To The Moon

Key Findings from the Latest Monthly pack:Global monetary policy settings have moved from headwind to substantial tailwinds as central banks step up precautionary easing into a window of contained inflation and macro downside risks.The big macro edge risks are recession (+deflation) on one edge vs reacceleration (+inflation resurgence) on the other edge.The US faces heightened risk of recession given policy uncertainty and confidence shocks from the chaotic start to the year, albeit with some offsetting factors e.g. fiscal stimulus, AI capex, rising asset prices.Meanwhile the rest of the world is looking better (Japan going strong, Europe and China turning up out of slowdown + stimulating).Among the asset classes most at risk of downside given (stretched) valuations and the stage of the cy

Golden Harbinger for CommoditiesWhile gold has more than doubled over the past couple of years, the rest of commodities have been stuck in a trading range.To the extent that some degree of the gold bull market reflects monetary easing and currency debasement, the logic of catch-up is one of monetary commodities (like gold) leading the charge and real-world activity-linked commodities playing catch-up later (just like what happened in 2020-22). $Gold - main 2602(GCmain)$ Valuation Indicators — Commodities vs GoldOne key clue for possible gold-commodity rotation or even just commodity catch-up is where the valuation indicators are sitting for gold vs commodities.Gold looks expensive, while commodities look cheap.Whether it ends up being rotation

Now, some of you might be thinking: hmm yeah, ok, but we just saw bonds crap the bed during the 2022 mini-bear-market; and both stocks AND bonds ended up falling during that episode. Then add to that the fact that bonds are still basically in a bear market, and it would not be at all surprising to see some push back on the above sentiments I espoused.And that’s actually a big part of the story here.Investors have been scared and scarred away from treasuries, particularly as stocks have gone from strength to strength. That’s a big reason for why sentiment is so bearish on bonds, and why allocations have been drifted by market movements and active rotation down to the lows highlighted in the chart above.It’s all part of the process of the market cycle, but I’d also hasten to point out that b

Investor allocations to bonds have reached the lowest point since 2007.We’ve seen this happen before.Bond allocations reached major lows at both of the last two major stock market peaks (2000, 2007), and basically served as a bear market harbinger.Aside from giving clues on the stage of the market cycle, this chart also served as a contrarian bullish indicator for bonds — with treasuries turning in strong double-digit returns after those two big troughs (and doing so while stocks dropped).So I think this chart says as much about the stage of the market cycle, as it does about the importance of asset allocation (bonds performing their role as diversifiers and risk dampeners), but also about the big bullish setup in bonds in general.As discussed the other day, bonds have all the makings for

Learnings and conclusions from this week’s charts:This week we found out where the key support levels are.Seeing some short-term buy signals and “BTFD” activity.Long-term sentiment indicators are sounding cycle warning signs.Capex goes in cycles, the current cycle looks extended (esp. tech).It’s important to layout and quantify downside (and upside) risks.Overall, the initial wave of the latest risk-off episode looks to have completed with markets finding support (and clarifying the key trigger points from here). Short-term we probably get a rally, but the numerous and varied pressures building up in the system caution against complacency.For SG users only, welcome to open a CBA today and enjoy access to a trading limit of up to SGD 20,000 with upcoming 0-commission, unlimited trading on S

Here's the topics I covered:1. Treasuries: Remain bullish treasuries given cheap valuations, consensus bearish sentiment, cycle-lows in investor allocations, but monitoring technicals/macro for catalysts (and inflation on the risk side).2. EM Fixed Income: Remain bullish EM sovereign bonds given cheap valuations, improving sentiment, strong technicals, policy support, and a favorable financial conditions backdrop.3. EM Equities: Remain bullish bigger picture on EM equities given strong longer-term picture, monetary tailwinds, valuations, allocations, but On-Watch given the recent deterioration in technicals.4. LatAm Equities: With improving technicals, cheap valuations, monetary tailwinds, it otherwise looks good, but risk pricing looks too complacent given imminent geopolitical risks.5. D

When I first made this chart I had to check and re-check it a few times.Because it just looks too weird.And that’s the thing: as an analyst, sooner or later you learn (often by making an embarrassing mistake) that if something looks weird — it *is* weird and you probably need to go and find out what error you or someone else made to make it look that weird…The problem is there’s no error here.Well, no data error at least.That weird looking surge in the rolling 12-month net-change in US listed ETFs is genuine. But I am certain that some errors of a different type are going to be seen here when the dust eventually settles from this frantic ETF launch frenzy.And p.s. here’s a little something this chart doesn’t show: a big portion of ETF launches have been focused on providing “investors“ wit

Learnings and conclusions from this week’s charts:This week we found out where the key support levels are.Seeing some short-term buy signals and “BTFD” activity.Long-term sentiment indicators are sounding cycle warning signs.Capex goes in cycles, the current cycle looks extended (esp. tech).It’s important to layout and quantify downside (and upside) risks.Overall, the initial wave of the latest risk-off episode looks to have completed with markets finding support (and clarifying the key trigger points from here). Short-term we probably get a rally, but the numerous and varied pressures building up in the system caution against complacency. For SG users only, Welcome to open a CBA today and enjoy access to a trading limit of up to SGD 20,000 with upcoming 0-commission, unlimited trading on

Bank StocksLastly, it’s also worth pointing out the strength we’ve seen in global bank stocks. Breadth across countries is running at a very strong pace, and after retesting its previous big breakout in April, the global bank stock index has now broken out to new all-time highs.It’s been a long time coming for banks to finally recover to pre-GFC levels, and as I’ve noted with a few other big breakouts we’ve been seeing this year — it follows a long period of ranging and consolidation (and repair/restructure) so it’s a highly significant development.Very interesting itself as far as the stocks go, but also interesting as another arguably quite positive macro sign and signal here.For SG users only, Welcome to open a CBA today and enjoy access to a trading limit of up to SGD 20,000 with upcom

Funding ConditionsIt’s also interesting to track the trends in reported loan demand (chart above) alongside lending standards (whether banks are increasing vs decreasing hurdles and scrutiny for approvals) AND monetary policy rates.Loan demand typically will fall when economic conditions are poor and uncertainty is high, but also when interest rates are rapidly rising and at levels where the hurdle to return on investment is too high.But the key takeaway on this second chart is: loan demand is recovering, lending standards are not tightening at any alarming rate, and interest rates are steadily declining — add to that tight credit spreads, and overall its a picture of much improved and generally supportive funding conditions for corporations (good for the growth and investment outlook).For