Macro Snapshot: Contrarian Bonds, Energy Upside, Japan in Focus

TopdownCharts
01-29

Hi there,

Here's the topics I covered in my latest Weekly Macro Themes report:

1. Treasuries: Cheap valuations, very low allocations, and consensus bearish sentiment/positioning make for a contrarian bullish setup, but the tactical elements are lacking right now (monitoring the situation).

2. Inflation Risk: The risk of a second wave of inflation is credible, and therefore higher-for-longer risk remains a threat for nominal bonds (but may help TIPS[breakevens]).

3. Stocks vs Bonds: The longer-term/strategic charts are pointing to downside risk for stocks vs bonds, but the tactical elements are opposite (bullish technicals, benign macro).

4. Oil & Energy Stocks: Remain vigilant to upside risk in the oil price, and in particular for energy stocks (which are under-allocated, undervalued, and under-the-radar despite promising technicals).

5. Japan Equities: Remain bullish Japanese equities given the improved macro-fundamental backdrop, scope for upside valuation re-rating, light allocations by global investors, still positive ERP.

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