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TopdownCharts
Topdown Charts is a chart-driven macro research house covering global asset allocation and economics. We primarily serve multi-asset investors and institutions.
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03-09 18:05

The major macro dilemma for investors

Key Findings from the Latest Monthly pack:Global monetary policy settings are increasingly shifting from headwind to tailwind as inflation falls and economic cycle data remain soft.The major macro dilemma for investors at this stage is the tails; resurgence risk on the one end (growth reaccelerates, inflation resurges), and recession risk on the other end (recession takes hold, deflation comes into focus).The second coming of Trump exacerbates this, with a puzzling policy path potentially pushing up inflation, but also raising recession risk (it will all depend on what gets implemented, how quickly, to what degree, and the second order effects e.g. with fiscal consolidation headwinds).The main upside risks for growth assets would be: a macro middle path (goldilocks, policy perfection), Chi
The major macro dilemma for investors

Chart of the Week - LatAm Deep Value

In the age of the “everything bubble”, it’s not often that you come across a chart saying something is outright cheap, or even near-record lows for that matter…And I know what you might be thinking — “it’s cheap for a reason“ or “it’s a value trap“ or maybe even “valuations don’t matter“.And there are situations where either or all 3 of those claims can genuinely apply.For example, “cheap for a reason“ is almost always true, because most of the time when an asset or market is cheap it’s because of a cyclical deterioration in fundamentals, or some kind of shock/crisis, or some other logical reason. A lot of the time that deterioration is transitory, and markets often overreact to that deterioration — driving valuations down further than they really should be (aka opportunities).Meanwhile “i
Chart of the Week - LatAm Deep Value

GoldNuggets — Sharpe, AUM, Miners

GoldNuggets Digest: the Gold Sharpe Ratio, Gold ETF assets, gold miner revenue growth, gold miner ETF outflows... $Gold - main 2504(GCmain)$ Gold SharpeJason Goepfert of Sentimentrader cautions on gold: “the 1-year Sharpe ratio for gold has just surpassed 1.6, ranking in the top 1% of all days since 1975. Gold tended to suffer poor intermediate returns the few other times its Sharpe ratio climbed this high.“ I’d also point out, as shown in the monthly pack, seasonality takes a choppy-to-bearish tone in March-May, valuations are becoming expensive, and sentiment/positioning are a little overbought. So we could be due a period of volatility and consolidation before the next wave higher.Gold ETF AUMAggregated assets under management (AUM) in US l
GoldNuggets — Sharpe, AUM, Miners

Weekly S&P500 ChartStorm - US stockmarket valuations remain dangerously high

Learnings and conclusions from this week’s charts: $S&P 500(.SPX)$ $SPDR S&P 500 ETF Trust(SPY)$ $NASDAQ 100(NDX)$ $Invesco QQQ(QQQ)$ $DJIA(.DJI)$ The S&P500 declined -1.42% in February (still up +1.2% YTD).Consumer + Wall Street expectations are rolling over off the highs.The spike in policy uncertainty + bearishness may help the market bounce.Foreign flows have helped blow a “US Exceptionalism Bubble”.Despite the selloff, US stockmarket valuations remain dangerously high.Overall, there’s plenty of short-term indicators (e.g. surge in bearish sentiment) that make it ea
Weekly S&P500 ChartStorm - US stockmarket valuations remain dangerously high

Weekly Macro Themes - US Small Caps Cautiously Bullish

This week I covered the following topics/ideas: $S&P 500(.SPX)$ $SPDR S&P 500 ETF Trust(SPY)$ $Invesco QQQ(QQQ)$ $NASDAQ 100(NDX)$ $iShares Russell 2000 ETF(IWM)$ 1. Volatility Views: This alternative volatility indicator is flagging the prospect of a major turning point in the US dollar and commodities, and an overall shift to a more volatile macro/market regime.2. Oil & Energy Stocks: Bullish crude oil on technicals and sentiment + supply and demand outlook. Also constructive on energy stocks given near-record low allocations, extreme cheap relative value.3. Carbon &am
Weekly Macro Themes - US Small Caps Cautiously Bullish

Emerging Market Credit Spreads

It’s not just the USA and Europe, EM corporate credit spreads are pushing lower as a warm blanket of complacency is wrapped around markets. The upside is that it likely does reflect an element of improved fundamentals given relative calm in macro and markets and improving data out of China. Furthermore, again — this can become self-reinforcing in that it reflects easier financial conditions, supporting growth and risk-taking, which in turn imparts a cyclical improvement in fundamentals.But the problem is it represents a very low risk premium for investors should things deteriorate. On my analysis I’d prefer EM sovereign bonds (ex-China), and EM equities where the risk premium is much larger and the upside potential asymmetric (but in the right direction… whereas corporate bond returns are
Emerging Market Credit Spreads

