16 Comments
Jun 29, 2023Liked by Callum Thomas

I have a meme in my mind of a person holding a stick and poking a "EM stock basket" saying "do something" :) that's how I feel following them. South America showed some life earlier this year and China finally had a bit of a move, but otherwise it's still been 'meh'. Patiently keeping an eye...

Expand full comment
author

Indeed! Maybe when we least expect it... I think key catalysts are: USD weakness (where e.g. DXY breaks down out of its range-trade), China stimulus (more follow-through, bigger rate cuts), and pivot to easing by rest of EM central banks

Expand full comment

PS our central bank has announced the end of tightening

Expand full comment
author

first in to tightening, first out... seeing similar thing for EM central banks e.g. LatAm

Expand full comment

I agree, “when we least expect it”. I am in NZ, I guess our market is EM, and remains in the doldrums with minuscule trades daily on great stocks. NZers investment funds appear to be heading to the States, lowering the NZD while tech stocks rise, possibly on the EM market investors money. I certainly fit that mould with investments in tech offsetting doldrums in NZ, tech especially favourable as exchange rates add to the gains

Expand full comment
author

Thanks. NZ is technically categorised in developed markets

Expand full comment
Jun 29, 2023Liked by Callum Thomas

Could you make a case for the markets, sans the expected slowdown in the economy, to continue to move higher? Thank you for your insight and content.

Expand full comment
author

Thanks, yes, here is a non-exhaustive list of possible bullish things:

-China stimulus (started but needs to do more)

-AI hype bubble going further than expected

-Fed pivot (but unlikely near-term)

-Shift higher in sentiment/flows/positioning (bears to bulls)

-FOMO (related to that: larger investors get dragged along and chase the bull)

-Earnings hold up better than expected (not my expectation given lead indicators tho)

-Recession signals are either wrong or get confounded by upside surprises

-Consumer/labor/real incomes/savings end up stronger than expected

-US domestic investment boom (fiscal + green + reshoring/mfg + space/robotics, etc)

-Bond yields fall, USD weakens (but for non-recessionary reasons: eases financial conditions)

That's all I can think of for now, obviously some of those are more likely than others, but I guess the takeaway is that it is possible...

Expand full comment

What Monetary Wall for 2H?

BTW excellent content, thank you very much.

Expand full comment
author

Cheers!

I can't post charts in the comments, so I have replied to this in a "note" -- see: https://substack.com/profile/30338892-callum-thomas/note/c-17885014

Basically the amount of central bank actions and monetary tightening set to hit the global economy in H2 is unprecedented in recent decades (reason H2 = the leads/lags of policy transmission)

Expand full comment
author

Questions & thoughts welcome in the comments section -- p.s. what's your favorite chart?

Expand full comment
Jun 29, 2023Liked by Callum Thomas

It`s a random comment so please bare with...

When I opened the link from the email I got an "Outlook has detected an unsafe link. Visiting this website might not be safe" warning. After clicking continue anyway it goes through to the page (weekly SP500 chartstorm) after several attempts. It did the same last week.

It might just be having a hissy fit but it doesn`t do it for any other sites. Just thought I`d give you a heads up. I took a screen shot if you want to see.

Best regards,

Jon

Expand full comment
author

Thanks Jon, yeah that's a "helpful feature" of Outlook -- you can either ignore it, or you can use the Substack app, or you can simply check here for the latest posts: https://www.chartstorm.info/

How to log-on to substack, FYI: https://support.substack.com/hc/en-us/articles/360059542452-How-do-I-log-into-my-Substack-account-

Expand full comment
Jun 29, 2023Liked by Callum Thomas

Thanks, sir, for your prompt reply.

All the best!

J

Expand full comment

As far as China goes.. the art of war is deception. Appear weak when your opponent is strong.

Their situation could shift rapidly at their choosing. Position while you can, not when you have to.

Expand full comment
author

Indeed, interesting perspective, a lot of history and very different culture behind the thinking over there. And correct -- China runs China for China

Expand full comment