The bears are still theres. As equity markets march relentlessly higher on vaccine rollouts, economic reopenings, catch-up growth and stimulus, a few growls can still be found. Deutsche is one: Equities have historically traded closely with indicators of cyclical macro growth such as the ISMs (correlation 73%). Growth (ISM) typically peaks around a year (10-11
Exclusively from Gerard Minack’s Downunder Daily: Inflation corrodes most asset values. It’s harder for investors to protect themselves against high inflation than against deep recession. Investors in developed markets haven’t had to worry about inflation risk for several decades, but now that risk is rising. This note looks at what investments have succeeded in previous
The recent run-up on tech stocks has some of the same ingredients as round one: Retail investors flush with US Treasury cheques. US yields in a corrective phase. COVID rebounding in many places. So, off it goes in the US and Australia: Alas, there are key differences this time around. The Bear Traps Report points
Cross-posted from ZH: It was exactly one month ago that Wall Street exhaled a sigh of relief, and according to the March BofA Fund Manager Survey, consensus among Wall Street’s professionals was that Covid was unofficially “over“… … and after a year of covid dominating the league tables as the “biggest tail risk”, both inflation & taper tantrum were now viewed as
Via FTAlphaville: Since the turn of the month, markets have been quiet. Almost too quiet you might say. After several percentage point gyrations in the key indices over March as new data flowed daily on vaccination rates, Covid case levels and US fiscal stimulus, everything seemed to calm down. Hell, even the VIX has dipped
I have to write this story every few years. Whenever we have a positive iron ore cycle, investors make the same old mistakes. In particular, they assume that the mining cycle of plumped-up dividends is sustainable: SMSFs have gone shorter banks for fear of lower dividends. They have rotated to miners for higher dividends. The
Let’s pick up the ongoing debate over what kind of market cycle this is. Readers will know I have been juggling three narratives to explain the ongoing market boom as it confronts an economic boom: Bad news is good news meaning the ongoing deflation (after a brief spike) will ensure asset prices outperform the economy.
If you ask Goldman Sachs then rising yields will never hurt equities. If you ask BofA then it is soon. If you ask me then it’s neither as inflation peters out first. The excellent Matt King at Citi now adds his two-bob’s worth: Consensus explains the yield backup in terms of rising nominal growth and
It is amusing to watch bottom-up analysts try to make sense of, and defend, Australia’s buy now, pay later bubble stocks. I know nothing of these stocks. But I can identify a top-down market trend when I see one. APT was never about much more than a monetary bubble produced by COVID-19. Just as was
Asian share markets are moving higher going into the Easter break with the firmer lead from Wall Street and some better than expected economic prints helping risk sentiment. Bitcoin is again relatively strong but remains unchanged as it finds more resistance at the $59K level while gold is poised here to breakout higher on its
President Biden’s new big infrastructure plan didn’t shake up markets as expected with Wall Street absorbing the proposed tax increases while the USD finally gave up some ground against the major currencies after being super strong all week. Treasury yields fell back slightly again but still remain above the 1.7% level as commodity prices were
Asian share markets are pulling back despite very solid manufacturing PMI prints in China and the end of fiscal year window dressing in Japan. Bitcoin is again relatively strong but remains unchanged and elevated above the $58K level as it tries to get back above its recent record high above $60K: The Shanghai Composite started
The evidence continues to accumulate that once populations are vaccinated they rush back into travel. A lot of fun is being had in US travel spending right now: Mobility is through the roof: Travel checkpoints are approaching the bottom of pre-COVID ranges: Likewise, hotel occupancy: It is my view that not only will travel rebound
It was a good time but not a long time for tearaway tech stock Afterpay and its various clones. All of them boomed over the last year as COVID-19 launched anything tech-related to the moon. But rising yields and the associated swing away from growth stocks and towards value has ended the party at a
It was a case of repeated expectations overnight on share markets at least, with the mixed Asian lead not upsetting the continued rise in European markets while Wall Street stumbled yet again in the wake of new tax increases for Biden’s new big infrastructure plan. The USD made another high, pushing Euro and the Aussie
Asian share markets are again quite mixed with Japanese stocks this time not moving while local shares pull back inline with the Brisbane (and greater QLD?) lockdowns, while Chinese shares surge. Bitcoin remains relatively strong but unchanged above the $57K level while gold is really struggling here after collapsing overnight and is now threatening the
Some more today on the US economic recovery, which is the leading indicator for the world as the vaccine glut approaches in H2. Goldman sees: The post-vaccine reopening of the economy is barely underway, but our expectation of accelerating sequential growth is transitioning from forecast to fact. Credit card data are consistent with a mid-single-digit
Tech Wreck 2.0 is intensifying and is a long way from over. It will continue so long as yields rise and value stocks come back into favour. That probably gives us another six months of washout by which time I expect many stocks to be down 90% plus. Growth has further to fall and so
Last night saw a pause in rising risk sentiment due to an absence of economic or other catalysts, although the freeing of the Ever Given ship in the Suez Canal should bode well for global trade. The USD made a five month high, pushing Euro down again while the Aussie dollar failed to gain traction.
