Founder and Strategist, Entext Economics & Strategy

Sean Maher

Founder and Strategist

Entext Economics & Strategy

Entext provides institutional investors with distinctive, actionable asset allocation and thematic research, which typically challenges the market consensus. Our clients range from credit, equity and multi-asset hedge and pension funds to family offices and sovereign funds. 
 
We focus on identifying key inflection points in macro data and relative asset performance amid the 'groupthink'  and confirmation bias that characterizes most investment bank analysis.

Macro Driven Investment Insight

Macroeconomics

The broad weakness in US data which began in mid-Q1 has been sustained this month while Asian trade and Chinese growth have surprised to the upside again, underpinning EM outperformance.The consensus overweight USD/short bond duration trade is unravelling painfully – macro CTA funds are down almost 1% YTD and the composite HFRX index up only 1.6%.Japan’s near 25% forward PER discount to the S&amp;P 500 looks anomalous, given net earnings revision momentum at its strongest since 2013 and benchmark JGB yields back at zeroThe US has seen further PER expansion YTD as Japan de-rated – a flattening yield curve implies a net interest margin squeeze for US banks and further aggregate earnings downgrades.The issue of containing the errant protégé whom the Chinese nickname ‘Fatty the Third’ dominated the Xi-Trump summit meeting and helped China avoid a tougher stance on trade.A ‘grand bargain’ with China which would make N. Korea its de facto nuclear free protectorate and oversee reforms seems the most desirable outcome to all parties.Long Macau casinos and short miners has played out well, with VIP activity rebounding in Q1 on the housing wealth effect while iron ore, coking coal and steel rebar have tumbled.Another key theme coming into 2017 has been that we were likely to see a global tech supply chain trade boom, justifying an overweight in associated North Asian chip stocks etc.Trade data from Taiwan and Korea confirms a strong Q1 for the sector – the structural overweight in semis and the wider tech sector is maintained.

The broad weakness in US data which began in mid-Q1 has been sustained this month while Asian trade and Chinese growth have surprised to the upside again, underpinning EM outperformance.The consensus overweight USD/short bond duration trade is unravelling painfully – macro CTA funds are down almost 1% YTD and the composite HFRX index up only 1.6%.Japan’s near 25% forward PER discount to the S&amp;P 500 looks anomalous, given net earnings revision momentum at its strongest since 2013 and benchmark JGB yields back at zeroThe US has seen further PER expansion YTD as Japan de-rated – a flattening yield curve implies a net interest margin squeeze for US banks and further aggregate earnings downgrades.The issue of containing the errant protégé whom the Chinese nickname ‘Fatty the Third’ dominated the Xi-Trump summit meeting and helped China avoid a tougher stance on trade.A ‘grand bargain’ with China which would make N. Korea its de facto nuclear free protectorate and oversee reforms seems the most desirable outcome to all parties.Long Macau casinos and short miners has played out well, with VIP activity rebounding in Q1 on the housing wealth effect while iron ore, coking coal and steel rebar have tumbled.Another key theme coming into 2017 has been that we were likely to see a global tech supply chain trade boom, justifying an overweight in associated North Asian chip stocks etc.Trade data from Taiwan and Korea confirms a strong Q1 for the sector – the structural overweight in semis and the wider tech sector is maintained.

Japan Derating Anomalous, as China Data Diverges From US…