Category Archives: Gold & Precious Metals
Q1 2019 Global Markets Outlook & Investment Strategy
For Q1 2019, we see best alpha opportunities for investors in the G-10 equities, particularly in global Consumer goods, industrials, Manufacturing, Utilities, Insurance. Although globally equities are now less expensive, US equities are currently representing the highest valuation risk, with headwind of a “too strong” USD not factored in correctly by analysts yet..
Weekly Equities Strategy Update
We still reommend that investors should reevaluate their current holdings, and pay close attention to the seasonal forces that likely will come into play in the short term. Seasonally, the next period of strength for US, EU and Asian equities comes into play in the month of October.
Weekly Global Equities Strategy Update
US economic focuses this week are on the FOMC announcement on the Fed Fund rate on Wednesday and the July Employment report on Friday. We think for the coming weeks, yields for the 10-Year are capped at the flag’s implied target of 3.14%, the highest level since mid-2011, implying a much faster pace of tightening, how might that affect equities?
Q3 Global Markets Outlook & Investment Strategy
Globally, equities are getting expensive, with US equities currently representing the highest valuation risk, with some tailwind benefits of a weaker USD fading temporarily. For Q3 2018, we see increased risks for investors in the G-10 equities, particularly in global Auto’s, Financials, Banks, Consumer Goods.
Weekly Investment Strategy Update & Charts Update
We clearly see better value still in Asian and EU stocks, and for investors to
overweight in both, relative to US equities and achieve higher returns until yearend
2017.
Weekly Investment Strategy Update & Charts Update
At a market level, investors’ medium-term strategic bias on equities continues to show signs of moving onto a less positive path. The latest sentix survey suggests sentiment and investors’ strategic bias on Eurozone equities has modestly weakened.
Weekly Investment Strategy Update & Charts Update
The International Monetary Fund today published a report indicating that The global economic recovery has strengthened financial stability but easy monetary and financial conditions against a backdrop of sluggish inflation is elevating medium-term risks. The IMF upgraded its global economic growth forecast for 2017 by 0.1% point to 3.6%, and to 3.7% for 2018, from its April and July outlook, driven by a pickup in trade, investment, and consumer confidence.
Weekly Investment Strategy Update & Charts Update
Investors increasingly poles apart on Equities versus Bonds The latest sentix survey
indicates that investors remain resolutely upbeat on equities and deeply downbeat on
bunds. As a result, the sentiment gap between bunds and Eurozone equities is now
large and growing, albeit the gap has yet to reach historic lows.
Weekly Investment Strategy Update & Charts Update
In the Americas, Friday’s release of the publicly available data from ECRI puts its
Weekly Leading Index (WLI) at 143.4, unchanged from the previous week. Y-o-y the 4-week moving average of the indicator is now at 2.83%, down from 3.09% last week and its 11th consecutive week of declines. The WLI Growth indicator is now at 0.0, also down from the previous week, it’s lowest since March of 2016.
Weekly Investment Strategy Update & Charts Update
In the Americas, the US economy is on track to grow at a 3.7% annualized pace in Q3, the Atlanta Federal Reserve’s GDP Now forecast model showed on Friday, following the release of the government’s July payrolls report.
Weekly Investment Strategy Update & Charts Update
We have highlighted since May 5th that signs of a seasonal peak in European and
now also for North American equity markets had arrived. The Euro Stoxx 600, the
DAX and the CAC reached their seasonal peaks on May 13th.
Weekly Investment Strategy Update & Charts Update
We continue to see the Euro to stabilize further and continue to rise. Safe heaven
currencies like the US$ and like Gold will reverse course and decline. As per our
Q3 Global Investment Outlook & Strategy, the EUR/US$ is on track to rise to our
Q3 end target of 1.18, and our 2017 EUR/USD target of 1.18 – 1.24.
Weekly Investment Strategy Update & Charts
As per our Q2 Global Outlook and Investment Strategy, we have been advising
our clients to reduce exposure to the US$ ($USD) and US equities ($SPX), and
instead increase allocations into US long bonds, namely 10-Year Treasuries
($TNX), and into EU and EM currencies and equities, which form a tactical Asset
allocation call has been spot on so far in the current quarter.
