Martin Shenfield, Managing Director of Macro Strategy, discusses the following points:
- Disconnect between US corporate/consumer forward expectations and reality – why do they persist and when will confidence in the V-shaped recovery dissipate?
- Winners and losers at country and sector level for each US election outcome; how to hedge US election risk
- China, the Tech war, and implications for economies and markets in Asia
- The macro implications of AIT – is this the end of 60/40 investing and what does this mean for alternatives?
- A summary of our key Asset Allocation recommendations globally and tactical trade ideas
Charles and Andrea discuss our core house view; that we remain convinced bears, S&P 500 down at least 20% from here is our starting point. Quarterly earnings & other triggers to send the equity market down in waves, these downward lurches could take more than a year to roll through. The current self-confidence driving stock prices higher merits the comparison of current forward p/e ratios to their only precedent, the 1999-2000 tech bubble, a comparison with the 2½-3-year bear market that slumped in 2000 and finally ended in early 2003 thus also merits comparison to now. Equities offer no margin of safety owing to these high p/e and EPS expectations. This makes them unappealing from a risk-reward perspective. We keep a cautious stance on equities owing to the lack of apparent value at current prices, but a sudden drop to retest this cycle’s lows is unlikely in the near term.
- Middle East flare-up riases the spectre of simultaneous yen, oil price strength
- Indirect effects from a lasting oil supply shock dominate risks to growth
- Capex resilience key for GDP as job market tailwinds fade
- Slow start to 2020, a strong finish, as headwinds give way to tailwinds
- Fed throws in the towel on inflation, sets up for a challenging 2021
- Is the US-Iran showdown a new headwind?