The current "most hated rally" in US assets has legs, creating a contrarian buying opportunity. As US proxy assets, Bitcoin (BTC) and Ethereum (ETH) should also continue to rally alongside US markets. A separate high-conviction trade is to be long Chinese equities, which are benefiting from a weak US dollar and favorable energy dynamics. Consider investing in the Shenzhen (ZI) index as a direct way to play this theme. The underlying economic cycle appears stronger than feared, supporting these risk-on positions.

US Equities & Assets

• The market had a very positive reaction to Fed Chair Jay Powell's speech at Jackson Hole, despite many pundits expecting a more hawkish tone.
• There is a strong consensus among institutional investors that US assets will underperform due to a perceived lack of institutional credibility (e.g., political pressure on the Fed).
• Despite this negative sentiment, fund flows into the US are breaking all-time highs. The speaker interprets this as investors "reluctantly participating" in the rally.
• The economic cycle is viewed as being stronger than feared. The speakers highlight the S&P PMI (a measure of business activity), which is accelerating and currently at a strong level of 54. They believe this is a more accurate indicator than the more commonly cited ISM PMI right now.

Takeaways

• The current rally in US assets is described as the "most hated rally," which the speakers believe means it "has legs and plenty of legs."
• The widespread bearishness from institutional investors is seen as a contrarian bullish signal.
• Investors should consider that the underlying economic strength might be underestimated by the market, suggesting that buying into US assets is still a "very good story."

Chinese Equities (Shenzhen Index - ZI)

• The speakers have been guiding their audience to invest in China, a trade that has performed very well. The Shenzhen (ZI) index is up 15% since the beginning of August.
• This strong performance is seen as a direct result of a weak US dollar, which makes it easier for emerging markets like China to manage their dollar-denominated debt.
• The potential for the US Federal Reserve to become more dovish (cut interest rates) under political pressure is seen as very positive for Chinese markets.
• Geopolitical factors are also seen as a tailwind for China:
  • China's economy tends to thrive when there is no progress in the Ukraine conflict.
  • China is reportedly buying large volumes of very cheap oil from Russia, which is positive for its economy.
• The speakers note that the US has not applied secondary sanctions to China for buying Russian oil (unlike India), suggesting a less confrontational stance that is beneficial for Chinese assets.

Takeaways

• The speakers are very bullish on China, calling it a "pretty decent safe haven right now."
• They note their own portfolio is up 20% on this specific trade, highlighting their conviction.
• The combination of a weak dollar, dovish Fed policy, and favorable geopolitical and energy dynamics creates a strong investment case for Chinese equities.

Bitcoin (BTC)

• A tweet from a pundit claiming the "Bitcoin top being in" was discussed and dismissed.
• The speaker argues that historically, market tops do not form when business cycle indicators like the ISM are at current low levels (around 48).
• The current debate and uncertainty about the market's direction are seen as typical for this stage of the cycle, not necessarily a sign of a peak.
• Crypto assets, including Bitcoin, are now viewed as "US proxy assets," meaning they benefit from the same trends driving the US market rally.

Takeaways

• The speaker is personally upbeat on Bitcoin and disagrees with calls that the market has peaked.
• The argument is that the underlying macro-economic environment does not support the idea of a market top.
• Investors should view Bitcoin's performance as linked to the broader "most hated rally" in US assets, suggesting potential for further upside if that trend continues.

Ethereum (ETH)

• Ethereum investors saw a significant rally following the Powell speech, with prices jumping 12% to 13% on Friday afternoon.
• This highlights the asset's sensitivity to macroeconomic news and changes in market sentiment regarding Fed policy.
• The general bullish sentiment expressed for crypto and the view of crypto as a "US proxy asset" applies to Ethereum as well.

Takeaways

• Ethereum remains highly responsive to macro catalysts, offering potential for significant short-term gains on positive news.
• The overall bullish case for crypto assets due to reluctant institutional buying and a favorable macro environment supports a positive outlook for Ethereum.