2024.04.01 Weekly

Q2 balancing act

12 min readApr 1, 2024

Markets appear to behaving like they simply don’t care about when and how many rate cuts is coming, but that it just is… Equity indices continue to push record highs on robust earnings growth expectations while the Gold rally could probably be explained by that sentiment of a global rate cutting cycle beginning also.

Aside rate cuts however, there is still a reasonable degree of uncertainty of how persistent ‘higher-for-longer’ might turn out to be, and how severe (if at all) the impact of monetary tightening will be on company earnings and economic growth outlooks that is both in deceleration. I highlighted some of these concerns last week and for this week, I look into some seasonalities for the coming quarter.

Some strong seasonal trends are afoot, particularly with April being an exceptionally strong month for broad risk after which the rally fizzles out heading into summer. I think Q2 will be all about balancing exuberance against macro uncertainties which I can very much envision playing out over the course of the next quarter looking at seasonal trends.



Equities typically see a solid month of gains to start Q2 that begins to peak ahead of summer months. As the old adage goes — ‘sell in May and go away’.


Commodities generally follow the April ‘risk-on’ with Energy performing strongly throughout the quarter, while other sub-classes has tended to peak early in the quarter. The strong seasonal performance of Energy is particularly interesting given the current macroeconomic backdrop that is particularly sensitive to higher Energy prices.

Apart from Agricultural commodities, seasonal correlations is notably strong in April but weakens soon after. Of the sub-classes, Industrial metals correlate particularly well with Equities and inversely with USD.


Major commodity-currencies follow the risk-on pattern we see in April. CAD is noteably strong alongside Energy commodities in Q2.

GBP holds up well with a mildly positive beta to risk assets, EUR a popular carry funder has been a consistent underperformer throughout the quarter, and USD being negatively correlated to risk starts weak against April risk seasonality but tends to see a reasonably strong rebound in May.

For low-yielders, JPY is traditionally weak throughout Q2 while CHF tends to perform well after the first month.

Seasonal correlations are strong in April for FX, but the usual relationships breaks down as the quarter progresses. This could be an interesting guide to come back to when picking fx themes around what looks like much trickier trading for FX in the latter half of Q2.



  • S&P 500 closes at a fresh record, posts strongest first-quarter performance since 2019 (CNBC). The Magnificent 7 are no longer the only stocks driving S&P 500 to record highs (MW). Momentum stocks are outperforming S&P 500 by widest margin since 2008 — A selloff in the momentum factor could take the broader market down with it, strategists warn (MW). Citi Strategists Downgrade US Tech Stocks as Rally to Broaden (BBG). Wall Street could be in for another good quarter after an exuberant start to the year, history shows (CNBC). Hedge Funds Bet on Europe in Hunt for Next Leg of Stock Rally (BBG).
  • Small investors power Trump Media’s market valuation above $13bn — Heavy trading in company behind Truth Social fuels talk of a new cycle of ‘meme stock mania’ (FT). Memes, Pumps, Blunders: Absurd Crypto Spectacles Make a Comeback (BBG).
  • Inflation risks appear to be rising, threatening to throw Fed’s rate-cut hopes into disarray (MW). Inflation Victory Is Proving Elusive, Challenging Central Banks and Markets — In the U.S. and Europe, underlying inflation has stopped falling or edged higher recently, weakening the case for rate cuts (WSJ). Fed officials still betting on inflation slowdown, but caution rising (RTS). Key Fed inflation gauge rose 2.8% annually in February, as expected (CNBC). Federal Reserve chair Jay Powell expects US inflation to keep cooling in coming months (FT). Waller says ‘no rush’ to cut interest rates after ‘disappointing’ inflation data (FT).
  • AI boom drives global stock markets to best first quarter in 5 years — MSCI index of world stocks rises 7.7% as optimism about US economy offsets expectations of slower rate cuts (FT). Generative AI ‘FOMO’ is driving tech heavyweights to invest billions of dollars in startups (CNBC). U.S. Tech Giants Turn to Mexico to Make AI Gear, Spurning China — Taiwan-based contract manufacturers step up investment south of the U.S. border (WSJ). A Peter Thiel-Backed AI Startup, Cognition Labs, Seeks $2 Billion Valuation (WSJ). Huge AI funding leads to hype and ‘grifting’, warns DeepMind’s Demis Hassabis British AI pioneer says the billions of dollars being poured into start-ups is obscuring scientific progress in the field (FT).
  • Cocoa surpasses $10,000 a tonne as shortages squeeze ‘out of control’ market — Poor harvests in critical production areas in west Africa double global prices in two month (FT) .Gold hits record highs on safe-haven demand, US rate cut bets (CNBC). Funds stampede into copper as price breaks higher (RTS). Traders bet on supply squeeze pushing up copper prices — Difference between spot price and future delivery is the largest ever, in records that go back to 1994 (FT).
  • Oil rises more than $1 a barrel on tighter supply outlook (RTS). Firmer oil prices expected as demand builds and supply curbs persist — Reuters poll (RTS). Global freight acceleration will lift fuel prices (RTS). Crude output at Mexico’s Pemex slumps to more than four-decade low (RTS). OPEC+ Cuts Are Tightening the Oil Market (BBG). OPEC+ unlikely to change output policy before June meeting (RTS).
  • Japan’s yen hits 34-year-low, heating talk of intervention (CNBC). Japan flags ‘speculative’ yen moves, signals chance of intervention (RTS). Standard Chartered says Japan ‘very, very close’ to yen intervention (CNBC).