Asian share markets have started the trading week in mixed fashion with today’s session seeing most markets pulling back and only Japanese stocks advancing. Bitcoin gapped higher, continuing its Friday session bounce to almost punch through the $55K level but still remains in a weekly downtrend after rebuffing the $60K level: The Shanghai Composite is
Morgan Stanley on the amphetamine business cycle: A year ago this week, global equities bottomed as jobless claims spiked to all-time highs with the shutdown of the global economy as a result of the pandemic, and gloom started to set in. It was also around this time that massive monetary and fiscal policy intervention began,
Friday night saw risk sentiment firm once again going into the end quarter/month as the hastened pace of the vaccine rollout in the US embiggened economic efforts as the Fed gave US banks the go ahead to increase dividends. This lead to another record high on Wall Street will seal the deal for Asian stocks
The three great market narratives noted last week are still locked in a battle of wills. Good news is bad news is summarised by BofA: Weekly Flows:$45.6bn into cash (largest since Apr’20), $10.0bn into bonds, $4.1bn into equities (smallest since Dec’20), $0.6bn out of gold. Flows to Know: 3rd largest inflow to TIPs ever, 1st
Risk sentiment came back overnight with both European and Wall Street bouncing back as volatility on bond markets pulled back slightly and the USD continued to lift on the back of strong initial jobless claims overnight. Concerns over the Suez canal supply blockage continue to rattle commodity markets, with oil dropping 4% and copper down
Asian share markets are extremely mixed in today’s session with Japanese stocks rebounding while Chinese shares remain nearly unchanged in response to last night’s selloff in tech stocks on Wall Street. Bitcoin continues to really struggle with another selloff going into the European session with the four hourly chart broadcasting more downside to follow as
A few more charts today on what happens when the population is vaccinated. The US has done a great job rolling out the vaccine and now mobility is taking off: And what do the vaccinated do first? They go out for a fat steak. Then they get on a plane: Even the inept Morrison Government
Last night witnessed a resumption in technology stock selling on Wall Street. The drivers of this are obvious. During periods of rising interest rates, growth stocks underperform as investors look to more immediate yields over long-term returns: So, how inflated is the Nasdaq and how far has it got to fall? First question first. A
Tech stocks fell sharply again on Wall Street as volatility around currency and bond markets was abated somewhat, despite the release of solid flash PMIs and a poor durable goods order print blamed mainly on the weather. The USD firmed again, while oil prices jumped on the Suez canal supply blockage, in what looks like
Asian share markets continue to fall across the region, save locally with the poor lead from Wall Street and rising concerns over COVID in Europe with Chinese shares leading the way again. Bitcoin continues to really struggle here with another weak session going into the European session with the four hourly chart broadcasting more downside
Crikey these markets are radical. Readers will know that I have been on the case of the new “taper tantrum” for many months. But the last few days have seen it come off bigly as oil has corrected heavily. So, where are we now with yields and wider asset prices in what we have come
