China

While the housing downturn will be fairly mild in the US, it will be more severe abroad. Continue to favor bonds of countries whose housing fundamentals will limit rate hikes.

CCP policy stimulus will boost growth in China this year. Copper prices breached $4.00/lb on COMEX this week, as expected. We continue to forecast $4.50/lb this year, with upside price risk dominating. Iron ore also will rise, but economic and regulatory policy uncertainty clouds the outlook. We remain long the COMT and XME ETFs. We are getting tactically long BRL/USD and AUS/USD on the back of our metals view, which is constrained by China’s reversion to absolute autocracy and ability to reverse policy suddenly and unpredictably.

Why will Chinese consumer spending recover but not its industrial sectors? Will China's reopening boost the global business cycle and inflation? How fast will US core inflation fall and what are the implications for corporate profits? Are global equities pricing in enough bad news/profit contraction?

China’s semiconductor demand and imports will continue to contract in 2023H1. Despite economic reopening, Chinese consumers will hold back spending on smartphones, personal computers (PC) and other consumer electronics over the next six months. Meanwhile, overseas customers will continue to reduce their orders for electronic goods made in China following the excessive consumption experienced during the pandemic. There is more downside for both Chinese and global semiconductor share prices. We recommend a relative trade: long Chinese semiconductor stocks / short global semi stocks.

Relative to beaten-down expectations, global growth will surprise on the upside in 2023. Investors should overweight equities for now but look to turn more defensive in the second half of the year.

How to play China's reopening? What are the dichotomies in the performance of China's plays in financial markets? Why has the Chinese central bank tightened liquidity since October and what has been the impact on local rates and the RMB? Is global growth about to bottom? What is the outlook for EM stocks, currencies, credit markets as well as the broad-trade weighted US dollar?