Global Concentrated Alpha outlook summary

    1. Since the Fed pivot, the equity market has moved to become further risk-on and has fully embraced a soft landing. The belief in a soft landing is not a good indicator of what happens next, given it was particularly strong in 2000 dot-com crash
    2. The Fed pivot is no surprise to us and comes remarkably late versus history, making it the first Fed to continue hiking post the peak in inflation
    3. Meanwhile, we see a further slowing of economic growth and expect US consumption to slow into 2024. This comes as excess savings from covid and stimulus support are depleted and savings rates are generally low versus historic levels
    4. The boom of AI in industrial production happened over a decade ago. The boom in generative AI is happening today. However, its effects are hard to judge and possibly overestimated. Of note, imports of chipmaking equipment to China have tripled over the last 10 months, likely driven more by fear of supply rather than large AI investments.

    Figure 1: “Soft landing” story count not a good indicator of final outcome

    Soft Landing story count dating back to 1980.
    Source: Bloomberg Finance L.P. as at 8 December 2023.

    This chart depicts the number of Soft Landing stories dating back to 1980

    Figure 2: The first Fed that kept hiking post inflation peak

    Core inflation around Fed pivots
    Source: BLS, Federal Reserve, NBER; Minack Advisors as at 12 December 2023.

    Core inflation chart illustrating trends around Federal Reserve pivots.

    Figure 3: Households seeing more need to save

    Consumer spending to slow down
    Source: ۶Ƶ Evidence Lab as at 13 November 2023.

    Line chart depicting a slowdown in consumer spending over time between the years of 2012 to 2023

    Figure 4: Spending intentions are slowing

    Consumer spending to slow down
    Source: ۶Ƶ Evidence Lab as at 13 November 2023.

    Bar chart outlining a percentage change in household Income spending between August 2022 to October 2024

    Figure 5: Unsustainable semiconductor equipment demand?

    Chipmaking equipment import value to China (US$M)
    Source: General Administration of Customs of PRC, Bernstein analysis as at 18 December 2023.

    Chart illustrating the import value of chipmaking equipment to China in US$M from 2015 to 2023, highlighting the unsustainable demand for semiconductor equipment during this period.

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