Prime Trade Ideas: Our 50 Favourites in Asset Allocation, Equities, Crypto, FX and Rates

We consolidated 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.

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 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 updates below. Alternatively, his full list of biases are in the table below.

• Neutral Retail (XRT): We initially favoured being underweight in the retail XTF on 10 June 2021. Since then, it had underperformed the S&P500 (SPX) by 32%. Valuation metrics have returned to near pre-pandemic levels, and the price is near the pre-pandemic trendline. John expects its performance to be more in line with the broader market going forward.
• Overweight Energy (XOP, OIH): The XOP ETF covers exploration and production companies in the oil and gas industry. They will be primary beneficiaries of high energy prices and the sharp industry turn to prioritizing free cash flow over boundless CAPEX. The OIH ETF will likely benefit from oil services companies helping E&P companies to get more out of their CAPEX dollars.
• Underweight Materials (XLB): The XLB ETF has outperformed the SPX by 1.5% since we recommended an overweight on 14 April 2022. John’s bias switched to a tactical underweight largely because of weakness in industrial metals commodities due to the China Covid lockdowns, and the prospect of a slowing economy as the Fed raises rates to fight inflation.
• Overweight Homebuilders (XHB): Barring outright economic collapse or a major crisis, homebuilders can keep building and making money. We retain our overweight homebuilders (XHB) bias.

Cryptocurrency Models

Find our latest bitcoin signals here and our latest ethereum signals here.

• Bearish Bitcoin: We had noted that higher US rates had caught up with bitcoin, while tighter liquidity conditions would continue to hurt risk markets; the macro backdrop remained bearish for bitcoin. Meanwhile, there are two bullish, three bearish, and two neutral signals in on-chain/flow signals; on-chain/flow signals are net-bearish. We retained our net-bearish bias on bitcoin.
• Bearish Ethereum: Our latest macro signals suggested it’s a bearish environment for ethereum. As did our on-chain/flow signals. Overall, we retained our net-bearish bias on ethereum.

FX and Rates

Find our latest discretionary macro biases in collaboration with SGX here and our latest FX options insights in collaboration with CME here.

• Bullish USD/CNH: We have a bullish bias on USD/CNH until the PBoC clearly intervenes to stop renminbi weakness. Our target remains 7.00 on USD/CNH.
• Bullish USD/TWD: Among North Asian currencies that are all vulnerable to sell off in line with China, we remain bullish USD/TWD.
• Neutral KRW: While the direction of KRW will be beholden to the broad dollar trend and the direction of CNY, we expect authorities to slow the pace of any won weakening against the dollar. We retain our neutral bias on KRW.
• Neutral SGD: S$NEER continues to trade above the band’s midpoint, leaving limited room for further appreciation within the current policy settings. This lack of near-term flexibility will leave USD/SGD to trade firmly with broad USD dynamics. And with the latest higher-than-expected reading on US inflation, any near-term pullback in the dollar seems unlikely. We retain our neutral bias on SGD.
• Bullish a July CAD/USD Call-Spread: A combination of a hawkish Bank of Canada and higher oil prices could see Canadian dollar strength in coming months. The Canadian dollar is at the bottom of its 2022 trading range, and we could see a return to the top of the range. A two-month CAD/USD call spread could be attractive in such a scenario.

Momentum Models

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 ten-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 ten-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.