2017 Q3 Global Markets Outlook & Investment Strategy
Globally, equities are getting expensive, with US equities currently representing the highest valuation risk, as US corporate earnings will be revised downwards, partly due to the continued higher weighted US$ and its negative translational impacts.
Weekly Investment Strategy Update
World trade flows grew in Q1, continuing a recovery that began in 2H of last year in an indication that the global economy may be set to enjoy a year of stronger growth. World trade flows grew at the slowest pace since the financial crisis in 2016 as a whole, but there are signs 2017 will mark a rebound.
Weekly Investment Strategy Update & Charts
We are seeing increasing signs of a very similar credit bubble in the US as in 2006/2007, and investors should consequently diversify risks by re-allocating more assets outside of the US equities and credit markets.
Weekly Investment Strategy Update & Charts
In the Americas, US retail sales and CPI data released on Friday gave further confirmation that the US economy is slowing.
Weekly Investment Strategy & Charts
Since March of last year, we also started to see increasing macro evidence that
the Euro area was going to be a more stable, secure and reliable place to invest
in than the UK and US, but our call fell mostly on deaf ears until 2017. Europe has
emerged once again as a region that offers a stable political and macro economic
environment, just as the fate of other economies is harder to predict.
Weekly Investment Strategy & Charts
As per our Q2 Global Outlook and Investment Strategy, we have been advising
our clients to reduce exposure to the US$ ($USD) and US equities ($SPX), and
instead increase allocations into US long bonds, namely 10-Year Treasuries
($TNX), and into EU and EM currencies and equities, which form a tactical Asset
allocation call has been spot on so far in the current quarter.
US Macro slowing, US$ & US equities Trump Dump
As we have been warning investors for the past 8 weeks, we have highlighted noticeable surface cracks in the US economy, which slowly are impacting how the US$, US bonds and US equities are performing.
Weekly Investment Strategy & Charts
Headline prices in the US, UK and Europe are already at or above 2%. At the same time, seven central banks globally are still running negative interest rate policy (NIRP), while aggregate global quantitative easing continues to expand at breakneck speed. Looking ahead, we think central bank liquidity, the major factor that helped support risky assets during the post-crisis era, might peak by early 2018.
Weekly Investment Strategy & Charts
Looking ahead, we think central bank liquidity, the major factor that helped
support risky assets during the post-crisis era, might peak by early 2018.
Weekly Investment Strategy & Charts
Given the AHCA defeat last Friday, financial markets have to re-assess reality versus wishful thinking. As we had been writing for the past 5 weeks, US assets (US$ and US equities) had been very overbought, and had failed to move towards new highs, and double tops had been put in place. We see Friday’s equity markets’ reversal as a major catalyst for trend change, and the catalyst for investors to focus on major asset re-allocation thinking.
Weekly Investment Strategy & Charts
Investor sentiment towards emerging market (EM) equities remains closely
linked with views on commodities. It is notable then that optimism on
commodities as a grouping has been tempered in the past month, even as EM
sentiment has headed higher.
Weekly Market Commentary & Charts
We continue recommending for investors to use the current US$ strength and
diversify into the seasonally better performing European and EM equities. As we
have written in the past 3 months, we see a stronger case in favor of higher
European allocations until mid May.
Weekly Market Commentary & charts
We continue recommending for investors to use the current US$ strength and
diversify into the seasonally better performing European and EM equities. As we
have written in the past 3 months, we see a stronger case in favor of higher
European allocations until mid May.
Weekly Market Commentary & Charts
We continue recommending for investors to use the current US$ strength and
diversify into the seasonally better performing European and EM equities. As we
have written in the past 3 months, we see a stronger case in favor of higher
European allocations until mid May. We believe that the political and sovereign
tail risks for Europe, particularly with respect to potential Eurozone
disintegration, are fully priced in the weak Euro and European equities.