European credit spreads are making new lows and equities new highs

Myself and others have highlighted how European Equities have been breaking out to new all-time highs on the back of bullish factors such as cheap valuations, monetary tailwinds, improving (geo)politics, reforms, and so-on.But not many have noted the similar bull market underway in European credit markets.Much like what I observed with US credit spreads, European High Yield Credit Spreads have been steadily narrowing and making new lows. The point of contrast would be that Europe hasn’t quite revisited the pre-08 lows like the US has, but it sure is on a trajectory to get there — and is very clearly already at the bottom end of the range.On face value this is a positive sign, it means credit investors are confident on the state of things, and are happy to take on credit risk. At the same t
European credit spreads are making new lows and equities new highs

GoldNuggets — Gold Halving, Turnings

The US Gold Jog ContinuesThere is a steady jog, some might call it a run, of gold $Gold - main 2504(GCmain)$ to the USA on tariff concerns. We’ve seen it clearly in the gold warehouse inventory charts (e.g. chart no. 26 in the pack), but here’s another example; Swiss gold exports to the USA have surged to record highs. The Gold HalvingBitcoiners always go on about the halvening being a key fundamental support for Bitcoin prices as it reduces supply growth (by making it 50% harder to mine new coins with “the halving“ taking place every 4 years).But as it turns out, precious metals have also seen “halving” — as Willem Middelkoop points out: “since 2005 the amount of gold discovered declined by 50% every 5 years. We are running out of new gold“.
GoldNuggets — Gold Halving, Turnings

Weekly S&P500 ChartStorm - Growth stocks are more concentrated, Value more diversified

Learnings and conclusions from this week’s charts: $S&P 500(.SPX)$ $SPDR S&P 500 ETF Trust(SPY)$ $NASDAQ 100(NDX)$ $Invesco QQQ(QQQ)$ $DJIA(.DJI)$ The range trade continues (+breadth shows regime shift).Markets have been underperforming around the weekend.Bad news/noise is damaging investor sentiment.2020 marked a multi-pronged shift in market behavior.Growth stocks are more concentrated, Value more diversified.Overall, the range trade continues — upside pushes are being limited as sentiment shifts to a more lukewarm-bearish tone under the onslaught of ongoing bad news/nois
Weekly S&P500 ChartStorm - Growth stocks are more concentrated, Value more diversified

Weekly Macro Themes - Global ex-US Equities

This week I covered the following topics/ideas: $S&P 500(.SPX)$ $SPDR S&P 500 ETF Trust(SPY)$ $NASDAQ 100(NDX)$ $Invesco QQQ(QQQ)$ $DJIA(.DJI)$ 1. China Macro: The macro outlook for China is getting less bad (property turning the corner, economic pulse improving), Chinese government bonds look expensive; expect stock/bond ratio to go higher.2. US Housing: Monitoring downside risks in the US housing market as high servicing costs for new purchases bump up against stretched valuations and potential reversal of supportive policies (fiscal, migration).3. Treasuries: It’s a case
Weekly Macro Themes - Global ex-US Equities

A break-down will be a waving flag for recession risk

This highly pertinent chart from the latest GoldNuggets Digest report shows what is basically the forgotten precious metal…With silver $Silver - main 2503(SImain)$ surging and gold $Gold - main 2504(GCmain)$ going for it, $Platinum - main 2504(PLmain)$ ’s been patient — stuck in the range, coiling into a triangle formation; waiting for its turn to breakout. And this is where it gets interesting:“I often describe silver as a combination of precious metal and industrial metal, and platinum is the same… but the weighting to industrial metal is even higher. So we probably need to see global growth sentiment heat up a bit more for this one to breakout (whi
A break-down will be a waving flag for recession risk

Chart of the Week - Inflation Resurgence

Something very interesting is happening in the macro world right now.Central Banks have undertaken a mass-migration from hiking rates to cutting rates.Normally this type of policy pivot would only be seen as a panic response to recession, crisis, and downturns. And to be fair there are some weak spots out there, but there’s no crisis, no full blown recession, and asset markets are charging higher.Inflation has come down —there is that; so you can argue that this pivot makes sense from the standpoint of pulling back on previous panic tightening…But here’s the problem: disinflation is done.Global median inflation rates have stabilized and some measures of inflation have even begun to turn up again.And yet the rate cuts continue, with more central banks joining the movement (e.g. Australia +
Chart of the Week - Inflation Resurgence

Weekly S&P500 ChartStorm - The US overwhelmingly dominates in global equities

Learnings and conclusions from this week’s charts: $S&P 500(.SPX)$ $SPDR S&P 500 ETF Trust(SPY)$ $E-mini S&P 500 - main 2503(ESmain)$ Sentiment is shifting; from euphoria to doubt.Valuations are at the upper end of a new higher range.Passive/index funds dominate vs active funds.The US overwhelmingly dominates in global equities.The bar is high for US vs low for global equities (opportunity).Overall, the evidence continues to show a shift in sentiment from previous extreme bullishness and frenzied flows to now increasing skepticism and concern as Trumphoria subsides and a new challenging reality sets in…1. Waning Euphoria:  The mood on the mark
Weekly S&P500 ChartStorm - The US overwhelmingly dominates in global equities

