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Improving earnings estimate revisions are a cyclical tailwind for the equity rally to broaden out.

What We Got Right and Wrong (4Q25) | Watch

• RIGHT: Staying anchored to the Macro Risk Indicator and the jobless-recovery framework proved correct, allowing us to remain risk-on through Q4 despite labor and housing concerns. EM over DM (especially Brazil), a tactical rebound in yields, selective FX cross trades, and a constructive commodities bias all broadly played out.

• WRONG: We didn’t appreciate the implications of the Takaichi election result in Japan for the JPY and JGBs, so exited our long CADJPY too early.

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US Equity Sectors, Capital Cycle vs Crowding Score. Jan 19, 2026.

The best time to invest is when a sector is uncrowded and capital scarce. Over the past three months, these shifts stand out.

1. Crowded Cyclicals:

Crowding has risen sharply in cyclicals — Banks, Industrials, and Materials. The “reflation” trade has quickly become consensus. This is not itself a reason to sell. But further upside is more reliant on improving economic data.

2. The Tech Anomaly:

Surprisingly, tech remains relatively unloved. Its capital cycle score is till favourable. Marginal returns on investment are holding up and exceed the cost of capital. This keeps tech attractive for growth at reasonable valuations.

Where “push” and “pull” align - Jan. EM/DM Leading Indicator Watch

• Cyclical macro tailwinds are strong, and our Macro Risk Indicator remains in “risk on” territory.

• Ample liquidity conditions still favor EM assets over DM assets, and we see opportunities in ex-US assets that go beyond the “sell America” narrative and are attractive on their own merits.

• This month, we take profit on our short Canadian 10y bonds trade and add a UK SONIA trade to benefit from more cuts being priced in beyond September 2026.

• We retain:

  • long Brazil equities & bonds;

  • long Indonesian equities & long IDR vs short USD;

  • long NZD vs short EUR;

  • and long KRW vs short USD.

Summary by Country:

• UK: Stagflationary again => more cuts later, not priced into SONIA curve

• Japan: “Impossible trinity” back in play => yen weaker before it gets stronger

• France: Stable LEIs, equities are outperformance candidate within DM

• Canada: Take profit on short 10y bond trade as recession risks priced out

• Brazil: Disinflation + signs of growth recovery => stay bullish

• Mexico: Growth headwinds persist, MXN poised for weakness ahead of USMCA

• Indonesia: Political risks vs improving macro set up

• South Korea: Rising growth and inflation to prompt hawkish BoK => long KRW vs short USD

Japan: The “impossible trinity” mechanism + what to watch to buy the yen

The Japan “doom loop” narrative has built momentum over the past six months, as the yen and JGB selloff has become disorderly.

We see some validity to this narrative given Takaichi’s fiscal largesse, the underlying mechanism is that policymakers are being pushed back into Japan’s “impossible trinity” problem.

Basically, Japan cannot have both exchange rate stability and such a slow pace of monetary policy normalization.

Our best guess is that USDJPY goes higher first (i.e., weaker yen) before Japanese policymakers will be forced to take action to exit the “impossible trinity” later this year. There are three key indicators to watch for when to fade the yen selloff.

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Optimism is consensus, but that’s ok for now - Jan. G3 Leading Indicator Watch | [Watch Discussion]

• US: Growth remains resilient with moderate upside risks on the back of a renewed fiscal impulse, continued Fed easing, and early signs of a manufacturing rebound.

• China: Our growth impulse leading indicator has rolled over, while liquidity tailwinds are fading at the margin. We still like Chinese tech equities.

• Eurozone: Cyclical leading indicators continue to recover. However fiscal optimism is already consensus. We are shifting our short EUR exposure to long NZD.

US

• Growth: Resilient growth, fiscal drag to reverse in 2026

• Labor: Coincident labor data still holding up, “jobless recovery” playbook intact

• Inflation: Sticky inflation to be offset by housing disinflation and soft labor markets

• Manufacturing: Manufacturing rebound still on the cards as tailwinds build

China

• Growth impulse leading indicator now neutral as liquidity tailwinds fade

• Not yet time to fade RMB strength, time to buy Chinese tech equities

Eurozone

• Cyclical leading indicators still recovering, but fiscal optimism is consensus

• Inflation stubborn, shift short EUR exposure to long NZD

EUR’s breadth vs other G10 currencies is breaking down

Global Macro Update: Short EURNZD, Short USDKRW, Long KWEB

We are refining and adding to our Global Macro Trade Ideas aligned with our 2026 Themes following recent price action and tactical model triggers. These include:

• Switch to long NZD vs short EUR

• Add long KRW vs short USD

• Add long China internet equities (KWEB)

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Echoes of 2016, 2003 and 1999: Signposts to watch - Jan. Macro Snapshot

• Our Macro Risk Indicator has only been as bullish as today on five occasions. None of these past moments since 1990 can be a perfect match, but three stand out: 2016, 2003 and 1999.

