Research Summary
The research report provides a comprehensive recap of H1, 2023, and outlines a playbook for H2, 2023. The report highlights that despite the macroeconomic indicators flashing late cycle with a slowdown in manufacturing data, inverted yield curve, and overall tightening of credit, equities are displaying early cycle characteristics with technology stocks leading the rally. The report also mentions that the divergence between macro data and the equity rally is intriguing. It further discusses the performance of various sectors and industries, with a special focus on US markets, global markets, and commodities.
Actionable Insights
- Monitor the Yield Curve: The report suggests keeping an eye on the yield curve as a steep curve doesn’t bode well for markets.
- US Equities: The report recommends an allocation to Mid Cap Value and Growth, Long Low Volatility; Short High Beta, companies that have operated under previous high-rate environments, cash flow positive, and strong balance sheet.
- Global Outlook: The report suggests going long on Japan and short on China, long on USDJPY and GBPUSD, and selectively overweight on Emerging Markets while being underweight on Europe (excluding Greece).
- Fixed Income: The report recommends select Investment Grade Bonds; BB+ / BB bonds – Government Treasury Bills; Select Municipal Bonds.
- Commodities: The report advises caution in this environment with shorter-term trades.
- Alternatives: The report suggests no alternatives as it sees challenges remaining in Private Equity and Real Estate.