Weekly Commentary & Charts
We continue recommending for investors to use the current US$ strength and
diversify into the seasonally better performing European and EM equities. As we
have written in the past 3 months, we see a stronger case in favor of higher
European allocations until mid May. We believe that the political and sovereign
tail risks for Europe, particularly with respect to potential Eurozone
disintegration, are fully priced in the weak Euro and European equities.
Weekly Market Commentary & Charts
AUD and CAD turn higher, USD weakness is gaining breadth.
Commodities break to the upside (Oil, Copper, Steel, Platinum, Palladium).
Emerging Market equities break out to the upside (Brazil; India; China).
Stock/Bond ratio ready to break higher.
Weekly Market Commentary & Charts
Continue to Sell/short US$ against commodities based currencies like
BRL, AUD, CAD, but also against the EUR
Overweight US 10 Year Treasuries
Continue to Overweight Commodities, Energy, metals
Overweight foreign stocks short and medium term, namely European
(German, French, Spanish, Dutch), Canadian, Japanese, Chinese, Russian
and Brazilian equities
Underweight US & UK equities
Morning Market Commentary & Charts
For the past 3 years we have been highlighting a disturbing and fairly overlooked
fact, namely that investors seem to like hype and hope over reality, particularly
when it comes to comparing investment outlook and opportunities between the
US and Europe, but also by comparing the US to the ROW.
Weekly Market Commentary & Charts
Investors are now clearly waiting for concrete economic policies from the Trump administration, with both the upward move in US yields and the US$ losing some momentum. Furthermore, we think there is an increasing chance that global risk sentiment could be affected by a possible standoff between China and the US. Longer term, we could see risks rise to a global recovery from more economic protectionism.
Weekly Market Commentary & Charts
The US$, (and all US$ priced and related asset classes like US equities and US
treasuries, commodities) are simply overbought, overheld, overvalued and
overdue for a correction. We see better value in foreign equity markets,
particularly as Japanese, Chinese and European equities are in the strongest
period of seasonal strength until end of April.
Basic Resources & Metals Commentary & Charts
After some significant consolidation in the industry over the past 2 years, (M&A, capacity adjustments, strategic alliances, etc.) we had forecasted that the 2H of 2016 would be a turning point for basic resources pricing and outlook. At this point, we would like to reiterate that we are expecting for basic resources and metal prices to advance by another +25% in 2017 from current levels.
Weekly Market Commentary & Charts
We are recommending for investors to hold seasonally attractive equity positions that remain in an intermediate uptrend and continue to outperform the S&P 500
Index (e.g. precious metals, technology, selected Canadian energy, DIS, UNH,
AAPL, etc.). Profit taking in other positions is appropriate. As highlighted in our
Fixed Income commentary, year-end portfolio adjustments continue, most
notably the switch to fixed income securities from equities.
Weekly Market Commentary & Charts
2017 seems for most an inherently tricky year to forecast, since the political shift in
power creates so many unknowns. Policy implementation could play a big role in
shaping economic output and corporate profitability, and both of these factors matter
immensely to stock performance.
Weekly Market Commentary & Charts
We are advising to stick with the seasonal trend in equity prices for the next two
weeks, but are warning investors to prepare to lock in significant profits before
Inauguration Day on January 20th.
Market Commentary & Weekly Charts
We believe that the global financials sector is likely to see a massive comeback
in 2017, as a rising rate environment combined with attractive valuations a
positioning, in the financials sector could be the perfect hedge against further
interest rate hikes in the portfolio.
Weekly Market Commentary & Charts
In the US, the strong US$ is having continued negative affects on the US economy in many different ways. The Census Bureau published its advanced look at international trade in the US and the result showed the deficit widened to $62.0 BN from $56.5 BN previous. Continue reading
Weekly Market Commentary & Charts
The very reliable long-term equity/bond model favor bonds over equities, therefore, investors should continue to overweigh their portfolios with bonds over stocks for safety and better return. Can investors’ temporary blindness become the “trumping” reason to go long bonds after the inherent correction of the 10Year treasury yields moving to our 2.35% yield target? We think so.