• Events in Venezuelan show that history is rhyming again. The United States is re-asserting strategic control over the Western Hemisphere. This was Pillar #1 in our recent thematic, The Primacy of Sovereignty.

Notes

• Cyclical Asset Allocation: Macro Risk Indicator as “risk-on” as ’16, ’03, and ’99

• 2016: Manufacturing recovery after rolling recession

• 2003: “Jobless” recovery with rising productivity

• 1999: High valuations and speculative mania with generational IPO

• Equity: Consensus optimism vs sound macro => energy/financial/tech barbell, EM, value

• Fixed Income: US 10y fair value range of 3.75% - 4%, watch the SOFR curve

• FX: More nuanced outlook for USD, but APAC vs EUR remains key divergence

• Commodities: Commodity outlook still strong, but parabolic metals rally due for pause

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Part 1: The appropriate amount of greed (Dec 2)

• The cyclical policy and macro backdrop remains supportive of risk assets next year. We acknowledge legitimate concerns about US labor/housing markets and high equity valuations, but still see opportunities in equities among EM, value, and laggards amid stable bond yields and a mixed dollar outlook.

• Although consensus expectations are not as uniform as last year, we once again present our 10 surprises for 2026 in tribute to Byron Wien:

Top 10 Surprises for 2026

• #1 Trump’s capex boom arrives a year late, broadens beyond AI

• #2 US growth surprises to the upside despite muted labor market

• #3 Housing disinflation breaks sticky inflation narratives

• #4 US 10y yields go nowhere, trades in a tight range around 4%

• #5 Value equities outperform growth

• #6 G10 FX divergence: Apac (AUD & NZD) over Europe (EUR & GBP)

• #7 EM equities outperform DM, led by Brazil

• #8 Oil trades below 50 and above 75 at some point during the year

• #9 China tech stocks outperform US tech stocks

• #10 Capital Cycle: US regional banks & energy services outperform

Part 2: A US-China world, and Europe is just living in it (Dec 8)

• US: Most leading indicators point to continued resilience despite muted jobs growth, and manufacturing could exceed expectations if capex broadens out amid Fed easing.

• China: The Chinese focus on net exports will mean that disinflation continues to spill over globally. We are skeptical the Chinese government is ready to revalue the RMB stronger, until they are confident in China’s leverage vs the US.

• Eurozone: Leading indicators point to a cyclical rebound but weak structural competitiveness from high energy costs and a strong euro make a reflation unlikely without a much weaker euro.

Part 3: Country-specific drivers to matter more in 2026 (Dec 11)

• Cyclical macro tailwinds remain strong as the global trend towards loose monetary policy, more fiscal easing, and resilient growth leading indicators is intact. We suspect 2026 will be a year where country-specific drivers can have more impact, leading to outsized divergences in relative performances across countries.

• New Ideas: Short USD vs long IDR; long Indonesian equities (Link to Top Global Macro Ideas)

DM

• Japan Resolving the impossible trinity problem means JPY can finally rally in 2026

• UK Growth LEIs yet to bottom, necessary to support domestic equity rally

• Canada Steady growth and inflation LEIs, 10y bond short (yield up) playing out

• Australia Accelerating nominal growth, stay long AUD vs short EUR

EM

• Brazil Disinflation the key macro driver, stick with riskparity, add on election volatility

• Mexico Growth downside risks, USMCA renegotiation looms

• Indonesia IDR and equities have catch up potential in 2026 as headwinds fade

• South Africa Broad tailwinds from easing cycle, low energy prices, high metals price

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Part 3: Country-specific drivers to matter more in 2026 (Dec 11)

• Global: Cyclical tailwinds still intact for 1H26, still supports EM over DM

DM

• Japan Resolving the impossible trinity problem means JPY can finally rally in 2026

