US MARKET INTELLIGENCE | MORNING BRIEFING

Research evidence excerpt

US MARKET INTELLIGENCE | MORNING BRIEFING

flagging hyperscaler capex as a datapoint that could flip us to a more bearish stance. If we see a

capex cut, or to a lesser degree buyback reduction, that will roil the markets pushing us toward a

bearish view. At this stage that seems less likely than a reiteration of forward guidance, helping to

boost Tech / Momentum. 2 notes worth reading come from Dubravko and Mislav, both flagging

upside in Semis / Tech / Momentum Factor.

o DUBRAVKO: Hyperscalers vs. AI Hardware, AI Capex & Monetization, Momentum Unwind,

2Q Earnings (full note is here)

o MISLAV: The maturing stage of AI/momentum unwind; Inflation rates rolling; Earnings to offer

a support (full note is here)

• NEW MONETIZATION MENU (JULY 20) – We make few changes WoW, still employing the barbell

of Tech and Cyclicals with some HC. On the Cyclicals trade, we still like this expression and think that

could be more inflows coming into Cyclicals ex-Semis especially Financials. Healthcare remains a

good diversifying play, with a relatively lower earnings hurdle and M&A tailwind. For those looking to

hedge Middle East risk, refiners remain our favorite play within the sector. Derek Chollet sees the

pattern of escalation / de-escalation continuing so energy moves should be faded but an upward

move in bond yields may prove to be stickier.

• EM VIEWS (ELLEN WANG & VICTORIA CAMPOS; JULY 20) – We expect growing divergence in

EM performance at the country/sector level and hence view country-relative trades as more relevant

for the EM monetization strategy in the current environment. Key themes and trades include: (i)

TACTICALLY LONG China H-shares over A-shares; H-shares have lagged YTD, as South Korea,

Taiwan, and A-shares have benefited from AI optimism.