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22.11.2021
The Euro
Renewed lockdowns, disappointing economic data & a dovish Central Bank are typically cited when discussing the poor performance of the European single currency. What’s the quantitative macro picture?
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19.11.2021
Black Friday
Black Friday is a week today. It had already become more than a one-day event but that is especially true this year with supply constraints prompting a flood of early shopping.
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Orion Nebula 11107 1920
18.11.2021
China risks
- a stress test for US equities
US Treasury Secretary Janet Yellen told CBS News an economic slowdown in China would have “global consequences”. Hardly new news, but a major tail risk facing all money managers.
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Max Larochelle Uu Jw5Sunyi Unsplash
17.11.2021
A word of warning for Dollar bulls
Momentum is with US Dollar bulls but, for some crosses, it is important to keep a close eye on inflation expectations. Higher inflation can hurt currencies, & this is especially noticeable for the Dollar versus the Euro & the Pound.
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Hs 2009 25 Hubble
16.11.2021
Fade European Covid fears
Mainstream media is full of stories about new restrictions in Europe as it once again becomes the epicentre of Covid cases. Equity markets have responded by selling the EU Travel & Leisure sector.

On Qi, this sell-off has taken the sector into potentially interesting territory.
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15.11.2021
USDJPY
Macro fundamentals point to higher USDJPY.
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Shivendu Shukla 3Yotpuyr9Zy Unsplash
12.11.2021
Chinese Real Estate
Chinese press, including state media, are fuelling speculation that Beijing may ease property firms access to debt markets & the liquidity they provide.
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11.11.2021
The view from 10,000ft
A step back to look at the big picture. What’s the view across asset classes from a quantitative perspective?
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10.11.2021
Upgrades
The home page of the Quant Insight web portal has been upgraded. New features include:

* Qi Vol Indicator
* Tactical Asset Allocation
* Macro factor shifts
See more
Vol Indicator 1
10.11.2021
Interview:
Bornite Capital explain how they track their assets to macro shifts
Matt frame from Bornite Capital explains how they get the edge using Retina™ signals via Symphony at the Innovate 2021 event.
See more
Close
19.11.2021
Black Friday
Black Friday is a week today. It had already become more than a one-day event but that is especially true this year with supply constraints prompting a flood of early shopping.
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That was the message from “Black Friday starts now” where RETINA flagged that US Retail was cheap to the broader market back in mid-October ahead of an early & more protracted shopping season. Retailers subsequently outperformed the S&P500 by 7.5% & Qi’s XRT vs. SPY model now sits 0.7 sigma (2.5%) rich to macro.
Friday
During earnings season several retailers have referred to the threat from inflation. Bottom-up analysis looks at companies pricing power; Qi looks at a stock price’s relationship with inflation expectations.

The chart shows those retail Consumer Discretionary stocks that benefit (suffer) from rising inflation to the right (left) of the vertical bound. We also add a valuation overlay. Red (green) stocks above (below) the horizontal bound are rich (cheap) to macro model value.

The majority of retailers still want reflation but a sizeable minority now have a negative relationship where rising inflation is a headwind; presumably a function of margin compression.

Bed, Bath & Beyond is an example which also screens as 29% rich to model. Note though inflation is not a significant driver versus other macro factors. Garmin however has just started a new macro regime with inflation the top driver & the relationship is negative. The macro perspective suggests it is a stock that, on current patterns, has little pricing power.
Orion Nebula 11107 1920
18.11.2021
China risks
- a stress test for US equities
US Treasury Secretary Janet Yellen told CBS News an economic slowdown in China would have “global consequences”. Hardly new news, but a major tail risk facing all money managers.
See more
Here we look at any US equity sector ETF with model confidence of at least 50% & then shock two China factors - Chinese GDP growth & sovereign CDS spreads - by two standard deviations. The blue bars show the subsequent percentage gain or loss in macro model value.

In short, US equity investors hawkish on China can find refuge in biotech but need to be wary of any energy exposure & the housing market.
China Scenario Analysis
The sector most vulnerable to a China shock is US energy. Every other macro factor held constant, XLE, XOP & OIH model value falls between 0.5 & 1.0% in the China stress scenario. They are, however, all already cheap to macro fair value.

Transport ETF IYT is the next most sensitive & is slightly rich (+0.3 sigma, +1.4%) to model. The standout though are Home Builders XHB & Home Construction ITB. Both screen as vulnerable & both are around one sigma rich to model.

