Cross-Asset Strategist & Quantitative Analyst, Pennock Idea Hub

Cam Hui

Cam Hui has been professionally involved in the financial markets since 1985 in a variety of roles, both as a quantitative equity portfolio manager and as a sell-side analyst. He graduated with a degree in Computer Science from the University of British Columbia in 1980 and obtained his CFA Charter in 1989.

Cross-Asset Strategist & Quantitative Analyst

Trade Goblet Half Full in the US and Half Empty in China

Introducing Our Trend Asset Allocation Model

Pennock Idea Hub

We are creators of independent equity research. The Pennock Idea Hub team are veterans of the investment industry. Much of our team has spent their careers at Merrill Lynch, Deutsche Bank, RBC Capital Markets and Wood Gundy. We have taken every aspect of research back to the studs and returned to first principles. The Pennock Idea Hub marries the interests of the sell and buy side. 

We offer the best research for institutional investors by:

-Only publishing research from veteran analysts
-Eliminate the inherent conflicts of the traditional sell and buy side relationship
-Ensure our team is always accessible; collaboration with clients nurtures our collective success

Cross-Asset & Quantitative Research

Cross Asset Strategy

Multiple Countries / Cross Asset Strategy

About a month ago, we had suggested that investors position themselves for a global cyclical rebound (see <a href="https://www.smartkarma.com/insights/a-seismic-shift-in-factor-returns" target="_blank" rel="noopener">A Seismic Shift in Factor Returns</a>). Since then, the yield curve steepened, which is a signal that the bond market expects better growth, and flattened again back to roughly where it started. It is therefore useful to issue an interim report card on the cyclical recovery thesis and see how things are going. A review of the real-time market-based signals shows that the cyclical recovery investment theme is alive and well. A deeper analysis by region reveals more nuanced details of risks and opportunities.Of the three major regions, Europe is the most attractive. Market-based signs of a cyclical revival and the reduction of tail-risk are becoming evident. As well, valuations are highly attractive by historical standards. The combination of cheap valuation and a reflationary catalyst gives European equities the greatest appreciation potential.U.S. equities are more richly valued, but U.S. economic growth is strong and recession risk is low. Trade war risk is asymmetric. Things can’t become much worse and there is far more room for improvement. China and Asia present a mixed picture of growth. While Chinese data and policy indicate slowing growth, selected Asian data and real-time market-based indicators are suggestive of stabilization and rebound. As long as the tail-risk of a disorderly unwind of China’s debt problems do not appear, we are inclined to give the cyclical bull case the benefit of the doubt.Bottom line: Stay long the cyclical rebound theme, but keep an eye out for a rapid deterioration in China’s growth outlook.

About a month ago, we had suggested that investors position themselves for a global cyclical rebound (see A Seismic Shift in Factor Returns). Since then, the yield curve steepened, which is a signal that the bond market expects better growth, and flattened again back to roughly where it started. It is therefore useful to issue an interim report card on the cyclical recovery thesis and see how things are going. A review of the real-time market-based signals shows that the cyclical recovery investment theme is alive and well. A deeper analysis by region reveals more nuanced details of risks and opportunities.Of the three major regions, Europe is the most attractive. Market-based signs of a cyclical revival and the reduction of tail-risk are becoming evident. As well, valuations are highly attractive by historical standards. The combination of cheap valuation and a reflationary catalyst gives European equities the greatest appreciation potential.U.S. equities are more richly valued, but U.S. economic growth is strong and recession risk is low. Trade war risk is asymmetric. Things can’t become much worse and there is far more room for improvement. China and Asia present a mixed picture of growth. While Chinese data and policy indicate slowing growth, selected Asian data and real-time market-based indicators are suggestive of stabilization and rebound. As long as the tail-risk of a disorderly unwind of China’s debt problems do not appear, we are inclined to give the cyclical bull case the benefit of the doubt.Bottom line: Stay long the cyclical rebound theme, but keep an eye out for a rapid deterioration in China’s growth outlook.

Global Cyclical Recovery: Easy Come, Easy Go?