Global Macro Strategist
Instrument: NK225c1
Price Target: Index level 21,660
Market Price: Index level 21,730
Trade tariffs and trade wars are just shifting into higher gear. The combination of potential auto tariffs, a stronger yen and risk-off could set the scene for a triple hit for the Nikkei, which is also struggling technically (it has broken through its 200-day moving average and is failing to hold above 22,000).
I think its only a question of time before we see the next round of tariffs from the US, and potentially more announcement this Friday or over the weekend.
Entry: 21,730
Stop: –
Target: 21,660
Time Horizon: Strategic
Position is 1x capital, so for the Macro Monday book that is circa $10m.
The potential key risk here is that trade disputes get solved sooner rather than later, leading to a relief rally in the Nikkei. A weaker yen could also complicate manners as that tends to be supportive for the Nikkei.
Trading Plan
For now its putting out a line on the short side on the Nikkei, looking to potentially add to the short at the 22,000 level – if we get there. And then to add a long S&P futures leg, so this is very much building out from a portfolio composition of the Macro Monday trading book.
2024: The wasted year
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Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