Weekly Market Commentary & Charts
Economic and political focus this week is on results of the election on Tuesday. Other
economic reports this week are not expected to be market movers.
Weekly Market Commentary & Charts
Economic focus in the US next week is on the FOMC meeting. Consensus is that the
Fed Fund rate will remain at 0.25%-0. 50%, but the Federal Reserve will give a clear
signal about increasing the Fed Fund rate by 0.25% at its December meeting. Other US economic reports are expected to confirm that the US economy is growing at a slow but steady rate.
Weekly Market Commentary & Charts
The time to buy into capital goods, mining, and railroad and energy stocks has never been better than right now.We continue recommending for investors to buy commodities such as crude oil and gold.
Market Commentary & Charts
As per our 2016 Global Investment Outlook & Strategy which we published last
year in December, when comparing Real Assets versus Financial Assets, the
following chart shows that real assets are at all-time lows versus financial assets.
The time to buy into capital goods, mining, and railroad and energy stocks has
never been better than right now.
Weekly Market Commentary & Charts
Again, the way we continue seeing it, the macro climate in both the US and most
of the G-10 countries is still fading, global trade still depressed, and capacity
global utilization still well under 70%, we see no rational reason as to why the
FED should raise rates this year, or in 2017.
Weekly Market Commentary & Charts
The period of uncertainty for world equity markets continues. Many equity markets,
commodities and primary sectors have returned to the top of their trading range
previously reached in mid-July. Establishment of another intermediate uptrend is
unlikely prior to the US Presidential election on November 8th. Prospects following the Presidential election are positive. Seasonal influences begin to change in the month of October.
2016 Q4 Global Markets Strategy & Equities Outlook
As highlighted in our 2016 Global Investment Strategy & Outlook, the global macro fundamentals had been slowing as we anticipated, and consequently Central Banks in the US, Japan and Europe have been adding liquidity to dampen the slowdown. Contrary to most “sell-side” big firms, which had been predicting 4 rate hikes by the FED in 2016 (GS, JPM, UBS, DB to name just a few) besides “buy-siders” (of the likes of Bill Gross/Pimco/Janus, Mohammed El Erian/Allianz and too many others to name).
Weekly Market Commentary & Charts
The period of increased volatility and increasing weakness for world equity
markets continues until the end of October.
Weekly Market Commentary & Charts
Global equities have passed their peak of annual seasonal strength on May 11th,
we are advising investors to aggressively sell Chinese, Japanese, US and EU
equities immediately, as many macro-economic, geo-political and political risks
will likely rise over the next 2 – 4 months into the summer.
Weekly Market Commentary & Charts
Global equities have reached their peak of annual seasonal strength in late April/mid May, we are advising investors to aggressively sell Chinese, Japanese, US and EU equities immediately, as many macro-economic, geo-political and political risks will likely rise over the next 2 – 4 months into the summer.
Weekly Market Commentary & Charts
Now that global equities have reached their peak of annual seasonal strength in
late April/mid May, we are advising investors to be aggressively selling Chinese,
Japanese, US and EU equities, as many macro-economic, earnings outlook and
geo-political risks will rise over the next 2 – 4 months into the summer.
Morning Market Commentary & Weekly Charts
Economic focus this week is on the FOMC meeting on Tuesday and Wednesday. Consensus is that the Federal Reserve will maintain the Fed Fund Rate at 0.25-0.50%. However, the bond market began to respond last week to anticipation of message by the Fed that it plans to increase the Fed Fund rate soon based on incremental evidence that slow US economic growth is accelerating.
Morning Market Commentary & Weekly Charts
Financial leaders from the G-20 nations said on Friday they were heartened by a recent recovery in financial markets, but warned that global growth was “modest and uneven” and threatened by weakness in commodities-based economies
Morning Market Commentary
In the US, the US federal budget balance rose less-than-expected last month, official data today in a report by the Department of the Treasury showed that US federal budget balance rose to a seasonally adjusted US$ -108.0BN, from US$-193.0BN in the preceding month (vs. economists’ consensus to rise to US$ -104.0B last month).
