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We consolidate our favourite biases into one, easy-to-read, weekly report! Please find the original pieces linked throughout and a summary table at the end of the document. Reach out to us on Slack or email the author with any questions about the content.
An Update on Our Trade Ideas
We summarise our latest trade ideas here with links to the original analysis.
- We see the Consumer Discretionary sector of the S&P 500 heading lower in coming months. Between already high valuations and the prospect of further cuts in earnings outlook for many companies, we continue to recommend an underweight position.
- We remain bearish ethereum. The macro backdrop continues to weigh on cryptocurrency, while the outlook is no better. Moreover, on-chain/flow signals are pessimistic. In the next two to four weeks, we like to be bearish ethereum.
- We rotate our bullish USD/CNH recommendation to bearish the CNY basket. Increased policy support suggests an ongoing preference for CNH weakness. But rather than outright, we see this as versus the basket.
- Bearish CNH/SGD. The People’s Bank of China easing bias contrasts Monetary Authority of Singapore preference for a stronger SGD.
- We remain bullish INR/TWD. Another rise in oil prices has meant renewed pressure on INR at a time when China reopening has supported TWD.
- We remain bullish USD/TWD. TWD has rebounded with a pullback in the dollar and a bounce in TAIEX. But with China weakness here to stay, we think the rebound will be short lived.
- We remain neutral KRW despite increased Bank of Korea intervention. Exports are weakening on softer global demand, and risk sentiment remains volatile.
- We turn bullish on iron ore. China has started to reopen, and recent data has bounced.
Bilal’s Asset Allocation Update
Find Bilal’s latest asset allocation biases here. Note, since its release, Bilal has changed his bias to a neutral weighting in crypto.
- Our core investment view remains the same. Markets are fragile, preservation of capital is paramount, and cash is king. Overall, our bias is to be underweight equities and bonds, overweight cash and commodities, and neutral crypto.
- This is a transition year, ending the era of low interest rates since the Global Financial Crisis. So, while equity markets bounced after the Fed reassured with a 50bps hike, rather than 75bps, we should not lose sight of the amount of rate hikes to come. The Fed could raise policy rates to the 5.25% peak of the 2000s or even 8%.
- In this environment, we are likely to face constant sharp market moves. The latest was the Chinese yuan plunging, but other markets are likely to follow in the months ahead. We are tracking extreme market moves on a weekly basis.
John Tierney’s Equity ETF Update
Find John’s ETF biases here and his latest update here. Alternatively, his full list of biases are in the table below.
- Underweight consumer discretionary (XLY): The S&P500 consumer discretionary sector is down a third since late last year. The meltdown is largely due to two stocks – Amazon and Tesla. Given the prominence of these two companies, the consumer discretionary sector promises to be volatile. But from a fundamental standpoint, we think it is headed lower in coming months.
- Last week, John reiterated his bias to be underweight the consumer discretionary (XLY) sector and overweight homebuilders (XHB).
Find our latest bitcoin signals here and our latest ethereum signals here.
- Bearish bitcoin: The macro backdrop remains bearish.The bitcoin and equity correlation remains high as the probability of recession within the next 12 months is back up to 50%. Meanwhile, there is just one bullish signal versus four bearish signals and one neutral signal. We remain bearish bitcoin.
- Bearish ethereum: Our latest macro signals suggest a bearish environment for ethereum. So did our on-chain/flow signals. Overall, we retain our net-bearish bias on ethereum.
FX and Commodities
Our latest discretionary macro biases in collaboration with SGX will be released soon while our latest FX options insights in collaboration with CME can be found here.
- In our latest SGX piece we rotated our bullish USD/CNH recommendation to bearish the CNY basket, and became bearish on CNH/SGD. Elsewhere, we remain bullish INR/TWD, bullish USD/TWD, neutral KRW. And in commodities, we turn bullish on iron ore.
- Bullish a GBP/USD put spread: Three-month GBP/USD put spreads could be attractive as double-digit UK inflation, a too-cautious Bank of England, and global risk aversion point to further GBP weakness.
Find the latest Momentum Model signals in collaboration with TMX here.
- Bearish S&P/TSX 60 Index: Our one- and three-month CTA lookback momentum models are net-bearish on the S&P/TSX 60 Index.
- Bearish Canada 5-Year and 10-Year: Our one-, three-, and 12-month CTA lookback momentum models are all bearish on the Canada five- and 10-year.
- Net-bearish global equities: Our best-performing CTA lookback momentum models are bearish on the S&P500, Nikkei, and DAX. In contrast, the best-performing CTA lookback momentum models are bullish on the FTSE-100.
- Bearish global rates: Our best-performing CTA lookback momentum models are bearish on the US five- and 10-year, Japanese Government Bonds, Bunds, and Long Gilts.
Ben Ford is a Researcher at Macro Hive. Ben studied BSc Financial Mathematics at Cardiff University and MSc Finance at Cass Business School, his dissertations were on the tails of GARCH volatility models, and foreign exchange investment strategies during crises, respectively.
(The commentary contained in the above article does not constitute an offer or a solicitation, or a recommendation to implement or liquidate an investment or to carry out any other transaction. It should not be used as a basis for any investment decision or other decision. Any investment decision should be based on appropriate professional advice specific to your needs.)
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