Here are the Morgan Stanley and RBS top trade themes in 2010,
MS says that forecasts are based on the expected growth out-performance of the US economy in 2010. Additionally, the Fed is likely to begin withdrawing stimulus in Q1 2010 and start hiking in Q3 2010, ahead of its G3 peers.
So short EUR/USD, long USD/JPY, short AUD/CAD, short NZD/NOK, short GBP/CHF, long PLN/CZK, short JPY/KRW, basket of short JPY, NZD, EUR, GBP vs long NOK, USD, CAD, SEK.
On the other hand, RBS thinks that in 2010, the world is likely to remain in a binary state – dominated by either risk on, or, risk off trades. The timing of Fed policy changes will largely dictate the shift in risk from on to off, and the risk trade together with rate differentials has the capacity to create a wild swing in USD sentiment, when the Fed finally acts. In our forecasts we have worked on the assumption that the risk positive trade continues at least into Q2, and the earliest we will get Fed tightening is H2 2010, and possibly a good deal later than that. Alternatively, if the risk trade is to shift to off because the real economy is under-performing, it will take a number of months for weakness to assert itself, since relatively reliable short-term leading indicators point to a continued recovery with only a mild loss of momentum in the next 3 months.