• UK Growth LEIs yet to bottom, necessary to support domestic equity rally

• Canada Steady growth and inflation LEIs, 10y bond short (yield up) playing out

• Australia Accelerating nominal growth, stay long AUD vs short EUR

EM

• Brazil Disinflation the key macro driver, stick with riskparity, add on election volatility

• Mexico Growth downside risks, USMCA renegotiation looms

• Indonesia IDR and equities have catch up potential in 2026 as headwinds fade

• South Africa Broad tailwinds from easing cycle, low energy prices, high metals price

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Part 2: A US-China world, and Europe is just living in it (Dec 8)

US

• Growth: Steady, potential for upside surprise

• Labor: Labor market softening, ’02-’03 “jobless growth” remains the template

• Inflation: Soft labor + falling inflation => dovish Fed bias in 2026

• Consumer: Still bifurcated but steady in aggregate

• Capex: Tailwinds aligned for capex-driven upside surprise

China

• Growth: Growth outlook remains weak as structural headwinds strengthen

• Inflation: “Anti-involution” efforts helping at the margin, but disinflation persists

• Assets: Not yet time to look for CNH strength, buy dips in Chinese tech stocks

Eurozone

• Growth: Structural headwinds outweigh cyclical rebound as global pressures mount

• Inflation: Inflation outlook mixed, disinflation will be gradual

• Assets: Weaker EUR remains the release valve to maintain export competitiveness

Part 1: The appropriate amount of greed (Dec 2)

• 2025 Recap: Everything Everywhere All at Once in 2025

• Cyclical Asset Allocation: Macro Risk Indicator remains in “risk-on” territory

• Leading Indicators: LEIs paint a picture of resilient growth and inflation rolling over

• Structural Asset Allocation: Financial repression, high valuations, changing profit drivers, high real yields

• Volatility: Don’t forget to look for opportunistic long vol hedge.

Top 10 Surprises for 2026

• #1 Trump’s capex boom arrives a year late, broadens beyond AI

• #2 US growth surprises to the upside despite muted labor market

• #3 Housing disinflation breaks sticky inflation narratives

• #4 US 10y yields go nowhere, trades in a tight range around 4%

• #5 Value equities outperform growth

• #6 G10 FX divergence: Apac (AUD & NZD) over Europe (EUR & GBP)

• #7 EM equities outperform DM, led by Brazil

• #8 Oil trades below 50 and above 75 at some point during the year

• #9 China tech stocks outperform US tech stocks

• #10 Capital Cycle: US regional banks & energy services outperform

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[Thematic] - The Primacy of Sovereignty

• Accelerating mobilization in US policy echoes McKinley, FDR, and Eisenhower.

• If it continues, geographical, industrial, and technological priorities will dominate the investment landscape, not “market forces”.

• The takeaway:

  • Historically, geopolitical rivalry has spurred a rapid, large-scale and sustained US response

  • Investing alongside the pillars of sovereignty will continue to provide a durable opportunity set well beyond AI

  • Industrial policy + fiscal-monetary policy co-ordination requires selective equity exposure, alternative “safe-havens”, and real assets over nominal bonds.

Macro Snapshot; Dec, 2025

• 2025 Recap: Everything Everywhere All at Once in 2025

• Cyclical Asset Allocation: Macro Risk Indicator remains in “risk-on” territory

• Leading Indicators: LEIs paint a picture of resilient growth and inflation rolling over

• Structural Asset Allocation: Financial repression, high valuations, changing profit drivers, high real yields

• Volatility: Don’t forget to look for opportunistic long vol hedge.

Top 10 Surprises for 2026

• #1 Trump’s capex boom arrives a year late, broadens beyond AI

• #2 US growth surprises to the upside despite muted labor market

• #3 Housing disinflation breaks sticky inflation narratives

• #4 US 10y yields go nowhere, trades in a tight range around 4%

• #5 Value equities outperform growth

• #6 G10 FX divergence: Apac (AUD & NZD) over Europe (EUR & GBP)

• #7 EM equities outperform DM, led by Brazil

• #8 Oil trades below 50 and above 75 at some point during the year

• #9 China tech stocks outperform US tech stocks

• #10 Capital Cycle: US regional banks & energy services outperform

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More vol = more opportunities - Nov. EM/DM Leading Indicator Watch

• For asset allocation, cyclical regime models still prefer EM over DM. Macro risk models suggest 6m outlook favorable for risk assets.

