UK Jobs Data Gives Green Light to March BOE Cut

Speakers

Adam — Market Strategist / Guest

Summary

Japan presents a bullish equity case post-election, though the market is underpricing the risk of a massive ramp-up in bond issuance over the next three fiscal years.
The Bank of England (BoE) is viewed as "locked in" for a March rate cut (80% priced), with UK wage data appearing "unambiguously dovish."
The US macro focus is shifting to the "Warsh Thesis": High productivity leads to low inflation, allowing for lower interest rates, a view potentially gaining traction among FOMC officials.

Trade Ideas

Ticker	Direction	Speaker	Thesis	Time
JAPANESE EQUITIES /JAPANESE EQUITIES / NIKKEI INDEX	LONG	Adam	"I think there's definitely a bullish case to be made for Japan. You kind of see that in the post-election reaction to equity markets." The market views the new government (Takeuchi/Ishiba context) and potential stimulus as a stabilizing force, encouraging capital flows into Japanese stocks. LONG Japan as a post-election momentum play. Fiscal discipline concerns or currency volatility.	—
JAPANESE GOVERNMENT BONDS	SHORT	Adam	"We've seen some report suggesting that Japanese bond issuance is going to ramp up massively over the next three fiscal years. And the market is kind of still not really kind of engaging with that prospect." While the market is currently buying bonds (yields down), a massive increase in supply (issuance) to fund stimulus will eventually force bond prices down and yields up. The market is currently mispricing this supply shock. SHORT JGBs (or expect higher yields) once the issuance reality hits. The Bank of Japan intervenes heavily to suppress yields.	—
UK EQUITIES /UK GILTS	LONG	Adam	"I think March is basically locked in... I think 50 basis points by year end is relatively reasonable. I think the data today was unambiguously dovish." Dovish wage data confirms inflation is cooling, clearing the path for the BoE to cut rates. Lower rates reduce discount rates for equities and directly boost bond prices (Gilts). LONG UK assets (Bonds/Equities) on confirmed rate cut cycle. Inflation re-accelerates or the BoE remains more hawkish than the market prices.	—
US EQUITIES /GROWTH STOCKS	LONG	Adam	"The Warsh case is a high productivity equals low, inflation equals lower rates... looking for these comments today to see if other FOMC officials on board with that view." If the Fed adopts the view that AI/productivity improvements are deflationary, they can cut rates even with strong growth. This "Goldilocks" scenario (Growth + Low Rates) is the ideal environment for equity valuations. LONG US Equities if Fed rhetoric aligns with the productivity thesis. Productivity gains fail to materialize, or inflation remains sticky, forcing rates higher.	0:00