Messy Détente Provides Entry Points to Play Regional Dispersion - Weekly Wrap

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Messy détente provides entry points to play regional dispersion - May EM/DM LIW - 22 May

DM

• UK Downside growth risks trump inflation fears => yields biased lower, receive 1y1y
• Japan BoJ at breaking point in face of fiscal & inflation => play via short CHFJPY
• Switzerland Growth hit by tariffs, import prices to keep a lid on inflation => SNB to stay dovish
• Australia Resilient housing market => hawkish RBA + bullish bias on AUD

EM

• Brazil Leading indicator resilience, NPL cycle peaking => Brazil risk-parity
• S. Korea K-shaped Korea, foreigners turn seller of equities into local retail trading frenzy
• India Growth resilient, inflation building, but below normal monsoon rains the tail risk
• Indonesia BI’s surprise 50bp hike compounds investor capitulation into June MSCI review

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Re-visiting our market tops checklist - 19 May

• We update our market tops checklist. Today's setup is somewhat reminiscent of September 2021. There are also signs of frothy corporate behavior and valuations, along with fears of Fed tightening.
• On balance, today's equity market looks to be more late cycle than at an imminent top. Amber warnings prevail.
• Link to Note and Checklist here.

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