• Given market divergences we last noted, current bout of risk-off not completely unexpected. Ultimately opportunity to add risk.

• Market volatility is creating new opportunities and reasons to take profit. We are closing long USD vs short KRW after a very favorable move over the past 2 months. We are also very close to initiating new longs in JPY and NZD.

Top Global Macro Ideas

• Find the full list of our top global macro trading ideas by asset class. Primarily rates and FX focused, with opportunistic equity trades (link)

• Observe price changes to assess idea.

DM

• JPN: Disorderly yield surge suggests JPY sell-off near exhaustion

• CAN: Lingering inflation + fading growth concerns => stick with 10y bond short (yield up)

• AUS: Growth & inflation holding up, still like short EUR vs long AUD

• NZ: Growth bottoming + NZDUSD LPPL crash exhaustion into RBNZ meeting

EM

• BRA: Inflation rolling over => stick with long bonds and long equities

• MEX: Growth backdrop remains weak, MXN likely to underperform as Banxico eases

• SK: Growth outlook continues to improve, take profit on long USD vs short KRW

• SA: Energy importer + metals exporter = structural sweet spot

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Asset Allocation Dashboard

• Find our investment ideas/portfolio positioning by time horizon. All linked to reports and charts.

• Or review our top global macro trading ideas by asset class. Primarily rates and FX focused, with opportunistic equity trades.

US resilient, China stalling, Eurozone edging higher - Nov. G3 Leading Indicator Watch

• Balance of shutdown data confirms resilient US economy. Cyclical roadmap: Fed still easing into elevated nominal GDP growth.

• US: Parallels with 2002–03. “Jobless” growth and rising productivity against backdrop of elevated excess liquidity and Fed easing.

• China: Growth LEIs and liquidity losing momentum. More stimulus needed for housing/consumer sectors.

• Eurozone: We struggle to get too excited about growth LEIs recovery given structural problems. Still like short EURUSD.

Notes

• US Growth: Still resilient

• US Inflation: Moderate inflation pressures, Fed can focus on labor market

• US 2002-03 Analog: “Jobless” growth, rising labor productivity and excess liquidity

• US Manufacturing: Lower yields, lower oil, and lower USD are manufacturing tailwinds

• China: Growth leading indicator rolling over

• China: Liquidity tailwinds slowing, more housing/consumer stimulus needed

• Eurozone: Improvements in growth leading indicators continue

• Eurozone: Inflation outlook mixed, weaker euro still playing out

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Staying the course - Nov. Macro Snapshot

• LEIs still support risk assets over the next 6m. Policy and liquidity tailwinds are intact while our growth LEIs for US, Eurozone, and China are elevated. Our “no recession” Fed easing cycle roadmap is starting to play out (stronger USD, higher equities, rising yields).

• Tactical: notable divergences in US equity markets and optimistic earnings estimates. Reason for caution with nimble portfolios.

• Despite US data blackout, available data suggests consumption and manufacturing are resilient. Watch labor and housing for further weakness.

Sector Notes

• Cyclical Asset Allocation: Growth, policy, and liquidity tailwinds persist

• Fed Easing Cycle: Equities, USD still tracking “no recession” Fed easing cycles

• Tactical Warning Signs: Notable breadth and credit divergences

• US Growth: Resilience from consumption and manufacturing …

• US Growth: … but labor and housing markets remain weak

• Equity: Earnings optimism elevated, macro tailwinds for value, EM

• Fixed Income: Yields trading around fair value

• FX: USD short squeeze thesis playing out

• Commodities: Outlook strong, energy and industrial metals still cheap vs gold

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Watchlist / Alerts

• Build and monitor your own personalized watchlist on Asset Explorer.

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• Search and filter across all major asset classes (equities, single stocks, fixed income, commodities, crypto, and more).

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Watch Demo

What We Got Right and Wrong (3Q25)

RIGHT:

• Being data dependent and anchored to models paid off. While we highlighted the downside risks worth monitoring (e.g., inventory cycle, labor market weakness), the Macro Risk Indicator shifted from neutral to risk-on as the Q3 US “growth scare” played out without turning recessionary.

