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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.
14.04.2021
Qi & the FT
The FT article "Investors brace for ‘major shift’ as momentum and value collide" cites Qi analysis.
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14.04.2021
Tactical Asset Allocation:
The Global Multi-Asset view
The Global Multi-Asset view
Qi's TAA analysis marries macro regime & macro valuation, with trend & momentum dynamics.
Premium content, for a full analysis sign up to a month of insights13.04.2021
A turn in Asian tech?
Asian exchange ChiNext was the first global technology instrument to fall out of a macro regime last year; moving ahead of similar regime shifts for US & European tech. It remained below our 65% threshold for the last 6 months but has now entered a new macro regime.
Model confidence is currently 71%, having risen 33% in the last 2 months.
Model confidence is currently 71%, having risen 33% in the last 2 months.
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13.04.2021
Long & wrong in EM?
Positioning surveys suggest long Emerging Market equities remain a popular position. Yet they have underperformed the S&P500 by almost 15% in 2months & are now at levels not seen since September.
Premium content, for a full analysis sign up to a month of insights12.04.2021
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.
All bar one of those reporting this week are in strong macro regimes.
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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.
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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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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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?
Premium content, for a full analysis sign up to a month of insightsNow 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?
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?
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
14.04.2021
Qi & the FT
The FT article "Investors brace for ‘major shift’ as momentum and value collide" cites Qi analysis.
See more
The Qi work on the shifting macro regime for momentum as a smart beta strategy can be found here
13.04.2021
A turn in Asian tech?
Asian exchange ChiNext was the first global technology instrument to fall out of a macro regime last year; moving ahead of similar regime shifts for US & European tech. It remained below our 65% threshold for the last 6 months but has now entered a new macro regime.
Model confidence is currently 71%, having risen 33% in the last 2 months.
Model confidence is currently 71%, having risen 33% in the last 2 months.
See more
The February / March sell-off has, in valuation terms, left it 1.5 sigma (6.1%) cheap to macro-warranted model value. Back-tests suggest this is a rare but statistically significant level. Since 2009, only three times has ChiNext been in regime & with this big a negative FVG. Buying those dips elicited a 67% hit rate & 4.9% average return.
Perhaps most interesting of all is that Qi’s RETINA ™ is now flagging a Divergence buy signal.
RETINA ™ combines Qi’s existing macro valuations with a numerical measure of trend plus accelerating / decelerating momentum. In this instance the signal is exclusively predicated on valuation & one of Qi’s optimisation strategies.
RETINA ™ combines Qi’s existing macro valuations with a numerical measure of trend plus accelerating / decelerating momentum. In this instance the signal is exclusively predicated on valuation & one of Qi’s optimisation strategies.
A Divergence rule identifies when macro-warranted model value & spot price have moved in the opposite direction over the last 10 days. In this instance, the most recent sell-off has not been justified by macro fundamentals.
Macro valuation + trend / momentum overlay. Look Up ™
Macro valuation + trend / momentum overlay. Look Up ™
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.
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.
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.
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.
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.
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.
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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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.
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.
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.
For all the talk of reflation, relative to long term trend, US growth has yet to post a similar upswing.
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.
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.
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.
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.
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?
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