Some interesting macro ideas for what Nomura believes will be a “summer bounce”. Their target on the S&P is 1440 or about 6% higher than current price:
“The key point for us with the trades below is that our conviction on a summer bounce is medium rather than high: we are only looking for a bounce, not a huge move (relative to volatility of recent years) and we also have a high conviction view that this bounce is setting us up for a much bigger risk correction in Q3. With all that in mind we are looking at liquid instruments across the asset classes, relatively modest profit targets and tighter stops than we would normally employ.
Trade 1: Pay USD 3f1y swaps at 1.25%, targeting 2.00%, stop at 1.00%.
Trade 2: Dec-12 / Dec-14 short sterling steepeners. Enter at 22bp, target 55bp, stop at 8bp.
Trade 3: Sell (protection) on iTraxx Main at 169bp, target 135bp, stop at 185bp.
Trade 4: Buy EUR/JPY at 100.20, targeting 105.00 with a stop of 98.75.
Trade 5: Buy oil vs. gold at a ratio of 19.3 targeting 16.0, stop at 21.0.
Trade 6: Buy SPX at 1358, target 1440, stop at 1310.
Trade 7: Hold long German / UK CDS targeting an average of 110bp.”
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.