Hamburger
Request a demo
Close
Close
Macro Markets Insights
Make informed investment decisions with unique insights
 
Topical observations from the Qi macro lens. Build your investment roadmap with the best-in-class quantitative analysis and global data.
Orion Nebula 11107 1920
25.05.2021
Peak growth?
Qi pulls in Chinese tracking GDP growth from Now-Casting as a core factor for global economic growth. That hit a local high of +17% YoY & has subsequently slipped lower. The chart below shows that in z-score terms. That surge in growth was a 4 standard deviation event but the subsequent retracement has taken back more than 50% of the move.

The markets’ increased attention on China’s credit impulse – the change in new credit as a percentage of GDP growth – speaks to fears China is transitioning from the engine of global growth, to one that has already peaked.
See more
24.05.2021
The most important chart in
financial markets today
The trend / momentum outlook for Brent from RETINA™. Unsurprisingly, the profile for WTI is identical. The picture is mixed currently but should both lines move into negative territory, thereby flagging a new downtrend in crude oil, the implications are significant.
Premium content, for a full analysis sign up to a month of insights
Nasa Hi5Dx2Obas Unsplash
21.05.2021
The turn?
In US equities, Growth outperformed Value for a third consecutive day yesterday. On Qi, the valuation gap on the Value / Growth ratio (via Vanguard ETFs VTV vs. VUG) has almost halved. At the highs one week ago, Value was 6.7% rich to Growth; that now stands at 3.9% rich relative to the prevailing macro environment. Spot is catching down to macro fundamentals.
See more
Evgeni Tcherkasski Bfbhwj4Qafo Unsplash
20.05.2021
US Dollar update
The bears are back in control of the US Dollar which is nearing 2021 lows. Qi’s USD G10 Watchlist is notable on three fronts.

Macro remains important – most models are in macro regimes. The majority of crosses are behaving in line with macro fundamentals – only USDCAD shows a valuation gap of more than one sigma. There is a clear but modest skew to the Dollar being cheap to macro.
See more
Spbf2
18.05.2021
The Spanish bull
The chart shows the 10 biggest Fair Value Gaps across Qi’s models of relative value pairs for global equity indices. Five of the top 10 show IBEX 35 as rich versus its peers.

On current patterns, Spanish equities look like the high beta play for European reflation. They outperform when inflation expectations rise, crude oil increases, the European yield curve steepens, credit spreads tighten & the Euro is soft.

But a fair amount of that good news is now priced making it a potentially attractive vehicle for those thinking the European re-opening trade is due a pause.
See more
Pexels Sam Willis 3934512
17.05.2021
Taper Tantrum? Watch the ECB
Last week’s US inflation print prompted USD rate vol rate to spike but it remains just below 2021 highs. Meanwhile, European rate vol hit fresh highs last week.

The chart below captures the move in interest rate volatility, which we use to capture market expectations around Quantitative Easing, in z-score terms. The BoC & BoE have already announced plans to taper; & this picture suggests the market fears the ECB is next. The tantrum is not a uniquely US event.
See more
Casey Horner Rmowqdcqn2E Unsplash
14.05.2021
The exaggerated death of 60:40
If inflation isn’t transitory then the Fed is committing a huge policy error – one that threatens both bond & equity returns. And the traditional 60:40 balanced fund suffers enormously under this scenario.
Premium content, for a full analysis sign up to a month of insights
Omega Nebula 11053 1920
13.05.2021
Even Taiwan?
When Taiwan, with an exemplary record of managing Covid & home to best-in-class chip makers, suffers a huge equity rout, it is clear there is something else going on. The answer it seems is deleveraging with margin calls accelerating the equity sell-off.

From a Qi perspective, macro fair value for the TAIEX future is rolling over, but the speed of the down trade in spot has opened up a -0.8 sigma (8.7%) Fair Value Gap.
Premium content, for a full analysis sign up to a month of insights
Jake Weirick 09Bqxnvo7Eu Unsplash
12.05.2021
Inflation
Inflation day in the US. The mood music has started to shift with markets ascribing high commodity prices / inflation as a negative for equities. Have we reached an inflection point where price pressures become a drag on equity markets?

The chart below shows the sensitivity of US equity sectors relative to the broader market to 3 factors – inflation expectations, metal prices (copper, iron ore) & energy prices (crude oil).
See more
11.05.2021
Chinese Cyclicals
Qi has built models for the Global X MSCI universe of ETFs tracking Chinese equity sectors.

