Prime Trade Ideas: our 50 favorites in asset allocation, stocks, crypto, FX and rates

0

We’ve consolidated our favorite biases into one easy-to-read weekly report! Please find the original parts linked throughout and a summary table at the end of the document. Contact us on Slack or email the author with any questions regarding the content.

Find Bilal’s latest asset allocation biases here. To note, since its release, Bilal has changed its bias for a neutral weighting in crypto.

This article is only available to Macro Hive subscribers. Sign up to receive world-class macro analysis with a daily newsletter, podcast, original content from award-winning researchers, cross-market strategy, stock insights, trade ideas, crypto stream frameworks , summaries of academic papers, explanations and market analysis. moving events, community chat room for investors, and more.

We’ve consolidated our favorite biases into one easy-to-read weekly report! Please find the original parts linked throughout and a summary table at the end of the document. Contact us on Slack or email the author with any questions regarding the content.

Bilal Asset Allocation Update

Find Bilal’s latest asset allocation biases here. To note, since its release, Bilal has changed its bias for a neutral weighting in crypto.

  • Our vision of core investing remains the same. Markets are fragile, preservation of capital is paramount and cash is king. Overall, our bias is to be underweight stocks and bonds, overweight cash commodities and neutral crypto.
  • This is a year of transition, ending the era of low interest rates since the global financial crisis. Thus, while equity markets rebounded after the Fed reassured with a 50 basis point hike, rather than 75 basis points, we should not lose sight of the magnitude of the rate hikes to come. The Fed could raise its key rates to the peak of 5.25% in the 2000s, or even 8%.
  • In this environment, we are likely to face constant and sudden market movements. The latest was the fall of the Chinese Yuan, but other markets are expected to follow in the coming months. We track extreme market movements on a weekly basis.

John Tierney’s Equity ETF Update

Finding John’s ETF biases here and its latest updates below. Alternatively, its full list of biases can be found in the table below.

  • Neutral Retail (XRT): We initially favored an underweight in the retail XTF on June 10, 2021. Since then, it had underperformed the S&P500 (SPX) by 32%. Valuation metrics have returned to near pre-pandemic levels and the price is close to the pre-pandemic trend line. John expects his performance to be more in line with that of the market as a whole.
  • Overweight Energy (XOP, OIH): The XOP ETF covers exploration and production companies in the oil and gas industry. They will be the main beneficiaries of high energy prices and the strong industry tendency to favor free cash flow over unlimited CAPEX. The OIH ETF will likely benefit as oil service companies help E&P companies make the most of their CAPEX dollars.
  • Underweight Materials (XLB): The XLB ETF has outperformed the SPX by 1.5% since we recommended an overweight on April 14, 2022. John’s bias shifted to a tactical underweight largely due to weakness in industrial metals due to China Covid lockdowns, and the prospect of a slowing economy as the Fed raises rates to fight inflation.
  • Overweight Home Builders (XHB): Barring an outright economic collapse or major crisis, homebuilders can continue to build and make money. We are maintaining our bias on overweight property builders (XHB).

Cryptocurrency models

Find our latest bitcoin signals here and our latest Ethereum signals here.

  • Bearish Bitcoin: We had noted that rising US rates had caught up with bitcoin, while tighter liquidity conditions would continue to hurt risky markets; the macro backdrop remained bearish for bitcoin. Meanwhile, there are two bullish signals, three bearish signals and two neutral signals in the chain/flow signals; chain/flow signals are sharply bearish. We have maintained our net bearish bias on bitcoin.
  • Bearish Ethereum: Our latest macro signals suggest that this is a bearish environment for Ethereum. Just like our on-chain/stream signals. Overall, we have maintained our net bearish bias on Ethereum.

FX and Rates

Find our latest discretionary macro biases in collaboration with SGX here and our latest information on FX options in collaboration with CME here.

  • USD/CNH bullish: We have a bullish bias on USD/CNH until the PBoC clearly steps in to halt renminbi weakness. Our target remains 7.00 on USD/CNH.
  • USD/TWD bullish: Among the North Asian currencies which are all vulnerable to the line selloff with China, we remain bullish on USD/TWD.
  • Neutral KRW: While the direction of the KRW will depend on the general trend of the dollar and the direction of the CNY, we expect the authorities to slow the pace of any weakening of the won against the dollar. We maintain our neutral bias on KRW.
  • SGD neutral: The S$NEER continues to trade above the midpoint of the band, leaving limited room for further appreciation under current policies. This short-term lack of flexibility will leave USD/SGD trading firmly with the broad USD momentum. And with the latest higher-than-expected reading on US inflation, any near-term dollar pullback seems unlikely. We maintain our neutral bias on SGD.
  • Upside of a July CAD/USD call spread: A combination of a hawkish Bank of Canada and higher oil prices could see the Canadian dollar strengthen in the coming months. The Canadian dollar is at the bottom of its 2022 trading range, and we could see a return to the top of the range. A two-month CAD/USD buy spread could be attractive in such a scenario.

Momentum models

Find the latest Momentum Model signals in collaboration with TMX here.

  • S&P/TSX 60 Bear Index: Our one- and three-month CTA lookback momentum models are significantly bearish on the S&P/TSX 60 Index.
  • Bearish Canada 5-year and 10-year: Our one-, three-, and 12-month CTA lookback momentum patterns are all bearish on Canada’s five- and ten-year.
  • Net bearish global equities: Our best performing CTA retrospective momentum patterns are bearish on the S&P500, Nikkei and DAX. In contrast, the best performing retrospective CTA momentum patterns are bullish on the FTSE-100.
  • Bearish Global Rates: Our best performing CTA retrospective momentum patterns are bearish on five- and ten-year US government bonds, Japanese government bonds, Bunds and long gilts.
Ben Ford is a researcher at Macro Hive. Ben studied BSc Financial Mathematics at Cardiff University and MSc Finance at Cass Business School. His theses focused respectively on GARCH volatility models and currency investment strategies during crises.

(The commentary in the above article does not constitute an offer or solicitation, or a recommendation to implement or liquidate any investment or to engage in any other transaction. It should not be relied upon as the basis for any decision investment or other decision. Any investment decision should be based on appropriate professional advice specific to your needs.)

Enter your email to read this exclusive Macro Hive

OR

START A 30 DAY FREE TRIAL

Already have a Macro Hive Prime account? Login

Share.

About Author

Comments are closed.