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Multi-Asset Strategy Team
Multi-Asset Strategy ResearchMulti-Asset Strategy Products: Multi-Asset Strategy Monthly, Multi-Asset Strategy Weekly, Absolute Essentials, Trade Alerts.
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In this week’s Essentials report we highlight potential support for US versus Emerging Market equities, a couple of key charts on Chinese assets and a potential technical inflection point for EUR/NOK.
Equities: S&P 500 optimism is stretched based on SBIs and put-call ratio; while EM equity optimism is also stretched (p1/5/8)
FX: Sentiment and momentum supportive for EUR/NOK pick-up (p3)
Bonds: EM local currency bonds break-out runs into a sentiment headwind (p12)
Focusing on ‘quality at a good price’ is our strategy looking ahead to a year that ASR believes will be characterised by a renewed slowdown in global growth, centred on US domestic demand.
In Equities, our idea is to go long MSCI USA Sector Neutral Quality versus short Min Vol. This is designed to benefit from our central scenario of global recession (several sectors with high leverage are overweight in Min Vol) but also hold up in an alternative one of global recovery.
In Credit, we still like long Investment Grade versus short High Yield in the US. Having kept pace with HY in 2019, IG should outperform in 2020 as it benefits both from its higher duration and lower credit risk. We see the large amount of BBB paper, with the associated risk of a swarm of Fallen Angels, as a bigger problem for HY than for IG; HY buyers would struggle to absorb the additional supply. Also, the current gap between HY and IG OAS does not adequately reflect: a) rising default risk as the next recession gets closer; b) the likelihood of low HY recovery rates in the next downturn; and c) some long-standing asymmetries in HY return and volatility patterns.
In FX, the backdrop favours intra-regional EM FX trades based on relative valuation and fundamental trends. Sticking with long RUB/ZAR. And, in Asia, IDR and MYR remain favoured – now versus INR and THB.
For FI ideas and themes, please see here.
In the first Essentials of 2020 we look at some key charts for the New Year. These charts look at stretched sentiment in DM and EM equities and highlight some key angles in Asian equities and FX, including dollar-yen.
This week’s key Sentiment and Positioning Take-aways:
In the final edition of Essentials for 2019, we look at 12 key charts for 2020. These charts look beneath the equity market surface, where elements of the sentiment story are becoming stretched, and also highlight key technical levels in UK assets and a couple of potential break-out stories emerging in FX and commodities.
This week’s key Sentiment and Positioning Take-aways:• US equities optimism stretched versus bonds (p2)
• EUR/GBP pessimism and GBP/USD optimism both at stretched levels (p16-17)
• Soybean Oil optimism stretched; sentiment tailwind for Cotton breakout (p20)
• Special Feature: Multi-asset positioning heading into year-end (p21-22)
We outline our fixed-income & interest rate best investing ideas for 2020, featuring duration risk, yield curve, inflation break-evens, bond spreads and more.
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