Morning Market Commentary & Weekly Charts
Global data: “Weak foreign economic conditions, a persistently high exchange value of the US$ and tighter financial conditions—will continue to restrain US economic growth for a time and thus collectively imply a temporarily low level for the neutral rate of interest.” Central bank limit: “financial market turbulence provided an important reminder that the ability of central banks to offset the effects of adverse economic shocks might be limited, particularly by the low level of policy interest rates in most advanced economies.”
Morning Market Commentary & Weekly Charts
According to the latest sentix investors’ survey, markets are less nervous on Chinese equities from a medium-term strategic perspective in recent weeks, albeit survey readings remain well down on twelve-month highs. This chimes with a wider revival in sentiment towards Emerging Equity Markets as an asset class, as well as a more upbeat view among survey participants on the outlook for Commodities.
Weekly Market Commentary & Charts
In the US, all eyes will be on this weeks’ FOMC meeting. We are not expecting for the FED to make a change to the current rates. Nevertheless, we see the Federal Reserve is the scariest of all Central Banks. Particularly, as they failed to adequately gauge US macro shifts and reacted with incorrect policy decisions subsequently.
Weekly Market Commentary & Charts
The global economy is heading for a storm as faith in policymakers dwindles, according to a stark warning from one of the world’s most respected financial institutions. The uneasy calm in financial markets last year has given way to turbulence, the Bank for International Settlements, known as the central bank for the world’s central banks, said in its latest quarterly report
Morning Market Commentary & Weekly Charts
Over in the US, Q4 GDP was marked up slightly to 1%, but that was mainly because of a bigger stockpiling of inventories that could weigh on the economy in early 2016, and reflects a slowdown in growth that set in during the waning months of 2015. The US grew 2.4% for the second year in a row, failing to reach 3% for the 10th straight year. We see the outlook for 2016 deteriorating further. Economists predict the US will stick to its current rate of growth, held in check by a strong dollar, weak exports and slack business investment. We maintain our 2016 target of 1.6% for the US GDP.
Morning Market Commentary & Weekly Charts
We stand firmly to our point that the December FED rate hike was a policy mistake proven by the increasing volatility and deterioration in asset prices in the world since. Hence why we do not expect the FED to continue in 2016 with further tightening, on the contrary, as we do expect the US economy to show a negative GDP print in either the current quarter, possibly also in Q2, we are anticipating for the FED to resume its QE program later in 2016.
Morning Market Commentary & Weekly Charts
Global credit analysis has been a much better gauge for financial market analysis for the past 4 decades. Although our firm’s balance of experience and expertise is stemming from equity markets and products, we have been applying a more asset class agnostic research mantra, being totally currency and financial asset category agnostic. Over the past 13 years in particular, we have taken more and more lead from the credit side, and it has helped us and our clients to be ahead of the herd, particularly when it comes to global asset allocation recommendations and making clear alpha choices.
Morning Market Commentary & Weekly Charts
The OECD today announced it sees evidence of further slowdown as its gauges of future economic activity, with its composite leading indicator for its 34 members, fell to 99.7 from 99.8 in December and continue to point to slowdowns in the US, the UK and Russia, however recent readings show steady growth in the Eurozone, and an acceleration in India.
Morning Market Commentary & Weekly Charts
Economic focuses this week are on the January ISM report on Monday and the January US and Canadian employment reports on Friday. Technical signs of a bottom and start of an intermediate uptrend in most equity indices, commodities and sectors appeared last week. However, as anticipated, volatility remains high, but declining: another technical sign of improving intermediate prospects.
Morning Market Commentary & Weekly Charts
Globally, we are expecting for mixed economic news this week. In the US (US Consumer confidence, New home sales, Chicago PMI, Michigan Sentiment). Focus is on the FOMC meeting on Tuesday. While near-term sentiment towards global equity indices is running at modestly positive levels, the latest sentix survey suggests investors remain deeply cautious on developed and emerging markets from a medium-term strategic perspective.
