Dissecting the Trade War Impact - US Auto Case Study

Excellent Bloomberg article by Keith Naughton highlighting GM as the US auto maker most vulnerable to global trade wars.Traditionally this is the domain of bottom-up analysis looking at the supply chain dynamics of individual companies. Our Macro Risk Model augments this by providing the top-down perspective.

Our chart shows the % change in Ford $F & General Motors $GM for a 1 std dev move higher in the 5s30s US curve since the election.

‍

The shape of the US yield curve captures the Trump Chaos Premium - steeper curves reflect fears of wider deficits, higher inflation, less overseas UST demand.

GM's sensitivity turned negative after Trump won the White House. Ford's dipped but remains positive.

GM is the auto stock most vulnerable to bear steepening in US Treasuries. The Bloomberg chart on the right overlays the 5s30s US yield curve with the F/GM stock price ratio.No bottom-up stock picker would be watching the yield curve on a day-to-day basis.And even if they were, how would they identify & measure the orthogonal relationship it has with their individual stock holdings?Macro doesn't have to be tough to follow.

Qi usesmachine learning to help integrate macro into the single stock equity investment process.