Hamburger
Request a demo
Close
Close
Hs 2009 25 Hubble
11.07.2022
How to pair fundamental &
quantitative equity investing
It’s a frustrating time for stock-pickers. Their bottom-up analysis of company fundamentals keeps being ‘polluted’ by macro events.

Qi empowers equity managers with the ability to differentiate between the stocks that are dominated by idiosyncratic risks, versus those that are a function of the macro environment.

Qi’s model confidence measure acts as a filter. A quick & easy way to spot where a stock is macro-driven, & potentially scale down risk. Thereby freeing up time & capital to allocate to stocks where your alpha edge will make the biggest difference.
See more
Jake Weirick 09Bqxnvo7Eu Unsplash
07.07.2022
Proof! What Value
needs to outperform Growth
Not another piece of commentary opining on markets. Empirical proof of what’s driving Value versus Growth.

Attribution analysis defines what moves Qi macro-warranted fair value. In the case of US Value vs. Growth (using Vanguard ETFs VTV vs. VUG), Qi model value rose 34.9% from the start of the year to the May 24th high watermark for Value outperformance.

Spot VTV / VUG rallied 35.3% in that time. The market moved exactly as macro conditions dictated it should!

That simple statistic demonstrates the importance of the macro environment for equity managers, even when they think they are allocating on a style basis.

The chart below shows the breakdown of the VTV / VUG model move over that period.
See more
Nasa Rtzw4F02Zy8 Unsplash
04.07.2022
Macro confuses me
- is bad news now good news?
Macro relationships are in a constant state of flux. That makes it hard for bottom-up equity managers to dissect what the macro environment is doing to their portfolio.

Perhaps the best example is the market cliché about bad news being good news. Some are making that argument now – that poor economic data will stop the Fed from tightening monetary policy, & hence is equity positive.

Reality is rarely so clear-cut. Indeed the current picture is more nuanced. How can an equity PM identify the true underlying picture?

Qi demonstrates that macro factors currently explain 84% of the variance of the S&P500. The chart shows the top macro drivers.
See more
Casey Horner Rmowqdcqn2E Unsplash
29.06.2022
Staying on top of the changing
macro environment
Equity PMs already have their hands full analysing the fundamentals of hundreds of companies, plus monitoring whether their picks have a growth or value tilt.

Macro adds another layer again. And a complex one at that given the number of macro indicators, & the need to sift through them, screening for importance & impact.

It is this perceived noise & complexity that makes the macro space such a turn off.

Is there a clean, easy to understand way to monitor the constant shifts in the macro environment?

Yes, Qi. And RETINA™ in particular which will push alerts into your workflow.

The chart below popped into RETINA™ users Symphony / Slack / email channels this morning, alerting them to the fact that tracking Japanese GDP growth has edged into negative territory. Why? Because weak vehicle sales overnight detracted 0.23% from Q2 economic growth.
See more
Ferenc Horvath Skcfibu91Aa Unsplash
27.06.2022
Stagflation vs. Recession
- how to get macro transparency
How can an asset manager stay on top of the shifting macro narrative? Discerning between stagflation & recession is a tricky call, but a vital one that will dictate performance over H2’22.

Take last week’s bounce in risky assets for instance. The chart below, which can be found on Qi’s portal homepage, shows the 10 macro factors that shifted the most last week.

The good news? Several key measures of financial conditions which had deteriorated significantly in recent months, enjoyed a respite.

The Dollar liquidity squeeze eased up, real rates fell, the stress in European government bond markets reversed course & money markets started to relax expectations for Central Bank rate hikes.
See more
Nasa Hi5Dx2Obas Unsplash
23.06.2022
Recession fears escalate
- how Ai helps asset allocation
Powell’s testimony & the fall in crude oil has driven recession fears to the forefront of investors’ minds.

Traditionally, equity allocators needed to process hundreds of variables (bottom up & top down) to decide the relative winners & losers should the economic cycle turn deflationary.

Or, they can use Ai to screen global equity markets for their independent relationship with inflation expectations.

The chart below shows global equity indices. Markets to the right of the vertical line want rising inflation expectations & therefore suffer in a deflation scenario.

The y-axis is the Qi Fair Value Gap: macro-warranted fair value. Indices in red above the zero bound are rich to model, the green below are cheap.
See more
20.06.2022
How to survive higher real rates
Central Banks have been explicit – they mean to tighten financial conditions in order to get inflation down.

Qi’s Credit Impulse chart aggregates together all the macro factors that capture financial conditions – credit spreads, the level of real yields, slope of the yield curve, currency strength, money market liquidity etc.

The widespread perception would be that the Fed is the most hawkish, & the ECB only just starting to catch-up. Actually, relative to trend, European financial conditions have tightened to multi-year extremes.
See more
Spy Vs Govt
16.06.2022
SPY vs. GOVT
Model confidence for SPY vs. GOVT is 65%. The relationship between US equities & bonds is back in a clearly defined macro regime.