Weekly Macro Themes - Global bank stocks have been performing well

This week I covered the following topics/ideas:1. Resurgence Risk: The global growth reacceleration + inflation resurgence macro edge risk is increasingly becoming the base case as a growing body of evidence points to imminent inflation upside.2. Commodities: Clear case for upside based on improving technicals, sentiment and positioning, growth reacceleration prospects, cheap valuations, and a prolonged period of underinvestment in supply.3. Credit Spreads: The credit (and equity) risk premium looks uncomfortably low, and while we can outline some risks, there doesn’t appear to be any near and pressing catalyst; but still lean cautious.4. Global Bank Stocks: Global bank stocks have been performing well technically, with strengthening macro/fundamentals to back it; global (ex-US) banks are
Weekly Macro Themes - Global bank stocks have been performing well

Bonus Chart - Further Perspective…

In CPI adjusted terms the EURO STOXX 50 looks less impressive, albeit arguably also looks better in terms of potential upside as there remains a large distance to the historical all-time inflation-adjusted highs. The breakout in real terms also looks very compelling.Similarly, relative to the $S&P 500(.SPX)$ it's been in a 24-year relative-bear-market. There have been numerous false dawns along that path, but the recent bounce after a failed breakdown to new lows looks promising, especially after the period of relative stalemate over the past couple of years.I remain convinced that we are set to see an imminent turnaround in global vs US stocks, and this here is a key part of that story.
Bonus Chart - Further Perspective…

Chart of the Week - MEEGA

If you’ve been fixated on the news flow around tariffs and stuck on the old narrative that Europe is doomed and can only regulate vs innovate then you might have missed the fact that European equities are up over +10% YTD.Change is in the air, a key set of breakouts and improving technicals serve as a timely prompt to consider whether there’s more to this —and more left in the move…What’s driving the strength in European Equities:Valuations: unlike expensive US stocks, European stocks are still cheap/reasonably priced, and trade at a record low valuation discount vs US. The thing I always emphasize is that when valuations reach such extremes they have a habit of speaking for themselves; the rubber band eventually snaps back.Monetary Policy: the European Central Bank began rate cuts earlier
Chart of the Week - MEEGA

US Tech stock warnings are sounding

Weekly S&P500 ChartStorm - 9 February 2025Learnings and conclusions from this week’s charts:Sentiment seems to be shifting (bull/bear trend change).US Tech stock warnings are sounding (volumes, dollar, flows).Chinese Tech stocks are turning up from prior bear market.The US equity risk premium is at multi-decade lows.Record high consensus expects US equities to outperform vs global.Overall, this week’s charts take a distinct cautionary hue as an aging bull contends with multiple hurdles, and topping risk flags begin to wave. But take a look for yourself and let me know what you think in the comments. Too bearish? Not bearish enough? Too early to say?1. Mag-7 Volume Warning:  Starting off with an intriguing eye-catcher, this chart shows the 1-year rolling average trading volume in M
US Tech stock warnings are sounding

China vs USA Tech Stocks

The chart below shows the path of US vs Chinese tech stocks. The funny thing with markets is that often the prevailing narrative is shaped more by price than anything else, and in that respect given what I outlined on narratives and perceptions above it’s probably no surprise to see the divergent paths here. $Invesco QQQ(QQQ)$ $Invesco China Technology ETF(CQQQ)$ It’s another prompt to have a rethink with regards to a possible closing of the gap in that chart (whether by China catching up or US catching down, or some combination), and also a reminder of the twists and turns in markets (i.e. they don’t just go in a straight line!).Just remember, the trend is your friend — until it bends…And things might be
China vs USA Tech Stocks

Chart of the Week - China Tech Surprise

We’re talking about upside in Chinese stocks (and maybe even downside in US stocks) — something which I still get the sense is a very outside-of-consensus view, and certainly jars against the mainstream media-market narrative…As a refresher the thesis basically states: valuations are cheap in China, expensive in the US, and hence we can deduce consensus as expecting great things from America and not much from China.Meanwhile on the macro, Trump 2.0 is not necessarily good for US stocks in the medium term given heightened policy uncertainty, probable contractionary fiscal policy, and a much much higher hurdle from stretched valuations and sentiment vs the last time he entered office back in 2017.As for China, they are just coming out of recession now and their property market is turning the
Chart of the Week - China Tech Surprise

Market Cycle Guidebook - January 2025

The monthly Market Cycle Guidebook is a key resource for investors — providing insight into the stage of the business cycle, monetary policy trends, leading indicators, earnings momentum, valuations across multiple different assets and markets, long-term return expectations, and tactical asset allocation views.Key Findings from the Latest Monthly pack:Global monetary policy settings are increasingly shifting from headwind to tailwind as inflation falls and economic cycle data remain soft.The major macro dilemma for investors at this stage is the tails; resurgence risk on the one end (growth reaccelerates, inflation resurges), and recession risk on the other end (recession takes hold, deflation comes into focus).The second coming of Trump likely exacerbates this, with a puzzling policy path
Market Cycle Guidebook - January 2025

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