Sectors

The Santa Claus rally has been fueled by investors optimism about a soft landing which is the least likely macro outcome in 2024. A pullback in the market is imminent as the probability of "too hot" or "too cold" will get priced in. We are downgrading Software and Services on a tactical basis to take profits but maintaining a strategic overweight in the same trade.

Following today’s US jobs data release, the Joshi rule real-time US recession indicator inched up to 0.18 and is now just a whisker from its recession event-horizon of 0.20.

In this final note for the year, we take profits and close several long-term investment positions: Overweights in Insurance and Commercial Services, and underweights in Utilities, and Retail and Commercial REITs.

The statement from last week’s Central Economic Work Conference indicates that Chinese authorities are still not considering large-scale stimulus in 2024. Odds are that a full-fledged business cycle recovery in 2024 is unlikely. Chinese share prices remain vulnerable, and strengthening in the RMB will be short-lived.

The Republican Party’s odds of winning the 2024 election will benefit, if anything, from state courts’ attempts to exclude President Trump from primary or general election ballots. Higher odds of a change of ruling party will increase stock and bond market volatility.

Vietnamese stocks may not see an immediate rally as global manufacturing and exports remain weak. But investors with longer-term horizons should stay overweight this market.

Our recommendations for blogs and X’s (on the economy, financial markets, asset allocation, bonds, quants, energy, real estate, geopolitics, and specific countries and regions) to try over the holidays.

Explore the eight main themes that will drive the returns of European assets in 2024.