WRONG:

• Most of our misses were about the trade expression/timing rather than the rationale:

  • UK growth stagnated as expected, but lingering inflation pressure means a SONIA curve trade would have been more suitable;

  • Our domestic Canada story was right, but price action was overwhelmed by global factors; and

  • KRW trades demanded quicker narrative shifts.

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The case for value: from UW to OW amid broadening tailwinds

• We are changing our long-held bias against value stocks and recommending a shift to overweight value vs growth.

• We are finally seeing alignment across A) market behavior, B) the macro outlook, and C) bottom-up fundamentals.

• On our indicators, today’s set up is as good as it has been since the GFC for value to outperform.

Our New Asset Explorer

• Search and filter across all major asset classes (equities, single stocks, fixed income, commodities, crypto, and more).

• Select multiple assets to compare and chart with our proprietary models and scores.

• Build and monitor your own personalized watchlist.

• Create custom scores to filter with.

Watch Demo

Our New Asset Explorer

• Search and filter across all major asset classes (equities, single stocks, fixed income, commodities, crypto, and more).

• Select multiple assets to compare and chart with our proprietary models and scores.

• Build and monitor your own personalized watchlist.

• Create custom scores to filter with.

Watch Demo

Notes

Lessons for today from the 1929, Nifty Fifty and Dotcom bubbles

• A bubble can go on for longer than expected due to feedback loops in investor and corporate behavior. As context to today’s AI moment, we re-visit our work on the bubbles of 1929, Nifty Fifty and Dotcom.

• Historically, there are two key signposts of a bubble nearing its end:

  • (a) Narrow market breadth

  • (b) Monetary policy tightening and liquidity headwinds

• The time to really start worrying is when the average stock starts to make lower highs and lower lows, while monetary policy pivots back towards tightening.

Opportunistic long VIX to hedge risk asset exposures

• The old saying in risk management: buy protection when you can, not when you have to.

• We’ve been intentionally opportunistic in flagging when the volatility market presents attractive risk-reward opportunities to add long vol exposure. Today, our indicators once again signal a favorable tactical setup to go long volatility.

• Our tactical “complacency” signal has triggered again for US equities. US single-stock implied volatility is now very elevated relative to the S&P index volatility.

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Research

A whiff of reflation - Oct. G3 Leading Indicator Watch

Our cyclical roadmap: Fed has eased monetary policy into a backdrop of elevated nominal GDP. Recession is unlikely if financial conditions are loose and savings rates are falling.

• US Inflation: Moderate inflation pressures

• US Consumer/Manufacturing: Signs of relief + potential for an inventory re-build cycle

• US Recession Risks: Recession unlikely if everyone dis-saves and financial conditions loose

• US Growth: 2002-03 analog in muted jobs market alongside resilient growth

• US Growth: Resilient leading indicators alongside resilient coincident growth

• China: Excess liquidity tailwinds, waiting for more housing/consumer stimulus

• China: Rebound continues for growth and inflation leading indicators

• Eurozone: Consensus too optimistic on disinflation

• Eurozone: Leading indicator improvement broadening, but structural issues remain

Opportunistic long VIX to hedge risk asset exposures

• The old saying in risk management: buy protection when you can, not when you have to.

• We’ve been intentionally opportunistic in flagging when the volatility market presents attractive risk-reward opportunities to add long vol exposure. Today, our indicators once again signal a favorable tactical setup to go long volatility.

• Our tactical “complacency” signal has triggered again for US equities. US single-stock implied volatility is now very elevated relative to the S&P index volatility.

Global Macro Update: Fed cut roadmap playing out, adjusting our top ideas

• Our “buy the rumor, sell the fact” playbook around the September Fed meeting is playing out, where the Fed cut marks a tradeable low in yields and the USD while ultimately supporting further equity gains.

• In the very short-term, we like adding tactical long VIX position amid signs of complacency. In light of this, and given some big price moves over the past week, we are narrowing our focus:

  • Take profit on long CADJPY

  • Take profit on Long INDA

  • Close flat PnL on short CNHINR

  • Change UK rates recession trade

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Research

Macro tailwinds persist + what to use as early warning indicators - Oct. Macro Snapshot

• LEIs for growth, liquidity, and policy remain supportive of 6m fwd outlook for risk assets. The incremental positive since last month: Eurozone and China growth LEIs have risen further.