  • US Payrolls Seen Hitting at Least 200,000 for a Fourth Month (BBG). US inflation moderating; consumer spending underpinning economy (RTS). US economy continues to shine with help from consumers, labor market (RTS). US consumer confidence steady in March; inflation expectations creep up (RTS). U.S. pending home sales increase moderately, NAR says (RTS). U.S. annual home price growth slowed in January, FHFA says (RTS). US new home sales fall; median price lowest in more than 2–1/2 years (RTS). Once America’s Hottest Housing Market, Austin Is Running in Reverse (WSJ).
  • Baltimore Bridge Collapse Is Upending U.S. Supply Chains (WSJ). Baltimore Ship Accident Has East Coast Ports Scrambling to Absorb Cargo (BBG). Biden administration warns of lengthy disruption at Baltimore port — Carmakers and insurers braced for fallout after bridge collapse shuts critical US trade hub (FT). Ships Have Become Supersized Since Baltimore Bridge Was Built — The Dali was carrying 4,700 containers when it toppled Baltimore’s Key Bridge — and the massive ship was nearly full (WSJ). US provides Maryland $60 million to rebuild Baltimore bridge (RTS).
  • Canada GDP Grows Stronger-Than-Expected 0.6% in January — Data reinforces expectations the Bank of Canada will once again stick to the sidelines at its coming policy meeting (WSJ). Mexican economy seen growing up to 3.5% in 2024, draft budget shows (RTS). As Nearshoring Increases in Mexico, the Peso Comes Into Focus — Mexico became the largest U.S. trading partner in 2023, totaling 15% of U.S. imports (CME).


  • UK public’s inflation expectations fall again in March — Citi/Yougov survey shows (RTS). Britain to slow rise of minimum wage from 2025, government says (RTS). Official data confirms UK economy slipped into recession last year (FT). BoE’s Mann says markets are pricing in too many rate cuts (RTS).
  • French and Italian inflation data boost hopes of ECB rate cut — Price growth in key eurozone economies undershoots expectations (FT). Confidence in Eurozone’s Economy Inched Up in March (WSJ). Economic experts slash growth forecasts for Germany — Five leading institutes expect expansion of just 0.1 per cent in 2024 as exports fall and domestic demand fails to pick up (FT).


  • Japan Manufacturers Sentiment Deteriorated for First Time in Four Quarters (WSJ). BOJ policymakers saw need to go slow in future rate hikes, March summary shows (RTS). BOJ’s Next Hike Likely in October at Earliest, Ex-Official Says (BBG). Tokyo inflation slowdown, output slide clouds BOJ’s rate hike outlook (RTS). Japan’s mixed inflation picture complicates BOJ rate hike path (RTS). Japan’s land prices rise at fastest pace since 1991 (RTS).
  • South Korean Export Growth Continued in March — Export growth for Asia’s fourth-largest economy was milder than expected but still kept up its recovery momentum (WSJ). S.Korea consumer sentiment dips as food inflation emerges as top election issue (RTS). AI Craze Drives Record Quarterly Foreign Flows to Korean Stocks (BBG). South Korea’s Semiconductor Output Rises by Most in 14 Years (BBG).
  • India’s central bank likely to hold rates steady until at least July- Reuters poll (RTS). In India’s sizzling stock market, consumer stocks rise 18% but are laggards (RTS). Investors bet an election win by Narendra Modi will extend India’s stock market boom (FT).
  • China’s March factory activity expands for first time in six months (CNBC). Macau roars back as gamblers return to ‘Las Vegas of the east’ (FT). Old Xi Jinping speech sparks China monetary easing speculation (RTS). China will be a driving force for the world economic recovery, official says (RTS).
  • Australia’s February Inflation Comes in Lower Than Expected (WSJ). Australian Retailers Shake off Malaise With a Little Help From Taylor Swift — Seven sold-out Taylor Swift concerts led to increased spending on clothing, merchandise, accessories and dining out (WSJ). RBNZ Fills Two Vacancies on Crucial Monetary Policy Committee as Economy Stalls (WSJ).