Of those in a macro regime, the Chinese Energy sector stands out. The energy complex is rich to macro model in both the US & Europe, but not to the same degree as CHIE which is 2.2 sigma (10.6%) above macro-warranted fair value.
See more
Close
Orion Nebula 11107 1920
25.05.2021
Peak growth?
Qi pulls in Chinese tracking GDP growth from Now-Casting as a core factor for global economic growth. That hit a local high of +17% YoY & has subsequently slipped lower. The chart below shows that in z-score terms. That surge in growth was a 4 standard deviation event but the subsequent retracement has taken back more than 50% of the move.

The markets’ increased attention on China’s credit impulse – the change in new credit as a percentage of GDP growth – speaks to fears China is transitioning from the engine of global growth, to one that has already peaked.
See more
Tuesday
A more aggressive fiscal response in the US, plus secular trends like green technology remain important arguments for a commodity super cycle. But China’s impact on metal prices is traditionally very strong. Unsurprisingly, the z-scores for copper & iron ore have tracked Chinese GDP growth lower.

Qi’s Optimise Trade Selection enables users to screen their holdings for sensitivity to macro factors such as these.
Tuesday2
Nasa Hi5Dx2Obas Unsplash
21.05.2021
The turn?
In US equities, Growth outperformed Value for a third consecutive day yesterday. On Qi, the valuation gap on the Value / Growth ratio (via Vanguard ETFs VTV vs. VUG) has almost halved. At the highs one week ago, Value was 6.7% rich to Growth; that now stands at 3.9% rich relative to the prevailing macro environment. Spot is catching down to macro fundamentals.
See more
Friday
That has prompted speculation the recovery in tech & growth potentially contains a broader message – that when the more defensive areas of the equity market outperforms, that rotation is signalling an earlier Fed tightening.

On Qi, that would manifest itself in a change in underlying relationships with the macro factors. The biggest driver in the current regime remains expectations around Fed Quantitative Easing. It alone accounts for 37% of model explanatory power.

The current relationship still shows QT is consistent with Value outperforming Growth. Moreover, sensitivity is not only large but rising.

For now, this looks more like a simple correction from an overshoot rather than any signal the Fed’s policy stance is shifting.
Friday2
Evgeni Tcherkasski Bfbhwj4Qafo Unsplash
20.05.2021
US Dollar update
The bears are back in control of the US Dollar which is nearing 2021 lows. Qi’s USD G10 Watchlist is notable on three fronts.

Macro remains important – most models are in macro regimes. The majority of crosses are behaving in line with macro fundamentals – only USDCAD shows a valuation gap of more than one sigma. There is a clear but modest skew to the Dollar being cheap to macro.
See more
Thursday
This is a premium content article - to see full analysis sign up for a month of insights
The USDCAD model is also interesting for its key drivers. Yes, the Canadian Dollar benefits from higher crude oil prices; but risk appetite & financial conditions dominate the current regime.

A spike in VIX & wider credit spreads are both consistent with higher USDCAD. So, a FVG of -1 sigma (-2.8%) makes it a potentially interesting play for any ongoing sell-off in risky assets.

The Antipodeans stand out as the two Dollar crosses where macro is not presently driving price action. Note, however, that RETINA™ is worth watching here. While macro model confidence is low, there is potential for a momentum signal instead. Both AUDUSD & NZDUSD are potentially carving out new uptrends - RETINA™ is tracking both.
Spbf2
18.05.2021
The Spanish bull
The chart shows the 10 biggest Fair Value Gaps across Qi’s models of relative value pairs for global equity indices. Five of the top 10 show IBEX 35 as rich versus its peers.

On current patterns, Spanish equities look like the high beta play for European reflation. They outperform when inflation expectations rise, crude oil increases, the European yield curve steepens, credit spreads tighten & the Euro is soft.

But a fair amount of that good news is now priced making it a potentially attractive vehicle for those thinking the European re-opening trade is due a pause.
See more
Tuesday
Back-testing the significance of these valuations reveals these levels are comparatively rare. For example, selling IBEX vs. Stoxx 600 at a +1.4 sigma FVG (when in regime) since 2009 produces only 5 such trades. The hit rate is 80% for an average return of +1.9%.

The equivalent numbers for the IBEX 35 vs. CAC 40 (+1.5 sigma FVG entry level) is a 73% hit rate & +0.5% average return. Since 2009 there have been 11 such instances. Selling IBEX vs DAX at a +1.1 sigma FVG since 2009 produces 16 trades, a 81% hit rate & a +0.9% average return.

