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The list is not exhaustive – Qi clients can assemble their own names using the Watchlist function. It is also notable that several are in micro rather than macro regimes. Idiosyncratic factors such as lower subscription growth are, for example, more important for Netflix which is the one lockdown stock rich versus its macro environment.

That said, from a macro perspective there is a pronounced skew to valuations being cheap. Whether working from home; day trading stimulus cheques, exercising or shopping at home, these stocks are not especially well valued by equity investors currently, at least in macro terms.

Mainstream media tends to focus on a series of fresh highs at the index level, but are single stocks providing a similar message about the delta variant keeping people away from offices?

For those looking to hedge their bets, note RETINA™ has a new bullish signal on Uber. It is -1.4 sigma (19%) cheap to model; moreover a divergence signal has arisen since spot has fallen 4.5% over the last 10 days, but Qi model value has increased 2.8%.

Qi’s model for the 5s30s US dollar swap curve is strong with confidence at 76% & rising. It suggests macro fair value is around 85.5bp. That leaves spot currently 9bp too flat.

Confirming its status as an indicator of forward growth prospects, global economic growth (Now-Casting tracking GDP for US, China, EuroZone, Japan) is the single biggest bucket. The country breakdown within that bucket is striking. The US yield curve is currently more sensitive to Chinese growth than domestic growth.

Moreover, the biggest single negative driver is China sovereign stress as measured by credit default swaps. Financial stress in China is consistent with a flatter yield curve (again, presumably reduced growth prospects).

For now, after a strong trend lower over July/August, Qi model value suggests the curve flattening is consolidating. Indeed, the flattening has overshot fundamentals to a modest degree.

While it remains in regime, this will be a vital indicator to watch for clues on how the bond market perceives the health of the global economic cycle. And, on present patterns, that means monitoring China.

Fed QT expectations is the red line. It clearly led the Q1 taper tantrum. Rate volatility spiked significantly in Feb / March &, on Qi, that was a 5 standard deviation move.

Since then we have seen a gradual drift lower &, the current snapshot suggests US interest rate volatility has reverted close to trend. Powell clearly has the capacity to surprise in today’s speech but, going into the event at least, there is no sign the bond vigilantes are particularly agitated.

An alternative interpretation would suggest the stage is set for the next exogenous shock that prompts a deviation from long term trend.

Unsurprisingly, the BoJ has followed its own path while the rate volatility market in Euros & Sterling suggest the ECB & BoE are largely derivatives of the Fed decision.

The inference from this picture confirms the current perception that the Fed will be first mover; the BoE not far behind, while rate vol markets think the ECB & BoJ are happy to maintain their uber accommodative stance for some time yet.

A brutal two week sell-off followed the introduction of Beijing’s “common prosperity” as investors wagered that it will also mean less Chinese demand for European high-margin luxury goods. And while they have recovered some lost ground on a return of risk appetite in the second half of August, they are still looking vulnerable. Qi’s RETINA™ service tracking trend and momentum is flashing a bearish signal on the iShares Stoxx 600 Personal and Household Goods ETF (EXH7) in which luxury brands account for over 40% of the overall sector. This ETF’s biggest weightings are in the luxury goods manufacturers LVMH (19%), L’Oreal (11%), Richemont (5.6%) and Hermes (5%). Qi signals are pointing to a downtrend in this sector, and while it appears to be cheap on a valuation basis to macro, model confidence is low so it looks like trend, momentum and sentiment are in the driver’s seat for now.

Checking the Oil Gauge:   Which Assets is Oil driving:
The new vibe coming out of China has also contributed to a sinking feeling felt by most commodity complexes in recent weeks. The uncertainty for China economic growth of “common prosperity” and sudden fear of lower demand for oil and other commodities was quick and harsh. But oil and copper have reverted to their long-term trend for the first time in some while. And if China is moving oil prices, it is important for investors to know that oil prices are moving a number of other assets since crude is currently serving as a reliable barometer for risk appetite.



Investors who are looking for oil to resume its bull trend can of course play this with the energy ETFs XLE, XOP and OIH, which rank as highly sensitive to oil prices. No surprise there. But also sensitive to the direction of oil are the unlikely bedfellows of Cannabis and Turkey which investors can sample through POTX and TUR, their respective ETFs (although they would be discouraged from sampling cannabis in Turkey). In addition, US government bonds also react to oil prices, with the sensitivity increasing sharply as you move out the yield curve. In fact, long term Treasuries (WN) are 19x more sensitive than 5-year Treasury futures (FV). European government bonds, by contrast, are largely indifferent to energy shifts.

FX investors should be aware that oil also moves currencies, and some that you might not expect. The usual petro-currencies have strong linkages to oil prices, but less intuitive is the TRY/JPY currency pair, which has the highest sensitivity at the moment. Again, Turkey features as a high beta play on risk appetite. The Aussie Dollar (AUD), which is well known to be highly influenced by commodities, oil included, is currently trading as very cheap. Indeed, against the USD, Euro, Japanese yen and Swiss franc it is nearing a one-year valuation low. AUD/USD is not only at a one-year extreme but at levels not seen since 2009. It seems a strong view on higher oil and commodity prices would want to include a play on AUD just now.

It should also be noted that the New Zealand Kiwi is looking cheap against safe havens like the Yen and Swiss Franc. “The message from the FX market is clear,” says Huw Roberts, Head of Analytics at Quant Insight. “A fair degree of bad news, both in terms of the global economic cycle and in terms of risk appetite, is in the price.”

Bottom’s Up for a Dovish Powell:
While the backdrop for China growth expectations has wrought havoc on the European luxury sector, commodity prices and even some commodity sensitive currencies, disappointing retail and consumer confidence data in the US fomenting economic growth concerns has largely been ignored by the US retail sector. Walmart (WMT) raised their outlook for 2021 for the second time in three months while Macy’s (M) did the same and Home Depot (HD) recorded their highest quarterly revenues ever.

But only WMT investors will need to be cheering for a dovish speech from Fed Chairman Jerome Powell on August 27. That’s because, unlike M and HD, WMT is in a strong macro-regime and is trading rich to its macro model. Since Fed QE is a dominant driver of WMT’s macro model, accounting for 36% of the model’s explanatory power, a Powell speech offering more of the current everyday low-priced monetary conditions will be a good deal.

But what about the retailers not currently driven by macro factors? “Where a model is not in a macro regime, stock pickers can have greater confidence that disappointing GDP trends won’t necessarily impact revenues and earnings,” says Roberts. “But when a model is in regime, even a bottom-up investment process needs to consider their macro risks.

Equity investors typically have less visibility on shifts in macro factors. But even macro players may lose a degree of perspective. Qi looks at macro factors in z-score terms, capturing their moves relative to long term trend. Crude's bounce this week coincided with Qi's measure showing the process of mean reversion to trend was complete.

Qi’s Optimise Trade Selection function enables users to stress test different scenarios – like crude oil shifts – across asset classes.