Only two sectors see model value rise in this China shock scenario. Biotech ETFs IBB & BBH represent the best defensive play.

The Qi framework allows investors to run empirical scenario analysis. Not educated guesswork, but the quantified impact on any asset from an isolated move in certain macro factors.
Hs 2009 25 Hubble
16.11.2021
Fade European Covid fears
Mainstream media is full of stories about new restrictions in Europe as it once again becomes the epicentre of Covid cases. Equity markets have responded by selling the EU Travel & Leisure sector.

On Qi, this sell-off has taken the sector into potentially interesting territory.
See more
Tuesday2
In outright terms, Travel & Leisure is 1.1 sigma (4.0%) below model fair value. Relative to the Euro Stoxx 600 it is 1.2 sigma (7.4%) cheap to macro. Both are 1y lows for the Qi Fair Value Gap.

Covid clearly represents a fairly unprecedented shock so back-tests come with a strong health warning. Still, as a guide, using these FVGs as dip buying levels since 2009 reveals hit rates of 67% & 78% respectively. The average returns were +4.0% & +1.0% respectively.

Of the ten biggest FVGs amongst Qi’s models for European sector relative value, seven involve Travel & Leisure; & all show it as cheap versus its peers.

A fair amount of bad news would now appear to be priced making the sector a potentially interesting vehicle for anyone with a contrarian stance with regards to the pandemic & the European economy.
Jeremy Thomas E0Ahdsenmdg Unsplash
11.11.2021
The view from 10,000ft
A step back to look at the big picture. What’s the view across asset classes from a quantitative perspective?
See more
Qi Watchlists allow clients to customise any list of securities by asset class, geography or theme. Here we curate a list of assets typically seen as sensitive to the global economic cycle.
Thursday
US break-evens are elevated (but out of regime) while the yield curve is too flat relative to model. The message from the bond market is Central Bank’s reaction function has changed. No longer content to watch-&-wait for inflation to self-correct, sticky inflation requires a policy response & that threatens future growth.

Cyclically-sensitive AUDJPY is also mildly concerned – it is modestly cheap to model. It’s a similar picture in commodities – oil & copper both modestly cheap. Gold is marginally rich to copper in RV terms, IAU vs JJC.

The equity picture is mixed. It’s marginal but, in the US, both small caps & tech are modestly rich versus large caps; Growth a tad rich versus Value. A classic cyclical vs defensive play like XLF / XLU is at fair value.

European internals are more cautious - Staples are rich vs Discretionary (STS vs. STR) – but overall equities, for now, don’t appear threatened by the message from Fixed Income.
10.11.2021
Upgrades
The home page of the Quant Insight web portal has been upgraded. New features include:

* Qi Vol Indicator
* Tactical Asset Allocation
* Macro factor shifts
See more
The Qi Vol Indicator
  • The Qi Vol Indicator has a good track record for leading spikes in VIX. Qi provides clients an alternative to the traditional fear gauge as a way to track regime shifts between “risk on “ & “risk off” environments and acts as red flag for less stable market trading conditions.
  • A spike in the Qi Vol indicator implies markets are being driven by more transient factors like flow, positioning & sentiment. All of which are typically more volatile than macro fundamentals.
New1
Tactical Asset Allocation framework
  • Qi takes the traditional investment clock to the next level, helping clients identify which regime – Goldilocks, boom, stagflation, recession - any security resides. No opinion but the empirically observed pattern of association over time.
  • All neatly captured in a time lapse chart that allows the user to travel through time to asses the evolution of each securities’:
1.) Sensitivity to economic growth
2.) Sensitivity to inflation
3.) Valuation edge
4.) Importance of macro
New2
Macro factor shifts
  • Qi now displays the top 10 moves in macro factors over the last week, immediately highlighting where big macro shifts have taken place. For time poor investors, the chart makes any big regime shift - a tightening in financial conditions, a deteriorating in risk appetite or a spike in inflation fears - obvious & easy to follow.
New3
  • Clients can also choose the factor they are interested in to see the historical evolution of the driver z-score, providing a great way for investors to put macro factor shifts into a more meaningful context.
New4
For more details on our product upgrades or if interested in testing this Qi dataset, delivery method or reports please contact a Quant Insight representative:
info@quant-insight.com
Vol Indicator 1
10.11.2021
Interview:
Bornite Capital explain how they track their assets to macro shifts
Matt frame from Bornite Capital explains how they get the edge using Retina™ signals via Symphony at the Innovate 2021 event.
See more
Close
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