On Qi, SPY is 1.9 sigma (7.2%) cheap to GOVT relative to prevailing macro conditions. This is a historically significant level – we have only been in regime & this cheap to model once before going back to 2009.

That Fair Value Gap has arisen because recently equities have significantly underperformed Treasuries, but macro-warranted model value has moved sideways.
Premium content, for a full analysis sign up to a month of insights
Fed Day
15.06.2022
Fed day
Qi has no view on the likelihood or not of a 75bp hike today. Or what that WSJ ‘leak’ does for Fed credibility. We’re not in the prediction business. What the Qi framework does capture is the current relationship between any security & a wide range of macro factors.

One of the biggest moves in this recent re-pricing has been the spike in 10y US real yields. Up ~35bp this week alone.

A material tightening of financial conditions that presumably acts as a headwind to most equity markets. But which are most vulnerable? Are there any beneficiaries?

The chart below shows global equity index models that are in macro regimes, & overlays sensitivity to US real yields with Qi’s Fair Value Gap. Unsurprisingly, nearly all equity markets lie to the left hand side of the chart – they want lower real rates. ChiNext is particularly reliant on the risk free rate remaining low.

There is one outlier – MSCI Indonesia, EIDO – that is okay with higher real yields.
See more
Xle Buy The Dip
15.06.2022
XLE - buy the dip
Qi remains negative on risky assets. Macro-warranted model value continues to point lower for critical benchmarks like the S&P500 and US corporate credit.

In fact, both Investment Grade LQD & High Yield HYG US credit are lagging the deterioration in macro conditions & trade more than one sigma rich to model fair value.

Energy has already proven a star performer in 2022 but, on Qi, it’s outlook is improving again. The chart shows XLE falling in this recent risk off rout. But macro fair value has risen 16.3% over June. That divergence has opened up a 1.1 sigma (15.4%) Fair Value Gap &, on RETINA™, a bullish divergence pattern.

The improvement in macro model value reflects some of Energy’s defensive qualities. Unlike many of its peers, Energy benefits from rising real rates, wider credit spreads & tighter Dollar liquidity.
Premium content, for a full analysis sign up to a month of insights
Close
Hs 2009 25 Hubble
11.07.2022
How to pair fundamental &
quantitative equity investing
It’s a frustrating time for stock-pickers. Their bottom-up analysis of company fundamentals keeps being ‘polluted’ by macro events.

Qi empowers equity managers with the ability to differentiate between the stocks that are dominated by idiosyncratic risks, versus those that are a function of the macro environment.

Qi’s model confidence measure acts as a filter. A quick & easy way to spot where a stock is macro-driven, & potentially scale down risk. Thereby freeing up time & capital to allocate to stocks where your alpha edge will make the biggest difference.
See more
Us List Quadrants 07072022
This will be a critical earnings season. Recession talk is everywhere, but arguably earnings forecasts are the one area yet to reflect the vibe shift.

The quadrant above looks at this week’s reporters & provides two perspectives. The vertical line is our 65% threshold for a macro regime.

Stocks to the right are macro-driven. Those to the left are where stock pickers should concentrate their energies.

Managers need to know that a bet on Blackrock is primarily a bet on credit spreads, VIX & real yields. A Fair Value Gap of 8.7% suggests BLK has discounted a fair degree of good news on these fronts.

But the majority of this week’s reporters are not macro plays. Earnings & forward guidance trump economics & financial conditions. Identify what regime a stock is in, then apply the relevant analysis, be it macro or micro.
Jake Weirick 09Bqxnvo7Eu Unsplash
07.07.2022
Proof! What Value
needs to outperform Growth
Not another piece of commentary opining on markets. Empirical proof of what’s driving Value versus Growth.

Attribution analysis defines what moves Qi macro-warranted fair value. In the case of US Value vs. Growth (using Vanguard ETFs VTV vs. VUG), Qi model value rose 34.9% from the start of the year to the May 24th high watermark for Value outperformance.

Spot VTV / VUG rallied 35.3% in that time. The market moved exactly as macro conditions dictated it should!

That simple statistic demonstrates the importance of the macro environment for equity managers, even when they think they are allocating on a style basis.

The chart below shows the breakdown of the VTV / VUG model move over that period.
See more
Proofvtvvsvug
Part of it was the notion of a cyclical bounce. Stronger economic growth & forward growth expectations plus higher commodities between them account for part of the rise in model value.

But financial conditions & measures of market stress were vastly more significant. Higher real rates & wider credit spreads were responsible for nearly twice as much in terms of Growth’s underperformance.