History suggests these RV pairs offer an efficient expression for anyone with a tactically bearish view on European equities.
Pexels Sam Willis 3934512
17.05.2021
Taper Tantrum? Watch the ECB
Last week’s US inflation print prompted USD rate vol rate to spike but it remains just below 2021 highs. Meanwhile, European rate vol hit fresh highs last week.

The chart below captures the move in interest rate volatility, which we use to capture market expectations around Quantitative Easing, in z-score terms. The BoC & BoE have already announced plans to taper; & this picture suggests the market fears the ECB is next. The tantrum is not a uniquely US event.
See more
Monday
This is a premium content article - to see full analysis sign up for a month of insights
If we see a European taper tantrum, which of the usual suspects look vulnerable?

QE expectations account for a third of explanatory power for European IG credit, IBCX. Whilst it screens as highly vulnerable, model FVG at 3 month lows (-1.2 sigma, -0.7%), suggest it has already discounted some of the bad news.

European Banks are modestly rich to model, both outright & relative to the broader EU equity market. Reflation, tight credit spds & a weak Euro feature more prominently than QE.

10y BTP-Bund spreads are in regime & are already one sigma (18bp wide) versus model value. But macro fair value is moving wider, just not as quickly as spot. QE isn’t a primary driver currently but the regime shows deflation (falling inflation /growth) & ‘risk off’ (wider credit spds, higher VIX) as critical. Note QT explains almost half of model variance for 10y Bunds.
Jake Weirick 09Bqxnvo7Eu Unsplash
12.05.2021
Inflation
Inflation day in the US. The mood music has started to shift with markets ascribing high commodity prices / inflation as a negative for equities. Have we reached an inflection point where price pressures become a drag on equity markets?

The chart below shows the sensitivity of US equity sectors relative to the broader market to 3 factors – inflation expectations, metal prices (copper, iron ore) & energy prices (crude oil).
See more
Wed1
This is a premium content article - to see full analysis sign up for a month of insights
The chart above shows the sensitivity of US equity sectors relative to the broader market to 3 factors – inflation expectations, metal prices (copper, iron ore) & energy prices (crude oil).

The split is clear. A handful of RV pairs display a negative relationship. That Consumer Staples XLP underperform SPY when inflation expectations rise is not surprising. A function of margin compression. Health Care XLV & Home Construction ITB show the same dynamic.

A host of models hug the vertical axis where sensitivity to these macro factors is more muted.

Meanwhile Energy (XLE, XOP), Financials (XLF, KBE), Metals & Mining (XME) reside wide out on the right hand side of the chart where higher inflation/commodities provide a clear benefit.
Apr11
The same chart from a month ago is striking in the sense the profile has not really changed. On Apr 11th the same cyclical sectors were on their own out on the far right of the chart with strong positive sensitivity to the broad inflation narrative.

All that has changed is the valuation picture. On Qi metrics, the value sectors were all cheap to the broader S&P500 a month back, & today are rich. The valuation picture helps explain recent market gyrations more than any fundamental shift in market drivers.

Arguably the most important shift will not be the move north from cheap to rich versus macro fair value. But from right to left – that is when Qi’s independent factor sensitivities will flag a regime change. One where inflation & commodities move from tailwind to headwind.
11.05.2021
Chinese Cyclicals
Qi has built models for the Global X MSCI universe of ETFs tracking Chinese equity sectors.

Of those in a macro regime, the Chinese Energy sector stands out. The energy complex is rich to macro model in both the US & Europe, but not to the same degree as CHIE which is 2.2 sigma (10.6%) above macro-warranted fair value.
See more
Ccc
Back-tests show when Chinese Energy is in regime, the FVGs have a strong track record of flagging profitable trading opportunities. This FVG level, however, hasn’t been seen before. Combined with macro fair value moving higher (just at a slower pace than spot) & the conclusion is that trying to pick a top in commodity plays currently is not prudent.

Instead, RETINA™ signals an alternative cyclical trade - Chinese Industrials. CHII isn’t in regime currently (55% model confidence) but valuation, even with that caveat, is close to macro fair value.

That leaves a neutral valuation picture but a positive momentum outlook with RETINA™ flagging a new uptrend potentially forming. Growth bulls looking for ongoing rotation to cyclicals, & looking for diversification away from western equities, could consider this alternative expression.
Close
Thank you for request
A team member will contact you soon shortly.
Find out more
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