Sectors

GAI technology has made tremendous gains over the past year. It has advanced from being a mere “curiosity” to becoming an everyday helper. While the promise of GAI is enormous, its effects are still limited: Companies are still struggling with monetization while productivity improvement is still at least a year away. In terms of evolution, the focus is shifting away from “picks and shovels” infrastructure companies toward model and application developers.

Turkey’s macro policy stance can hardly be called orthodox. And yet, corporate profit margins will contract meaningfully this year. The lira can also fall massively even if inflation eases from the extremely high levels – just as it did in the 1990s.

The Joshi rule real-time US recession indicator remains at an elevated 0.154 versus its recession event horizon of 0.200, indicating weakening US labour demand. With the last mile of US disinflation requiring labour demand to ‘catch down’ with labour supply, investors should watch the Joshi rule very closely to pre-empt a potential tipping-point. Plus: tactically long Portugal versus Europe, and wheat versus cotton; and tactically short USD/CLP, Qualcomm (QCOM), and Salesforce (CRM).

Clients are increasingly more positive about the US economy, but there are no signs of exuberance. The rally could continue as the majority is not fully invested. Financial conditions have already eased, and the Fed is unlikely to surprise on the upside but will deliver a promised cut this summer. CRE is a still pain point of the US economy. We are not bearish, but after a fast and furious rally, markets are fragile.