Adam Linton 4.1 15 ideas

EUR/USD at 1.20 seems stretched, and if the ECB doesn't hike rates, it could unwind, especially given growth implications.

The US dollar has more downside room to run as markets look through the current conflict towards a ceasefire, leading to an unwind of hedging around the dollar.

The yen's bullish thesis is challenged if the Bank of Japan doesn't hike rates, as growth and inflation are already cooked in, making it problematic for yen bulls.

Tech sector is performing well, up 13% month-to-date, driven by positive earnings such as from TSMC, and is filling the void in the market as equities move past the conflict.

European stocks are less attractive because they lack a big tech sector, which is driving gains in the US, and there is a high bar for European earnings to impress.

Adam Linton explicitly stated that the market needs to see where Brent crude oil settles after recent price drops. If Brent remains markedly above pre-conflict levels, it will pose a growth headwind for energy-importing economies, affecting global market performance and relative outperformance, particularly for the U.S. Monitoring Brent levels is crucial for assessing growth implications and investment decisions, hence WATCH. A swift geopolitical resolution or a significant decline in oil prices could alleviate the growth headwind and change the outlook.

The analyst states that if the US withdraws without the Strait of Hormuz reopening, crude will need to retain a geopolitical risk premium. He notes Brent is up ~50% from pre-conflict levels and questions Iran's incentive to reopen the strait. The primary economic impact stems from the strait's closure, not just the conflict. If a US withdrawal does not lead to the strait reopening, the supply constraint remains, supporting elevated prices. WATCH due to the high uncertainty and binary geopolitical outcome. The price direction hinges on the strait's status, making it a critical monitoring point for energy markets. The US administration takes a different action, or Iran reopens the strait for other strategic reasons, removing the supply constraint and risk premium.

"Some of these kind of shovel and pick a pack stocks, you know, you take it to South Korea and Kospi, they're benefiting." While US software suffers from disruption, the hardware manufacturers (memory/semiconductors) located in South Korea are the "shovels" enabling the technology. Investors are rotating out of the disrupted (US Software) and into the enablers (Korean Hardware) as a hedge against US policy risk. Long South Korean equities as a relative value play against the US. Global recession dampening hardware demand or escalation in Asia-Pacific geopolitics.

"Reports... suggesting that the prime minister there has voiced apprehension about further rate hikes... I didn't really buy into this... narrative that Japan was going to be fiscally responsible." The bull case for the Yen relied on fiscal discipline and BOJ rate hikes. With bond issuance ramping up (fiscal looseness) and political pressure stopping rate hikes, the fundamental support for the Yen is gone. This clears the path for the Dollar to rip higher against the Yen. Long USD/JPY targeting 160 (currently ~156). Unexpected hawkish pivot by the BOJ or direct currency intervention by the Ministry of Finance.

"We're seeing the software at the eye of the storm and we're seeing something peripheral or adjacent to it being taken out... American Express down over 6%... Equal-weight S&P closed lower." The market is pricing in "displacement effects" (likely AI disruption) which is negatively impacting software and service companies (like AXP). When combined with "tariff anxiety" and "tape bombs," the broad US market (represented by Equal-Weight and Small Caps) is structurally weak compared to global peers. Short or Avoid US Software and broad US indices. A sudden resolution to tariff uncertainty or a rotation back into US growth stocks.