15 September 2022 Equities | FX | Portfolio Updates

Prime Trade Ideas: Protecting Your Portfolio in Periods of Rampant Inflation

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.

‘Cash is king’ has become a favourite phrase of Bilal’s. He is yet to let it go – and for good reason. The market is finally catching up with our view that the Federal Reserve must hike considerably more to curb inflation. As the ‘everything bubble’ bursts, he remained underweight equities and bonds, and neutral commodities and crypto.
John updated his US equity ETF biases. He reiterates that the energy sector remains extremely attractive while he has turned marketweight on semiconductors and closed two ETF positions.
Our biases in Asia are going as planned. We look to continue our success, adding a USD/CNH call option and a bullish THB bias.
Lastly, we are marginally bullish bitcoin and neutral ethereum over the next two to four weeks.

Bilal’s Asset Allocation Update

Find Bilal’s latest asset allocation biases here.

Rarely can we point to one factor driving the performance of all markets. But since the global financial crisis in 2008, that factor is low interest rates. Now, the tide is changing; interest rates could be going to at least 5%! In our view, all this point to further downside across asset markets.
We continue to be overweight cash. This is a defensive posture but also gives us liquidity and the ability to mop up assets when they reached distressed levels. It also prevented us from losing money in August.
We remain underweight equities and bonds given our view on the above.
A lack of supply is battling with weather growth prospects; we remain neutral commodities.
We also remain neutral crypto.

John Tierney’s US Equity ETF Biases

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

There were two updates to John’s US equity biases:
- Overweight energy: While current softness in oil prices could push energy equities lower, John views this as an exceptionally attractive opportunity to add to energy positions.
- Marketweight semiconductors: John moves from overweight to marketweight – it is a tactical move. Medium term, he is bullish on the industry. After all, the world is only becoming more digital.
And he closed two ETF positions:
- Closed AWAY (reopening): Unable to capitalise on the massive travel boom, internet-based travel companies have underperformed the SPX by 25%. There is little hope they, as a group, will succeed as travel returns to normal.
- Closed OIH (energy): With little new CAPEX, it is likely to underperform relative more diversified energy companies.

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 marginally bullish bitcoinover the next two to four weeks. The macro backdrop has worsened, but on-chain/flow metrics are picking up, providing a supportive environment.
We are neutral 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 while our latest views on rates in collaboration with TMX can be found here.

In our latest SGX Asia Currencies Insights update, we add a bullish view on THB while we see value in buying an October USD/CNH call with a 7.00 strike. Meanwhile, we hold onto our biases (bearish CNH, INR, KRW, TWD; and neutral SGD).
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.