Prime Trade Ideas: Time to Turn Bullish on China?

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 Latest Trade Ideas

We summarise the latest updates on our trade ideas here, with links to the original analysis.

• John unwound his retail, US infrastructure and European equity index positions. He is now up 2% against the S&P 500.
• We flipped to bearish USD/CNH. We also closed out of our bearish INR/USD and KRW/URD biases. Our remaining three biases are unchanged (bullish THB, bearish TWD and neutral SGD).
• We turned neutral-bearish on ethereum and remained equally bearish on bitcoin over the next two to four weeks.

Bilal’s Asset Allocation Update

Find Bilal’s latest asset allocation biases here.

• We continue to advocate our ‘everything breaks’ portfolio. The core rationale is that we are entering a new regime of higher interest rates – something investors have not faced for decade. And with inflation expected to average over 6% across the UK and Spain, 5.5% in Germany, and 4.5% in the US, it is hard to see why central banks would be willing to end their hiking cycles anytime soon.
• With this backdrop, we continue to like to be overweight cash. Elsewhere, we think most assets will underperform, whether equities, bonds, property or crypto. That is why we continue to be underweight or neutral on these asset classes.
• The wildcard are commodities – the medium-term picture is bullish energy, but recession worries are near-term bearish. For now, we remain neutral commodities.

John Tierney’s US Equity ETF Biases

Find John’s full list of ETF biases here. Alternatively, they are in the table below.

• John adjusted his ETF portfolio once more. This time he has exited his Retail and US Infrastructure trades (vs S&P 500) on the basis that he believes they will perform in line with the market going forward. He also unwound his short European equity index positions with the Eurozone expected to experience a milder than recession than previously believed.
• John previously launched a new framework! His methodology remained the same, but he now tracks his performance (relative to the S&P 500). In doing so, he presents trades in long/short format rather than over/underweight or marketweight.

Henry’s European ETF Biases

Henry made this call back in March. The premise still holds, and we review short-term adjustments periodically.

• Long-term overweight renewable energy (FAN, INRG): The EU remains hugely exposed to Russian energy – not just in gas but nearly all fossil fuels. It means that simply replacing the supply of Russian gas energy with other sources may be practically difficult (due to infrastructure) as well as geopolitically unattractive. Longer term, a concerted increase in renewables spend is highly likely.
• Paring overweight financials exposure. European stocks have faced substantial volatility as of late, from Russian gas supply, ECB policy, and Italian politics. It has meant we have pared exposure to the financial sector. Long term, however, we see strategic value in overweighting financials (CB5).

Cryptocurrency Models

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

• We are neutral-bearish bitcoinover the next two to four weeks. On-chain/flow signals no longer bullish while the macro backdrop remains poor for the cryptocurrency.
• We are neutral-bearish ethereumover the next two to four weeks. In short, a poor macro backdrop, alongside the disastrous collapse of the FTX has presented crypto markets with a resilient headwind. Over a longer horizon, we see value in being long ethereum.

Discretionary Macro

Our latest discretionary macro biases in collaboration with SGX can be found here (FX) and here (Commodities and China Growth Tracker) while our latest views on rates in collaboration with TMX can be found here. We also examine investor positioning with CME here.

• In our latest SGX Asia Currencies Insights update, weswitched from bullish to bearish on USD/CNH, and closed out our bearish INR/USD and KRW/USD bias. Elsewhere, we remain bullish THB, bearish TWD and neutral on SGD.
• In our latest SGX Commodities Insights and China Growth Tracker update, we remained bearish on iron ore as Covid-19 cases continued to build. Our next update will be posted this week – watch out!
• In our latest TMX piece, we are bullish Canadian rates (two- and 10-year) and bearish US rates (two- and 10-year). This is because we think the Fed will end up hiking more than the Bank of Canada, an opposing view to the market, while Canadian housing is more vulnerable than US housing.
• In our latest CME FX update, we are bearish GBP and think most of the UK optimism has peaked.

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.