Morning Market Commentary & Weekly Charts
When it comes to 2015 and our predictions, we were heavily countered by a lot of investors in the US & the UK with disbelief, as we had been most concerned about an increasing slowdown in GDP economic activities in both China and the US. Even as we speak, this morning the IMF downgraded global GDP expectations for 2016 from 3.6% to now a reduced 3.4%. We have 2.9% as a forecast for 2016, and believe that there will be continued concern by financial market participants throughout the 1H of 2016, whether this number can be met.
Morning Market Commentary & Weekly Charts
Our weekly investment strategy advice for investors is: To wait until the dust settles， following last week’s shock events, which we wee predicting as an immediate consequence to Ms. Yellen’s ill timed, rate rise.
Morning Market Commentary & Weekly Charts
Economic data this week is expected to confirm slowing economic growth in the US. Data will be sufficient to prompt the Fed to increase the Fed Fund rate for the first time in a decade. As indicated earlier, an increase in the Fed Fund rate will set the stage for a significant recovery in North American equity markets over the next three months.
Morning Market Commentary & Weekly Charts
Economic news this week focuses on November Retail Sales. El Nino type weather through this winter is expected to have a positive impact on Industrial Production and the S&P 500 Index (i.e. an extra 3% gain during El Nino winters). The month of December is the strongest month of the year for North American equity indices. However, strength tends to be concentrated during the last two weeks of the month (i.e. Christmas rally period).
Morning Market Commentary & Weekly Charts
International events will dominate all asset classes, as terrorism in several parts of the world remains a focus. Economic news this week is expected to be slightly positive relative to previous reports. US Thanksgiving holiday is on Thursday. US markets are open on Friday, but trading will be exceptionally thin.
Morning Market Commentary & Weekly Charts
For the past 10 months, the global economy has fared increasingly disappointing. And, we continue to see no encouraging signs for the coming 6 – 9 months for any of the major economies, be it in Asia, Europe or the Americas. Additionally, the most tragic events over the weekend in Paris, and the to be anticipated responses by French and European and allies’ intelligence forces are going to put additional stress into families, societies and consumers. We are anticipating significant government retaliatory and future pre-empting measures, which collectively are surely not going to affect the psychologies of European and foreign consumers and tourists and travelers in a positive way.
Morning Market Commentary & Weekly Charts
The easy money in equity markets and economic sensitive sectors has been made already for the current intermediate up cycle. Q3 reports will have an influence on equity markets again this week. Earnings released to date have been mixed. Beyond the earnings report season, seasonal influences are positive for most equity markets and primary sectors. We advise investors to accumulate seasonally attractive equities and economic sensitive sectors on weakness. Economic data this week focuses on the October employment report on Friday. Consensus is that the report will improve significantly from the exceptionally disappointing in September. Other economic data is expected to be mixed. PMI reports from China and Europe are expected to show a slight improvement over previous reports.
Morning Market Commentary & Weekly Charts
Economic data this week focuses on the FOMC meeting on Wednesday. Consensus is that the FOMC wants to increase the Fed Fund rate to reflect improving economic conditions, but wants more evidence of sustainable growth. We remain convince that there is not enough US intrinsic macro strength, besides global macro weakening, for the FED to raise rates in 2015, and very likely the same for 2016
Morning Market Commentary & Weekly Charts
International news is expected to be relatively quiet this week. Economic data focus in the US this week is on the housing industry.The easy money in equity markets and economic sensitive sectors has been made already for the current intermediate up cycle. Beyond the earnings report season, seasonal influences for equities turn positive. Short and intermediate technical indicators are overbought, but have yet to show signs of rolling over. Preferred strategy is to accumulate seasonally attractive equities and economic sensitive sectors on weakness between now and the end of the month.
Morning Market Commentary & Weekly Charts
Bond proxies like utilities and REITS gained ground, while banks and insurers sold off sharply. It was a bad week for risk assets leading to the bigger question of whether the August prices plunge was a normal correction or something more serious. A bounce off that low was expected, but has now run its course. We are still expecting for markets to retest the summer lows between September and October.