Global equities ACWI recorded yet another record close as with the Developed markets index EAFE. Emerging ex-China EMXC fell short of the YTD high for a 3rd consecutive week but has put in a higher YTD close. Daily highs and closes are becoming shallower which suggests vulnerability of a sell-off.

SPX is carving out an acute rising wedge. There were some exhaustion signals earlier in March which failed to produce the price action to confirm it. If April is to be a strong month for stocks as seasonality suggests, I would think it needs a small pullback to open that door rather than continuing to rip higher in a ‘vulnerably unhealthy’ fashion from this juncture.

NDX action has been noticeably more tired compared to SPX and very close to showing more complete ‘local-top’ signals. I’ve been expecting the rally to find a near-term top as it ventures towards 18500 over the past month or so, and its certainly finding some decent resistance since late-Feb.

NYFANG+ rolled over since I marked the long doji rejection candle last week. Trendline support and 20dema is not far below here and I’m waiting for a strong bearish candle for a close below them to gain some conviction of a brief correction.

MSCI US Cyclicals-Defensives spread hasn’t made any progress since late-Jan but structurally, it is showing more promise of thematic exhaustion.

Small/Mid-caps index is giving me some conflicted signals about how the other indicies are shaping up. Its put in another higher high and close for the year and I’m still waiting to see if finds a meaningful turn in this area. I feel these rate sensitive sectors got a boost from the quarter-end bond buying, and with some big US data out this week, a rebound in yields could produce a turn.

Meme stocks are making a comeback and the most-shorted stocks index is getting a lift again. It’s back to attempting a breakout but it won’t take much for that picture to change quite quickly with key supports not far below.

Revisiting the 2 indicies I’m focused on at the moment: 1) Nikkei starts the month on the backfoot with a strong bearish candle from above the 40k handle on print today. I pointed out this channel top projection using the trendline support a couple weeks ago and its shaping up very well for a correction leg…

2) OMX too is shaping up nicely as its beginning to rollover from this zone measured out from breakouts of key levels/ranges.

Still early days but there are some signs of broad equities tiring out from it’s recent rally. If we get some downside continuation, I will be plotting out pullback levels in view of looking to ride the strong April seasonality before the tentative plan of reengaging shorts again later in May.


BBG commodities index put in a big rally into quarter-end. Newsflow is highly suggestive of more upside which would give the macro narratives around disinflation, imminent cuts and the firming up of consumer confidence something to think about.

Given up on attempting to fade the gold rally for the time being. Perhaps I’ll try a few jabs prior to NFP and CPI the following week if anything.

Crude and Gasoline action looks particularly strong. While I don’t have much interest interest in chasing it even though Q2 is historically a strong period for Energy, it will be worth keeping a close eye on it for implications on market expectations and performance of other assets.


It’s been surprising risk assets have performed so well when yields have rebounded more than 30bps across the curve so far this year (ytd-change in the bottom panel).

The 10yr is sitting heavily on a key pivot level around the 4.2% handle where I expect it find a footing as I’ve alluded to over the last 2 weeks. This week will be a big test to see whether thats the case:

  • UST supply amounts to be announced
  • ISM may affirm persistence of price pressures as highlighted in the last S&P Global Flash PMIs
  • Jobs report expected to print another strong month of 200k+ gains

Plenty there that could keep yields supported to act as headwinds against the broadening in the equities rally (that was largely made up by rate-sensitive laggards) and tailwinds for the USD rebound that is eyeing new ytd-highs.


Current themes I’m seeing based on index price action above and macro narratives:

  • Bearish EUR — widening growth and policy expectations to keep EUR on the backfoot and a preferred funder over the USD.
  • Bearish CHF — SNB dovish pivot and net-selling of Francs, market replacing JPY as a popular funder for higher-betas.
  • Bullish USD — continue to maintain a moderately bullish bias on US exceptionalism; currently long vs JPY and EUR.
  • Bearish JPY — swift hikes unlikely while differentials remain very wide, though MOF intervention concerns could keep downside muted.
  • Neutral GBP — neutral for now but medium term bearish view on growth stagnation with hardly any light at the end of the tunnel.
  • Bullish CAD — USD crosswinds and strong Energy seasonals, looking to buy on dips particularly against EUR and CHF.
  • Neutral AUD — hints of China recovery to offset domestic weakness.
  • Bearish NZD — broad weakening of macro data and dairy auctions, RBNZ with room to cut, looking to sell rallies.

That’s all for now. Wish you a good start to Q2!