December 11, 2018
In This Week's Update:
- Deep-seated economic and political forces will continue to undermine a meaningful trade truce between China and the United States.
- U.S. economic momentum might strong enough to allow the Fed to deliver more rate hikes next year than what the market is discounting, but they are vexed by mixed signals just like investors.
- Regardless, global growth should stabilize by the middle of next year as China picks up the pace of stimulus and the dollar peaks.
- Until then, a cautious stance towards global equities and other risk assets is warranted.
- Global bond yields will fall further in the near term, but would continue to rise by a faster-than expected pace over a horizon of 6-to-18 months as global growth picks back up
Cliff Notes Look Its Tariff Man 12 10 2018
December 3, 2018
In This Weeks Update :
- Federal Reserve Chair Jerome Powell said he sees U.S. interest rates as “just below the broad range of estimates" of neutral. Risk assets rallied, as markets interpreted the comments as a sign that the pace of future policy tightening in the U.S. may be slower than previously anticipated. Equities rose, led by U.S. and tech stocks and the momentum factor, and U.S. Treasury yields fell.
- U.S. President Donald Trump and Chinese President Xi Jinping agreed to work together to resolve their trade dispute and put further tariffs on hold for 90 days. We see this outcome boosting global risk appetite in the short term
- Economists expect strong U.S. non-farm payrolls growth in November, and the data will offer a key signal ahead of the Fed’s December meeting.
Full Article Here - Cliff Notes Trade Talks 12 03 2018
November 29, 2018
In This Week's Update:
· Equities have had a wild ride so far this quarter, while the S&P 500 bounced smartly off of its October 29th lows, the decline that preceded the bounce was unusually severe. And the market fell sharply again during the shortened Thanksgiving week.
· That downdraft unsettled a lot of investors, and made us reconsider our constructive take on risk assets: To judge by the November 5th Barron’s, and some client conversations, several technically-minded investors are unconvinced by the bounce then or here on Monday.
· But nothing has really changed with our equity downgrade checklist, however. The fundamental picture hasn’t changed at all – neither corporate revenues nor margins appear to be in any immediate difficulty; though we still expect inflation to surprise to the upside, the latest data will not push the Fed to speed up its gradual rate-hike pace; and the combination of blockbuster third-quarter earnings and October’s selloff made valuations nicely more reasonable.
· So we see no reason to further downgrade equities now, noting that we went to an underweight positions several weeks ago, though we do have the admonition of a Wall Street legend ringing in our ears: If the fundamental backdrop remained unchanged, we would be inclined to upgrade equities if the S&P 500 fell back to the 2,600-2,640 range, even though we are operating with a heightened sense of vigilance befitting the lateness of the hour.
Full Article Here - Cliff Notes A Wild Ride 11 26 2018
October 16, 2018
In This Weeks Update:
- Rising U.S. bond yields will continue to put downward pressure on global stocks in the near term, but will not trigger an equity bear market until rates reach restrictive territory. We are still at least 12 months away from that point.
- Last week’s drop in the S&P 500® marks the 27th 5%+ pullback of this bull market and the third of 2018. We do not take these market moves lightly, but it is also important to put them into context — both relative to history and relative to the fundamentals.
- We downgraded global equities from overweight to neutral in June, while maintaining our bias for Developed Market stocks over Emerging Market stocks. Barring any major new developments, we would turn bullish again if global stocks were to fall by another 5-10% from current levels.
Cliff Notes The Bond Bear Bites