Probably less well known is the role played by European government bond markets. The widening in peripheral spreads as markets fretted about the ECB’s hawkish pivot was the biggest single driver of Value’s outperformance.

Qi model confidence is currently 73% - macro retains strong explanatory power. Equity managers choosing their tilt for H2 2022 need to be aware of the macro environment & how that determines the Value vs Growth asset allocation decision.
Nasa Rtzw4F02Zy8 Unsplash
04.07.2022
Macro confuses me
- is bad news now good news?
Macro relationships are in a constant state of flux. That makes it hard for bottom-up equity managers to dissect what the macro environment is doing to their portfolio.

Perhaps the best example is the market cliché about bad news being good news. Some are making that argument now – that poor economic data will stop the Fed from tightening monetary policy, & hence is equity positive.

Reality is rarely so clear-cut. Indeed the current picture is more nuanced. How can an equity PM identify the true underlying picture?

Qi demonstrates that macro factors currently explain 84% of the variance of the S&P500. The chart shows the top macro drivers.
See more
Spxdrivers
Yes, the S&P500 wants lower real rates currently. Real yields have moved higher for all of 2022 until recently, when hard landing fears escalated. Some may construe that as evidence of the bad news = good news thesis.

But the biggest single positive driver is Fed rate hike expectations where sensitivity has increased significantly. Equities want an upward sloping money market curve, i.e. the economy is healthy & interest rates will be higher tomorrow than they are today.
Spxfedrateexpectations
But recession fears have inverted the money market strip; the market is now discounting rate cuts next year.

Over June, macro model value for the S&P500 fell 11.1%. Of that move, 3.2% was due to the market's shift to recession & rate cuts. In comparison, the fall in real rates hardly impacted.

In this instance, bad news is bad news. Only robust empirical analysis can quantify these relationships.

Looking at individual macro drivers in isolation is misleading. Only by pulling together the entire macro picture but then breaking it down to identify the dominant driver(s), can PMs understand the aggregate picture.
Casey Horner Rmowqdcqn2E Unsplash
29.06.2022
Staying on top of the changing
macro environment
Equity PMs already have their hands full analysing the fundamentals of hundreds of companies, plus monitoring whether their picks have a growth or value tilt.

Macro adds another layer again. And a complex one at that given the number of macro indicators, & the need to sift through them, screening for importance & impact.

It is this perceived noise & complexity that makes the macro space such a turn off.

Is there a clean, easy to understand way to monitor the constant shifts in the macro environment?

Yes, Qi. And RETINA™ in particular which will push alerts into your workflow.

The chart below popped into RETINA™ users Symphony / Slack / email channels this morning, alerting them to the fact that tracking Japanese GDP growth has edged into negative territory. Why? Because weak vehicle sales overnight detracted 0.23% from Q2 economic growth.
See more
Japangdpnowcasting
When will a stock picker ever have time to track second tier high frequency economic data like Japanese auto sales?

Qi’s Ai driven process makes macro easy to digest, thereby solving a universal problem – how to make macro simple to understand & an integral part of your investment process.
Ferenc Horvath Skcfibu91Aa Unsplash
27.06.2022
Stagflation vs. Recession
- how to get macro transparency
How can an asset manager stay on top of the shifting macro narrative? Discerning between stagflation & recession is a tricky call, but a vital one that will dictate performance over H2’22.

Take last week’s bounce in risky assets for instance. The chart below, which can be found on Qi’s portal homepage, shows the 10 macro factors that shifted the most last week.

The good news? Several key measures of financial conditions which had deteriorated significantly in recent months, enjoyed a respite.

The Dollar liquidity squeeze eased up, real rates fell, the stress in European government bond markets reversed course & money markets started to relax expectations for Central Bank rate hikes.
See more
Macrotop10
The bad news? The catalyst for that shift in financial conditions was increased recession risk. Tracking GDP growth fell significantly in the US & Europe. “Doctor” copper, often used as a leading indicator for the global business cycle, fell sharply.

A macro backdrop that supports peak inflation, less monetary tightening & a potential soft landing is risky asset positive. But one that heralds recession is anything but.

Somehow money managers need to find a way to calibrate between these two scenarios. How? Qi model value shows fair value for any security given its sensitivity to the macro factor shifts seen above.

For example, currently the mix between recession risks & easier financial conditions are producing a stalemate for the S&P500. Macro warranted model value is flat-lining at the lows.

But macro conditions have improved noticeably for US High Yield credit HYG.

Both show current market levels close to macro model value, but only credit is enjoying an improvement in underlying macro fundamentals.
Nasa Hi5Dx2Obas Unsplash
23.06.2022
Recession fears escalate
- how Ai helps asset allocation
Powell’s testimony & the fall in crude oil has driven recession fears to the forefront of investors’ minds.

