CoreMacro | Thematic Reports

The AI bubble is a different type of bubble. It is primarily an earnings bubble rather than a valuation bubble. Like all bubbles, the AI bubble will burst. For now, however, our AI demand indicators do not suggest that this is imminent.

Most of the increase in S&P 500 earnings estimates this year has stemmed from shortages. The oil shortage, which has pushed up estimates for energy companies, will fade once the military conflict is resolved. However, the shortage of semiconductors and other AI paraphernalia could persist for a while longer. As such, we are moving our recommended 12-month equity allocation from a slight underweight to neutral. We are already neutral on a 3-month horizon.

Outside Asian semiconductor producers, EM corporate earnings and profitability have seen little improvement. Despite the ceasefire in the Middle East, the medium-term outlook for EM stocks is still unattractive.

Special Report

This Special Report assesses evidence of RMB’s involvement in global carry trades, examines its structural characteristics, and identifies key indicators of a potential unwind.

Special Report

The yen carry trade will unwind this year. However, it will be triggered by a drop in “carry asset” prices and a spike in the JPY/USD, rather than by Japan’s improving interest rate differentials. Go long JPY against the USD.

Special Report

This report analyzes the structural and cyclical factors driving service spending in Chinese households and highlights sectors with promising investment opportunities for the next 6 to 12 months.

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.

Special Report

We examine past capex booms which turned into busts. Our analysis suggests that AI is following the same script as those ill-fated booms.

We recommend a new relative tech equity trade that will likely produce positive returns over the next six to 12 months, regardless of whether the AI hype continues or reverses.

Special Report

China’s policy-driven constraints prevent the “destruction” part of the creative destruction process. Instead, they entrench overcapacity, deflation, and poor profitability. We are reluctant to chase the rally in Chinese stocks in absolute terms.