• Macro backdrop remains good. However, many asset classes have low embedded risk premia and high valuations relative to history.

• We flag two early warning signs to indicate when high valuation assets are vulnerable:

  • A) VP Correction Signal; and

  • B) any signs of bear steepening, especially in response to further Fed cuts.

• Our N. American semiconductor capital cycle score remains healthy and better than tech hardware and software. Scores are also much better than European/Asian semis.

Notes

• Cyclical Asset Allocation: “Risk-on” tailwinds persist, potential for equity rally to broaden out

• Fed Easing Cycle: Tracking “no recession” Fed easing cycles so far

• US Inflation: Inflation remains above target, but leading indicators are rolling over

• Early Warning Signs: Keep calm, watch VP Correction Signal / bear steepening for warning signs

• Capital Cycle: Semis still capital scarce vs tech hardware/software, US better than Europe/Asia

• Equity: Earnings optimism elevated, macro tailwinds for EM, small caps

• Fixed Income: Yields trading near low end of fair value range, moderately biased upwards

• FX: Cyclical FX Edge model still points to USD rebound

• Commodities: Commodity outlook improving, energy and metals cheap in gold terms

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VP Monthly Flagship Reports

Leading indicators point to “risk-on” cyclical outlook - Macro Snapshot (Sep 2)

• Risk of a tactical wobble (weak seasonality, stretched CTA exposure) does not take away from bigger picture: cyclical macro backdrop is improving.

• Q3 US growth scare fading, global liquidity rising, and most central banks easing in sync.

• We would look to start shifting away from our balanced allocation, preferring equities over fixed income.

• We are not blind to high valuations in US indices, but we see pockets of relative value in energy and healthcare sectors as well as select emerging markets. Within fixed income, we still prefer TIPS vs nominal bonds.

Growth steady, inflation risks known, fade policy divergence - Sep. G3 LEI Watch (Sep 11)

• US: Housing and labor markets are in slow motion deterioration, but consumption remains resilient, while there are signs of manufacturing green shoots.

• China: LEIs are still recovering, and excess liquidity will help equities more than the real economy. Deflationary spill over to other economies looks set to persist.

• Eurozone: Markets are pricing 3 Fed cuts in 2026 vs 0 cuts for the ECB. This seems too divergent given the relative growth/inflation outlook.

Supportive growth and liquidity - Sep. EM/DM LEI Watch (Sep 18)

• Tailwinds are intact for risk assets from growth, policy and liquidity, and our liquidity-driven regime model still favors EM assets over DM.

• Local conditions are starting to matter again as we are seeing divergent leading indicator outlooks within different DM and EM economies.

• We are adding short CNHINR based on an LPPL sell signal and the strong cyclical backdrop in India.

What We Got Right and Wrong (2Q25)

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Most Read Notes

Buy the rumor, sell the fact into Fed + global macro updates (Sep 12)

• We are taking profits on our long SOFR, while retaining a long USD bias into next week.

• Add long USDKRW as our preferred long USD exposure alongside short EURUSD.

• Close our short CNHKRW for flat and stop out of short AUDUSD.

Lessons from previous “no recession” Fed cuts (1984, 1995, 2024) (Sep 16)

• Asset price behavior after the first Fed cut depends heavily on if a recession materializes or not.

• Today, our leading indicators do not foresee a recession, which means the most comparable analogs are the “no recession” Fed cuts in 1984, 1995, and 2024.

• The takeaway for today is to expect further gains for equities, a rebound in the dollar, and limited downside for bond yields.

US Small Caps: From UW to neutral on macro tailwinds (Sep 23)

• We are reversing our long-held bias against US small caps and returning to a neutral outlook.

• Periods of synchronized global central bank easing have historically led to a more reflationary environment, resulting in small cap outperformance.

• Macro tailwinds and inflows are likely to be meaningful drivers of small cap outperformance, but the structural quality problems remain.

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Research

US Small Caps: From UW to neutral on macro tailwinds

• We are reversing our long-held bias against US small caps and returning to a neutral outlook.

• Periods of synchronized global central bank easing have historically led to a more reflationary environment, resulting in small cap outperformance.

• Macro tailwinds and inflows are likely to be meaningful drivers of small cap outperformance, but the structural quality problems remain.