Morning Market Commentary & Weekly Charts
Risks related to international events remain quiet with most focus on China. Volatility in Chinese equity markets remains extreme. Economic news this week (other than the FOMC news on Thursday) is expected to be mixed. FOMC news on Thursday is by far the most important equity market-moving event this week. Polls say that chances of an increase in the Fed Fund rate are 25%. Knee jerk reaction to an increase likely will be negative. However, weakness will provide a buying opportunity.
Morning Market Commentary & Weekly Charts
We continue to advise investors to reduce weightings towards US equities and add aggressively towards equities markets such as Europe, (Germany, France, Netherlands; Spain) and Asia, (Japan, China, India, Vietnam, Indonesia; Philippines) and Latin America (Brazil, Mexico).
Morning Market Commentary & Weekly Charts
Economic news this week is expected to show accelerating US economic growth in Q3, a scenario that likely will raise concerns about timing of the first increase in the Fed Fund rate. International events also could influence equity markets this week Hot spots include China, Russia, Venezuela and selected Middle East countries.
Morning Market Commentary & Weekly Charts
Chinese inflation grew +1.6% y-o-y in July, up from +1.4% the previous month and
ahead of estimates of +1.5%. Talks between Greece and its international creditors are progressing and hopes are that a third bailout deal could be agreed by 20th August. The outlook for Ireland has been amended to positive from stable by the credit ratings agency Fitch. In the US, data from the Labor Department showed employers added 215,000 jobs in July, missing the consensus forecast of 225,000. Lastly, the global economies are getting relief from Oil prices declining to new lows.
Continue reading
Morning Market Commentary & Weekly Charts
As we had highlighted in several publications since March 2015, Global GDP Growth is set to slow across a growing number of the world’s largest economies, including the US and China. China’s worries have spread to oil, which is adding to last week’s -5% drop. Global economic growth slowed during June, led by a significant contraction in emerging market output. The global economy is struggling with secular stagnation. Too much fiscal and monetary intervention by governments an their central banks and now with even more of these policies, things will get increasingly worse, not better. For now, we are expecting for Europe to temporarily slow over the next 2 months again, before gaining macro momentum in late September until the end of the year.
Morning Market Commentary & Weekly Charts
We are seeing increased technical evidence that world equity markets and most sectors remain in a corrective phase since mid-May. Short and intermediate technical indicators for most equity markets and sectors are oversold but continue to trend down. The latest survey of investors’ sentiment conducted by sentix has revealed that investors’ feel relief after the turn in the Greek debt drama. From an already high level, sentix Sentiment rises once more by over 10 percentage points and signals a party mood. In contrast, commodities command investors’ respect. Here, fears that the whole sector is in a free fall dominate. Meanwhile, the US$ benefits.
Continue reading
Morning Market Commentary & Weekly Charts
The EU and Greece have secured debt restructuring and medium-term financing. We are not expecting for “Greece’s no vote” to have a substantial impact for equities, either for bonds or foreign exchange. For both equities and bonds, early signs of a peak in summer volatility have appeared. Now is the time to prepare for seasonal buying opportunities. However, we are seeing increased technical evidence that world equity markets and most sectors remain in a corrective phase since mid-May. Short and intermediate technical indicators for most equity markets and sectors are oversold but continue to trend down.
Morning Market Commentary & Weekly Charts
Valuations for European equities are even more very favorable since the usual sell-off in May began, both on an absolute and on a relative basis. We are expecting for the ECB to make a decision whether to continue providing emergency liquidity assistance (ELA) to Greece at a meeting today. Consequent to the continued geo-political uncertainty in Europe regarding Greece and implications on the rest of the Eurozone, and the US, we do continue to expect for the US Federal Reserve not to raise the Fed Funds rate in 2015.
Continue reading
2015 Q3 Global Investment Strategy & Equities Outlook
10-Year US and European Bond yields will turn lower one more time. The US$ will decline further. Oil & Commodities will move higher. Global Equities will correct,
but then recover sharply towards end of Q3 into Q4. EAFE to continue to outperform US equities.
