exposure to China & HK Real Estate
- Three names stand out: Phoenix Mills, Macrotech Developers, and DLF Limited, all of which have seen ownership rise to record levels.
- New positions in Indian Real Estate by Allianz and JKC have been offset by closures in Chinese Real Estate by LO Funds and SEB, among others.
10. How Different Is the Current Unemployment Behavior?
- A climb in the unemployment rate can be associated with recessions, especially when dominated by a negative change in employment
- But the recent rise in the unemployment rate through July does not seem to be consistent with the characteristics of prior recessions on balance
- Nevertheless, further increases in the unemployment rate need not be of the same breed
