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Macro Markets Insights
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Topical observations from the Qi macro lens. Build your investment roadmap with the best-in-class quantitative analysis and global data.
Juskteez Vu Tirxot28Znc Unsplash
12.04.2021
US bank earnings
Financials kick off US earnings season with several blue chip names reporting this week.

All bar one of those reporting this week are in strong macro regimes.
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Orion Nebula 11107 1920
09.04.2021
Mind the gap
VIX closed at its lowest level since February 2020 last night. The “fear gauge” is signalling all is well in the world of US equities.

Qi’s macro valuation shows the S&P500 as largely in line with macro fundamentals. A +0.4 sigma (+2.4%) Fair Value Gap suggests it is only very modestly elevated versus its key macro drivers.

One cautionary note, however, is the divergence between VIX & Qi’s Vol Indicator.
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Pexels Miriam Espacio 110854
09.04.2021
Divergent Recoveries
The IMF have warned about “divergent recoveries” as a potential threat to the global economy in general, & Emerging Markets in particular.
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Anna Anikina Ath9Gmakfpe Unsplash
08.04.2021
Infrastructure Super Cycle
What is the best way to trade President Biden’s American Jobs Plan? Qi’s Infrastructure Super Cycle Watchlist contains a mix of US single stocks, sectors & thematic ETFs.
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07.04.2021
Japan
USDJPY is back in a macro regime. It is also 1.7 sigma (2.7%) rich to macro fair value. It got as high as +2.2 sigma (+3.5%) at the end of March, but model confidence was still just below our 65% threshold.

Now our R-Squared criteria is met & we have an inflection sell signal - both spot price & Qi model value have moved lower over the last 3 days.

If the Yen were to strengthen, traditional perceptions would see that as a potential headwind for Japanese equities. What are the current key drivers for the Nikkei & TOPIX?
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Evgeni Tcherkasski Bfbhwj4Qafo Unsplash
01.04.2021
Infrastructure
One option for trading President Biden's new American Jobs Plan is the PAVE ETF which tracks the US Infrastructure Development Index.

PAVE is in a strong & stable macro regime. Model confidence is a robust 94% currently, & it hasn't been below 80% in the last 12 months. Macro matters.

What are the key drivers, & to what extend has it priced in the Democrat's plans?
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Omega Nebula 11053 1920
31.03.2021
Gold vs. Bitcoin
Bitcoin is many things to many people but, on the current pattern of associations, it offers a more efficient inflation hedge than Gold.

Gold has a valuation edge - it is now one sigma (4.7%) cheap to macro fair value.

Bitcoin's model value is around 60,000 so it is effectively in line with its macro environment. Both are in strong macro regimes but the contrast in sensitivity to inflation is the most striking feature.
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30.03.2021
Rates on the move
US interest rates are on the move once again. Nominal 10y yields have hit a new 2021 high while 10y real rates have risen 10bp this week alone.

The critical question for equity investors remains whether rising yields are a benefit as they reflect a bullish growth backdrop. Or, by tightening financial conditions, represent a headwind to future performance. Qi empirically demonstrates the sensitivity of different US equity sectors to US real rates.
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Jeremy Thomas E0Ahdsenmdg Unsplash
29.03.2021
The US Dollar
Screening across all Qi's currency models for the 10 biggest valuation gaps results in seven of them being crosses that involve the US Dollar.

All seven show the Dollar as rich versus macro model value.

Four of those seven show the FVG at a 1 year extreme.
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Cameron Venti Xkcaeep4Ui4 Unsplash
26.03.2021
EURUSD
The down trade in EURUSD over March has not been driven by deteriorating macro fundamentals. Qi model value has moved sideways & that has opened up a 1.26 sigma (2.8%) Fair Value Gap
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Juskteez Vu Tirxot28Znc Unsplash
12.04.2021
US bank earnings
Financials kick off US earnings season with several blue chip names reporting this week.

All bar one of those reporting this week are in strong macro regimes.
See more
Only Blackrock is below our model confidence threshold & a function of micro, idiosyncratic drivers.

Otherwise, macro matters for US financials. Moreover, they are largely moving in line with macro fundamentals. Most of this week’s reporters are close to model fair value.
Image 23
At the margin, Goldman Sachs & Morgan Stanley offer a slight valuation edge, trading just below macro model value. At the other end of the range, Bank of NY Mellon & State Street are both around 5% rich to model.

The macro profile is similar across the sector. Tight credit spreads remains the number one driver. Reflation is captured via a positive sensitivity to both inflation expectations & energy prices. Rising US real yields are a tailwind not a headwind.