Buy the rumor, sell the fact into Fed + global macro updates

• Take profits on our long SOFR, while retaining a long USD bias into next week.

• Add long USDKRW as our preferred long USD exposure alongside short EURUSD.

• Close our short CNHKRW for flat and stop out of short AUDUSD.

Our New Asset Explorer

• Search and filter across all major asset classes (equities, single stocks, fixed income, commodities, crypto, and more).

• Select multiple assets to compare and chart with our proprietary models and scores.

• Build and monitor your own personalized watchlist.

• Create custom scores to filter with.

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Research

Supportive growth and liquidity - Sep. EM/DM Leading Indicator Watch

• Tailwinds are intact for risk assets from growth, policy and liquidity, and our liquidity-driven regime model still favors EM assets over DM.

• Local conditions are starting to matter again as we are seeing divergent leading indicator outlooks within different DM and EM economies.

• We are adding short CNHINR based on an LPPL sell signal and the strong cyclical backdrop in India.

DM

• UK - Inflation sticky above target but real yields now offer value

• Japan - More signs of peak inflation, more yen weakness ahead

• Canada - Labor market fears priced in, stick with long CADJPY

• New Zealand - Growth and inflation LEI resilient, RBNZ expectations too dovish

EM

• India - Strong growth, low inflation => stick with equities, short CNHINR on LPPL bubble

• Brazil - Falling inflation and growth headwinds to spur more BCB easing

• Indonesia - Growing signs of asset price dislocation amid political tensions

• South Korea - Improving growth outlook, but low carry could weigh on KRW

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Notes

Lessons from previous “no recession” Fed cuts (1984, 1995, 2024)

• Asset price behavior after the first Fed cut depends heavily on if a recession materializes or not.

• Today, our leading indicators do not foresee a recession, which means the most comparable analogs are the “no recession” Fed cuts in 1984, 1995, and 2024.

• The takeaway for today is to expect further gains for equities, a rebound in the dollar, and limited downside for bond yields.

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Research

Growth steady, inflation risks known, fade policy divergence - September G3 Leading Indicator Watch

Video Discussion

• US: Housing and labor markets are in slow motion deterioration, but consumption remains resilient, while there are signs of manufacturing green shoots.

• China: LEIs are still recovering, and excess liquidity will help equities more than the real economy. Deflationary spill over to other economies looks set to persist.

• Eurozone: Markets are pricing 3 Fed cuts in 2026 vs 0 cuts for the ECB. This seems too divergent given the relative growth/inflation outlook

Notes

• Buy the rumor, sell the fact into Fed + global macro updates: We are taking profits on our long SOFR, while retaining a long USD bias into next week. We add long USDKRW as our preferred long USD exposure alongside short EURUSD. We close our short CNHKRW for flat and stop out of short AUDUSD.

• Eurozone Inflation: SOFR vs Euribor pricing too divergent, 2026 priced for 3 Fed cuts, 0 ECB cuts: With inflation falling and growth steady, EUR real yields (e.g. 5y5y real OIS) seem too high. Meanwhile, our ECB regime model remains firmly in the easing regime.

Research

Leading indicators point to “risk-on” cyclical outlook - Sep. Macro Snapshot

• Risk of a tactical wobble (weak seasonality, stretched CTA exposure) does not take away from bigger picture: cyclical macro backdrop is improving.

• Q3 US growth scare fading, global liquidity rising, and most central banks easing in sync.

• We would look to start shifting away from our balanced allocation, preferring equities over fixed income.

• We are not blind to high valuations in US indices, but we see pockets of relative value in energy and healthcare sectors as well as select emerging markets. Within fixed income, we still prefer TIPS vs nominal bonds.

Notes

• Cyclical Asset Allocation: LEIs show “risk-on” tailwinds, as US growth scare fades

• Cyclical Asset Allocation: Improving macro outlook driven by liquidity, policy and growth

• US Growth: Still resilient growth LEI, as GDPNow and services recover

• US Growth: Household savings rate falls again, fiscal deficit remains large

• US Inflation: First sign of inflation pass-through, one to keep an eye on

• Equity: Earnings LEI steady but high US valuations suggest being selective

• Fixed Income: Tactical signals suggest long-end yields biased higher

• FX: Tactical and cyclical bullish in

  dicators aligning for a US dollar rebound

• Commodities: Commodity outlook continues to improve, stick with gold exposure

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