Prime Trade Ideas: How to Beat the S&P 500

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 launched a new framework for his US equity ETF biases. The methodology revealed that he is beating the S&P 500. You can follow him here.
• We turned bearish iron ore following China’s Party Congress.
• We are neutral-bearish ethereum over the next two to four weeks.

Bilal’s Asset Allocation Update

Find Bilal’s latest asset allocation biases here.

• You need to throw out the conventional ways of investing when markets go through regime changes. Following the typical business cycle approach would have put you at losses in all asset classes, except equities.
• Our approach has been different. We argued that we are entering a new regime driven by higher interest rates. It means bonds, equities, real estate, and crypto have invariably faced harsh pressure. The one asset class we like is cash. It means you will ‘survive’ and has attractive returns through the ‘70s and ‘80s.
• So, we like to be overweight what others are underweight, namely cash, and remain underweight what others are overweight, namely bonds and equities. This is the ‘everything breaks’ portfolio.
• Elsewhere, we are neutral on commodities and crypto.

John Tierney’s US Equity ETF Biases

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

• John has launched a new framework! While his methodology remains the same, he now tracks his performance (against the S&P 500). In doing so, he presents trades in long/short format rather than over/underweight or marketweight.
• He is currently outperforming the market by 0.9%. Excluding the clean energy sector, which has been exceptionally weak recently, he would be up an average of 4.4%.
• On indices, John prefers the S&P 500 over the NASDAQ 100 or any of the major European indices.
• On themes, John is long value, leisure and airlines, regional banks, insurance, US infrastructure and clean energy. He is short growth, semiconductors, major banks and retail.

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 bitcoinover the next two to four weeks. The bullish on-chain/flow signals offset by elevated recession probabilities remain elevated with no sign of the Federal Reserve pivoting.
• We are neutral-bearish ethereumover the next two to four weeks with on-chain/flow signals unable to provide a basis for any sustained move higher following the merge.

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,we turned bullish on SGD with elevated domestic inflationary pressures likely pressuring MAS to tighten, and remained bearish on CNH, INR, and TWD, and neutral KRW. Meanwhile, our 7.00 October USD/CNH call matured in the money.
• In our latest SGX Commodities Insights and China Growth Tracker update, we turned bearish on iron ore following China’s Party Congress. Meanwhile, inventories are well stocked, supply could continue to exert downward pressure on prices.
• 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.