In every case macro model value is flat-lining; consolidating after a 5month uptrend. The move in these factors will be critical in deciding the next move for financials.
Orion Nebula 11107 1920
09.04.2021
Mind the gap
VIX closed at its lowest level since February 2020 last night. The “fear gauge” is signalling all is well in the world of US equities.

Qi’s macro valuation shows the S&P500 as largely in line with macro fundamentals. A +0.4 sigma (+2.4%) Fair Value Gap suggests it is only very modestly elevated versus its key macro drivers.

One cautionary note, however, is the divergence between VIX & Qi’s Vol Indicator.
See more
Vix
The Qi Vol Indicator captures the ability of macro to explain price action across some key global benchmark instruments in equity, rates & FX markets.

When macro’s explanatory power falls, markets are more vulnerable to other factors like positioning & sentiment; both of which can cause sharp price swings. Hence, low macro model confidence equates to a higher Qi Vol Indicator which can, in turn, signal a period of elevated volatility.

There are some ‘false dawns’ but overall the Qi Vol Indicator has done a good job of leading sharp spikes in VIX over the last 5 years - summer 2016, “Volmageddon” early in 2018, Jan 2019 & most recently the Covid shock of February/March 2020.

Neither the absolute level, nor the rate of change in our Vol Indicator is currently giving any cause for concern. That said, the divergence versus the VIX is notable & worth monitoring.
Pexels Miriam Espacio 110854
09.04.2021
Divergent Recoveries
The IMF have warned about “divergent recoveries” as a potential threat to the global economy in general, & Emerging Markets in particular.
See more
One potential risk for H2 2021 is if, in sharp contrast to the stimulus in the US, Beijing chooses to actively rein in its growth. In z-score terms, the Chinese recovery (the blue line is Now-Casting’s China tracking GDP) has been the outlier & the clear engine of recovery early in 2021.

For all the talk of reflation, relative to long term trend, US growth has yet to post a similar upswing.
Friday
The ability to track the impact of Chinese or US growth on different asset classes over the months ahead will be absolutely critical. One to monitor. Moreover, Qi’s Optimise Trade Selection functionality gives clients the ability to identify which markets are most sensitive to Chinese or US GDP going forward.
Anna Anikina Ath9Gmakfpe Unsplash
08.04.2021
Infrastructure Super Cycle
What is the best way to trade President Biden’s American Jobs Plan? Qi’s Infrastructure Super Cycle Watchlist contains a mix of US single stocks, sectors & thematic ETFs.
See more
Macro model confidence is typically high & most valuations are close to fair value.
Thursday
Steel company Nucor appears to have discounted some of the good macro news already. Otherwise the models that are modestly rich to model are at the sector level (Materials XLB & Industrials XLI) or specialist infrastructure ETFs – PAVE & IGF.

Single stocks are, relatively speaking, modestly lagging the potential Biden uplift. Commercial vehicles company Cummins which is working on electric buses is the book-end at 3.4% cheap to macro.

Each stock-picker will have their preferred play. Qi clients can run their own picks versus the prevailing macro regime to see where the bottom-up & top-down views align.
Evgeni Tcherkasski Bfbhwj4Qafo Unsplash
01.04.2021
Infrastructure
One option for trading President Biden's new American Jobs Plan is the PAVE ETF which tracks the US Infrastructure Development Index.

PAVE is in a strong & stable macro regime. Model confidence is a robust 94% currently, & it hasn't been below 80% in the last 12 months. Macro matters.

What are the key drivers, & to what extend has it priced in the Democrat's plans?
See more
30.03.2021
Rates on the move
US interest rates are on the move once again. Nominal 10y yields have hit a new 2021 high while 10y real rates have risen 10bp this week alone.

The critical question for equity investors remains whether rising yields are a benefit as they reflect a bullish growth backdrop. Or, by tightening financial conditions, represent a headwind to future performance. Qi empirically demonstrates the sensitivity of different US equity sectors to US real rates.
See more
Jeremy Thomas E0Ahdsenmdg Unsplash
29.03.2021
The US Dollar
Screening across all Qi's currency models for the 10 biggest valuation gaps results in seven of them being crosses that involve the US Dollar.

All seven show the Dollar as rich versus macro model value.

Four of those seven show the FVG at a 1 year extreme.
See more
Cameron Venti Xkcaeep4Ui4 Unsplash
26.03.2021
EURUSD
The down trade in EURUSD over March has not been driven by deteriorating macro fundamentals. Qi model value has moved sideways & that has opened up a 1.26 sigma (2.8%) Fair Value Gap
See more
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