Geopolitics
Investors should stay defensive on recession risks until they subside meaningfully.
China's reopening is much more positive for the Chinese economy than it is for the rest of the world, as it will boost its domestic service sector activity and consumer spending much more than the industrial economy. A slowdown in Chinese industrial activity will put downward pressure on its demand for raw materials and energy, helping the world avoid another spike in inflation. Upgrade Macau casinos to overweight as the key beneficiaries of reopening. Off-shore TMT and bank shares face structural headwinds.
Investors should bet against the global rally in risk assets and maintain a defensive positioning until recession risks verifiably abate.
Investors should bet against the global rally in risk assets and maintain a defensive positioning until recession risks verifiably abate.
Our recommendations for podcasts (on macro and markets, as well as non-work-related topics) to try over the holidays.
Prefer government bonds over stocks, defensive sectors over cyclicals, and large caps over small caps. Favor North America over other markets. Favor emerging markets like Southeast Asia and Latin America over Greater China, Turkey, and emerging Europe. Stick with aerospace/defense stocks.
Prefer government bonds over stocks, defensive sectors over cyclicals, and large caps over small caps. Favor North America over other markets. Favor emerging markets like Southeast Asia and Latin America over Greater China, Turkey, and emerging Europe. Stick with aerospace/defense stocks.
In this report, we argue that the dollar will enter a volatile trading range, before a bear market begins in earnest. That said, fundamental forces are aligning for US dollar downside.
Investors should maintain a conservative and defensive strategy until recession risks are clearly reduced.
Our best calls of the year were long defensives over cyclicals, short Russia and emerging Europe, long aerospace/defense, short Greater China, and long Latin America. Our worst call of the year was long cyber security stocks.