CoreMacro

We are downgrading Brazilian equities from neutral to underweight and maintaining our underweights in Brazil's domestic bonds and sovereign credit within their respective EM portfolios. Go long Brazilian 5-year CDS as a short-term trade.

Special Report

Outside semiconductor stocks, EM/China profitability has been well below both their US peers and the levels that prevailed during the EM structural bull market in the 2000s. Over a 3- to 5-year horizon, EM/China relative equity performance versus global will be range-bound.

Special Report

China does not produce too much. It spends too little. The only viable way for China to reduce investment without raising unemployment is by lowering national savings. Doing so is likely to be politically challenging, however. This suggests that China will suffer from subpar growth and deflationary pressures for the foreseeable future.

MacroQuant recommends a slight underweight position in equities, and favors a below-benchmark duration stance in fixed-income portfolios. The model is very positive on the US dollar, neutral on gold, constructive on copper, and very bullish on oil.

Special Report

Over the past 10 years, Japan’s profit margin expansion has been driven neither by advances in labor productivity nor by operational efficiency gains, but by massive currency devaluation and lower depreciation charges. Going forward, higher wages and unit labor costs, as well as currency appreciation, will become major headwinds to margins.

Europe faces a difficult macro backdrop, but whether it slips into recession remains finely balanced. We present two perspectives before translating them into investment implications.

Global equities have reached extremes on multiple measures, none of which are reliable timing tools. But imbalances in economics and investing can build for far longer than rational analysis would predict - and usually unravel much faster than investors expect.

As long as the AI boom keeps booming, all other investment considerations will remain on the back burner. However, if the AI trade fizzles, this would expose deep-seated problems within the global economy, which could very well lead to an economic downturn as early as next year.

China's economy is slowing, but policymakers are unlikely to launch broad-based stimulus in H2. Meanwhile, the emergence of China's "Kimi moment" underscores Beijing's commitment to technological upgrading and the country's rapidly advancing AI capabilities.

Special Report

News flash: Young urban professionals are not gasping under the weight of an impossible rent burden. Investors should not be led astray by lightly examined popular narratives.