CoreMacro

The stock market’s pre-eminent growth sector is not US tech, it is French luxuries. No other sector can compare with French luxuries’ massive and sustained pricing power. The risk for French luxuries is not a China slowdown, the risk is that the structural increase in super-wealth comes to an end. If anything though, the coming disruption from generative AI will boost super-wealth. Ironically therefore, the best investment play on generative AI might be French luxuries.

The profit outlook for the Eurozone continues to deteriorate. Find out what the drivers behind this deterioration are.

Today’s Strategy Report chartbook presents the data underpinning our view that both inflation and growth are slowing, likely pointing to a recession beginning sometime in the first half of next year. We are tactically equal weight across asset classes after being stopped out of our equity overweight on August 17th and expect our next move will be to underweight equities and overweight fixed income, in line with our twelve-month view.

Informe especial

In part 2 of this series, we discuss mainstream EM equity valuations and present the results of our cross-country analysis. The goal is to identify overweights and underweights within an EM equity portfolio.

While it may be tempting to bottom fish, we advise that investors maintain a cautious stance on Argentinian sovereign credit. Even though the election of a right-wing candidate in the coming months may boost investor sentiment, the country still faces major headwinds: more currency devaluation, and another possible default/debt restructuring.

Deflation prevails in China’s economy. Marginal interest rate cuts will be insufficient to boost growth as the economy is experiencing debt deflation and might be entering a liquidity trap. There will likely be more economic disappointments in the coming months. Chinese stocks will continue to sell off. Government bond yields will fall to new lows, and the RMB will depreciate further against the US dollar.

Indian stocks have gone up this year even as the broader EM markets have been falling. How long can Indian markets continue to rise?

European yields are testing the upper end of their recent trading range. Is the European economic outlook consistent with an imminent breakout?

Informe especial

In this special report, we discuss whether the economic conditions necessary for a stronger yen (and higher JGB yields) will materialize over the next 12-to-18 months.

Informe especial

Commentators often use notions like debt deflation, balance sheet recession, and liquidity trap interchangeably. Yet, these are different concepts. This report develops a framework and provides a diagnosis of China’s economic malaise. A follow-up report will deal with what kind of treatment is needed for a recovery. As a trade, we recommend shorting the EM equity index.