CoreMacro

The high-frequency Joshi Rule confirms that the US labour market is holding up. Equity investors should regard 5-10 percent selloffs as tactical buying opportunities. Bond investors should stay underweight US duration. Plus, a new high-conviction trade is to go overweight the 30-year German bund versus the 30-year US T-bond.

Special Report

In this report, we present an AI investment framework for long-term investors. We conclude that an “AI Winter” is likely to begin over the next one-to-three years. Investors should strategically favor value over growth stocks.

We remain bullish on the alpha-generating potential of Vietnamese stocks over the medium and long term. But our negative outlook on global/EM beta makes us bearish on this bourse in absolute terms over the medium term.

Japanese financial assets will finally have unfettered access to outsized returns. This performance will come in fits and starts, but we are comfortable laying our cards down on buying the yen, and Japanese industrial stocks.

There is an old joke about the drunk who searches for his keys under the light post. When asked why he is looking for his keys there, he replies that “this is where the light is.”

Mexican equity and fixed-income markets will continue outperforming their EM counterparts, regardless of whether global risk assets sell off or not. Also, we recommend a new trade: long Mexican stocks / short the S&P 500.

September job gains topped modest expectations, but year-over-year payrolls growth appears to have fallen below stall speed. We remain concerned about US activity.

Europe is not left out of the AI race. Despite lagging US and China in LLMs and AI capex, Europe is quietly making progress where it matters, including industrial adoption. European capitals and the EU seem committed to not let that technology slip away, and are investing to support a “second-wave” role in AI. Scaling remains uneven, especially for SMEs, but will not prevent productivity gains in the region.

MacroQuant remains tactically overweight equities, favors an above-benchmark duration stance in fixed-income portfolios, remains bearish on the US dollar, and is bullish on gold.

Stock market valuations are moving as a near-perfect mirror image of the US real interest rate, meaning that the Fed is underpinning the stock market. But if the market stopped believing in AI-driven profits growth, valuations would collapse, irrespective of the Fed’s efforts to underpin them. When might this happen? Plus, two new tactical trades are: long BTC versus gold; and overweight industrials.