While macro is constantly moving, the AI wave (primarily NVIDIA) seems to be overshadowing everything else going on, being used as an argument for elevated asset prices. Will equities be wrongfooted by macro? The outlook is still positive, but risks are looming.
We have for a long time been framing real world demand as the reason why real world assets like commodities and real estate have been lagging behind. With the supply side of the equation getting tight, while demand has stayed strong, prices are starting to move, fast! And positioning follows.
Although increasing signs of survey-based economic improvements being a head-fake, it’s still possible to capitalize on the upcoming increase in ISM manufacturing. Here’s the cheapest asset to buy relative to the business cycle in each asset class!
The dovish report today implies a relief in USD-rates, which we try to capitalize on through FX.
The US CPI report came in a tad on the soft side, which is good news for the rate cut crowd, and risk assets will likely be allowed to rally further from here with lower USD-rates feeding into FCIs during May. Meanwhile, real-time gauges of activity already hint of a comeback relative to the soft April patch.
By taking the rolling beta of various assets to the performance of Global Macro Hedge Funds, we are able to generate an approximation of how macro traders are positioned in this environment. A clue: They are leaning towards a CNY devaluation too, while they are short USD fixed income and long the USD (broadly).
While economic data hasn’t been as strong as one would have hoped for, there are plenty of signs that risk assets and equities in general will do well in the coming time, which brings hot inflation prints and higher liquidity. Macro is interesting as always!
The April washout in global equities has reset the über bullish positioning in equities seen pre-April, but that leaves equity positioning more normalized right as liquidity kicks in. Time for further gains in equities? We think so.
Our PCA-tool has recently flagged SEK weakness, and with the increasing chance of a Riksbank hold tomorrow and a dovish NOK CPI report, it’s time to head out on the sidelines.
The overall dovish FOMC message Wednesday has laid the foundation for liquidity bets to perform over the coming weeks, as the hopes of rate cuts are back alive amidst the election year, which is rarely bad for risk assets.
Tonight’s FOMC decision will likely come as a surprise to markets, but the rhetoric and possible acknowledgement of market pricing will be key. We provide 5 things that we look at to understand the situation the Fed has placed themselves in.
Equities are back to winning ways, while USD rates traders agree on 0 cuts this year being a probable scenario. Meanwhile, China is likely preparing for a devaluation of the CNY, and the intervention risks in JPY pairs increases, and the next macro battle in 2024 will likely be found in EM.
Equities are back on track amidst rates traders agreeing on 0 Fed cuts being increasingly more likely. Our short and sweet morning post here.
Option-implied probabilities derived from DEC2024 SOFR options show interesting dynamics in Fixed Income sentiment, where rates traders now almost see 0 cuts or even hikes as the most favored outcome by December this year. Read how positioning data has evolved over the last week here.
Everything will be about central bank divergences going forward, as the Fed is looking to hold rates steady while ECB prepares to cut. How will it affect allocations, and what should you look out for in markets the next couple of weeks? Find out here.
Volatility was more or less muted in the beginning of the year, but the cocktail of less dovish statements from Fed officials, strong economic data and the USD wreckingball has sent volatility in the other direction. Has it moved positioning? Not really, but that doesn’t mean that it’s not important.
The hawkish US CPI report today has the potential to wreak havoc with market narratives and place the Fed in a difficult position, while commodities are in a prime position to continue their run. Read about the 5 things we watch in global macro here.
As the cyclical survey-based comeback seems to be priced in fully by markets, new fan-favorites have emerged: inflation hedges.
Markets find themselves at a crossroads as the US economy is doing better than feared, while inflation is not acting the way the Fed hoped for. Meanwhile, European disinflation continues, which paves the way for larger divergences between central banks.
Manufacturing sensitive assets have generally been outperforming broad-market benchmarks over the past weeks, despite some signs that the manufacturing boom could be short-lived. Some markets have started to agree, lowering exposure in both commodities and cyclical FX.
Markets continue to celebrate what looks to be a perfect landing, while BoJ is seemingly preparing an answer to the post-hike weakness in JPY. Read about the other 3 things we watch this week here.
We called out the cyclical rotation a couple of weeks ago, and while our trades have performed according to plan, we are starting to see signs of the trade getting too crowded to our taste.
The Li Keqiang Index posted its biggest monthly increase since 2005 in February, and multiple indicators are now blinking green for Chinese momentum.
Market positioning is finally aligning with the trends highlighted in the past weeks, and commodity positioning is now almost outright bullish for cyclical metals, while cyclical equities are moving. Read how markets are positioned here.
2024 has been better than feared for the USD, with hotter inflation data and better economic conditions paving the way for a stronger dollar, but what happens if the Fed cuts into sticky (or even rising) inflation?
Hints of a BoJ hike in as early as March sent Nikkei 225 down, while China-proxies like Hang Seng and South Korea were bid. Will a move from BoJ wreak havoc with market positioning?
Equities have been leading the way in the new year return-wise, but things are starting to indicate that other asset classes might also join the battle. We provide our take here.
Equities continue to thrive given upbeat liquidity and growth conditions, while Fixed Income and commodities have provided more of a lackluster return, but are the unpopular bets returning in positioning data?
Commodities positioning have remained fairly silent over the past few weeks, but we are seeing early signs of appetite for cyclical commodities now. Early innings of a cyclical rebound or just noise?
A possible return of cyclical momentum paired with inflation has caught the attention of macro enthusiasts, but markets continue to celebrate the promised cuts from the Fed. Will sentiment change with tonight’s meeting minutes? We elaborate on the 5 things we look at this week!