Traditionally, equity allocators needed to process hundreds of variables (bottom up & top down) to decide the relative winners & losers should the economic cycle turn deflationary.

Or, they can use Ai to screen global equity markets for their independent relationship with inflation expectations.

The chart below shows global equity indices. Markets to the right of the vertical line want rising inflation expectations & therefore suffer in a deflation scenario.

The y-axis is the Qi Fair Value Gap: macro-warranted fair value. Indices in red above the zero bound are rich to model, the green below are cheap.
See more
Globalequitiesinfl
For a US equity allocator, for example, the chart immediately identifies the Russell 2000 as the most vulnerable to recession – highly reliant on rising inflation expectations & slightly rich to macro.

For anyone with an Asian focus, Singapore EWS is slightly cheap to model but it is the most reliant on reflation.
  • Qi portal users – use Optimise Trade Selection to screen your asset class for sensitivity to inflation expectations.
  • Qi API users – replicate the chart above on your portfolio’s holdings.
20.06.2022
How to survive higher real rates
Central Banks have been explicit – they mean to tighten financial conditions in order to get inflation down.

Qi’s Credit Impulse chart aggregates together all the macro factors that capture financial conditions – credit spreads, the level of real yields, slope of the yield curve, currency strength, money market liquidity etc.

The widespread perception would be that the Fed is the most hawkish, & the ECB only just starting to catch-up. Actually, relative to trend, European financial conditions have tightened to multi-year extremes.
See more
Qi Credit Impulse
How is an equity manager supposed to keep track of these shifts? Users can manipulate macro factor z-scores like this using the API.

How can an equity manager know which of their holdings are most sensitive to tighter FCIs? Via the Optimise Trade Selection function. Let’s look at EU sectors’ sensitivity to real yields as an example.

European Technology is the most reliant on low real yields currently. It has also lagged the recent sell-off & sits close to model fair value.

The other standout is EU Retail – it is highly sensitive to real yields & 0.5 standard deviations or 9.9% rich to macro fair value.
Ots Eu Sectors
For equity managers whose main risk scenario is still higher real yields, Qi reveals the two sectors most vulnerable with the best entry levels.

Run Optimise Trade Selection on the single stocks / sectors / ETFs you trade.
Fed Day
15.06.2022
Fed day
Qi has no view on the likelihood or not of a 75bp hike today. Or what that WSJ ‘leak’ does for Fed credibility. We’re not in the prediction business. What the Qi framework does capture is the current relationship between any security & a wide range of macro factors.

One of the biggest moves in this recent re-pricing has been the spike in 10y US real yields. Up ~35bp this week alone.

A material tightening of financial conditions that presumably acts as a headwind to most equity markets. But which are most vulnerable? Are there any beneficiaries?

The chart below shows global equity index models that are in macro regimes, & overlays sensitivity to US real yields with Qi’s Fair Value Gap. Unsurprisingly, nearly all equity markets lie to the left hand side of the chart – they want lower real rates. ChiNext is particularly reliant on the risk free rate remaining low.

There is one outlier – MSCI Indonesia, EIDO – that is okay with higher real yields.
See more
Global Equities 10Y Us Real Rates
Interestingly, ChiNext is rich to model value, Indonesia is cheap. That gives bears two possible trade ideas. A hawkish Fed that pushes real rates higher still would hurt ChiNext when it is already almost 2 sigma (27.1%) rich to model.

Prior to the US CPI shock, many investors were buying into the idea of a bounce in Chinese tech. That was predicated on the idea Beijing's regulatory onslaught is easing up. Be aware there is a macro dynamic at play too &, on that front, a fair degree of good news is already priced.

Indonesia’s sensitivity is significantly less but, at the margin, higher real yields help & it is two sigma (10%) cheap to macro.

Two ideas for global equity allocators to consider should real yields spike further.
Close
Thank you for request
A team member will contact you soon shortly.
Request a demo
Explore Quant Insight's unique data, analysis and solutions to understand how you and your team can easily integrate our information into your workflow.
Book a 15 minute intro call here



Or, simply complete the short enquiry form on this page, and one of our team will be in touch via email.
Name: 
Company email: 
Tel number (optional): 
Company: 
My geographical location is:

My asset class focus is:
Submit
Close
Microsoftteams Image 3
Quant Insight’s Macro Analytics
on Goldman Sachs Marquee
Goldman Sachs is embedding Qi’s data-science-driven
macro factor risk data into Marquee to offer risk
management capabilities that help provide clarity to your
investment analysis as you navigate your portfolio exposures,
asset by asset, through dynamic market conditions.
Goldman Sachs is embedding Qi’s data-science-driven macro factor risk data into Marquee to offer risk management capabilities that help provide clarity to your investment analysis as you navigate your portfolio exposures, asset by asset, through dynamic market conditions.