Stocks have the seasonal tendency to outperform bonds from mid-November until the end of March, a trend that we see to continue in 2015. As in prior reports, we do think that the current stagnation-type economic environment, impacting two-thirds of the global economy, namely the US and Europe, and Japan, is going to provoke most long-term investors to conduct a major switch from “negative-return based” bond investments into high-yield equities with stable and defensive cash flow generative outlook.
Morning Market Commentary & Weekly Charts
European 10-Year government bonds are entering their period of seasonal strength from mid-May until end of August. After the short-term current correction in US, European and Japanese 10-Y
treasuries, which we expect to last for another few days, we are expecting for further yield compression between French, Italian, Portuguese, Spanish 10-Y Government bonds and the German bunds to materialize over the coming 2 – 3 months, and are advising for investors to increase their weightings into Spanish, Italian, Portuguese, Irish 10-Year bonds into the current correction.
Morning Market Commentary & Weekly Charts
Economic focus this week in the US is on the FOMC meeting results to be released on Wednesday. Earnings and sales by S&P 500 companies during the next two quarters remain a concern. Intermediate and technical indicators for most equity markets and sectors remain overbought and trending down. Short-term technical indicators (mainly momentum indicators) for most equity markets and sectors are trending up.
Morning Market Commentary & Weekly Charts
Seasonally, rates typically decline during the summer months as investors “de-risk” from equity markets, however, the potential for the Fed to raise rates sometime this year has the market fleeing this asset class, putting some temporary uncertainty into the success of this seasonal phenomena.
Morning Market Commentary & Weekly Charts
Total global debt is up 40% since 2007 to US$ 199 TRN according to a study by Mc Kinsey. As a percentage of GDP, debt is now higher in most nations than it was before the crisis of 2008/2009. On average globally, it is 286% now vs. 269% in 2007. Despite the economic rebound since 2009, the debt of households, corporations and especially governments continues to rise. Governments in advanced economies have borrowed heavily to fund bailouts in the crisis and offset demand in the recession. The danger is far larger and more imminent than commonly admitted, as evidenced in the chart below.
Morning Market Commentary & Weekly Charts
European, US and Japanese equity markets period of seasonal strength is starting now. Hence, why we recommend reducing equity weightings in those markets, and advising investors to wait for better prices for re-allocating money in late summer.
Morning Market Commentary & Weekly Charts
International events could have an impact on equity markets this week. The Greek government is close to running out of international currency to pay its debts. Negotiations continue. Discussions about framework of the Iran nuclear agreement continue. Venezuela is close to government breakdown. Terrorist hot spots seem to surface on a regular basis. Economic news this week is expected to show a slight recovery in the US economy in March from the weather related slowdown in February. Focus is on March Housing Starts to be released on Thursday.
Morning Market Commentary & Weekly Charts
Seasonal influences turn strongly positive (possibly due to anticipation of good news released by CEOs at annual meetings when they release “difficult” first quarter results e.g. stock splits, share
buy backs, dividend increases). We are advising investors to accumulate seasonally attractive economically sensitive North American and internationals equities, with the exception of Japan
(due to March 31st being end of fiscal year, and a consequent -8% – 10% historical sell-off affecting Japanese equities from April – July) on weakness this week for a seasonal trade lasting until at least May.
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2015 Q2 Global Investment Strategy
Equities globally still offer the best risk-adjusted returns compared to most other asset classes. Overall, for the broader equity markets to go higher, we need to see a rotation into the more cyclical sectors and into the financials. We prefer sectors like Energy, Industrials, Materials, Financials, Utilities and particularly public infrastructure themes for Europe, the US and Japan, where valuation measures look less demanding, with increasing cash flows, and high yields and growing dividends like particularly in Automotive, Energy Industrials and Basic Materials. Chinese, Indian, Brazilian and Russian equities have entered their period of seasonal strength, and hence why recommend to stay overweight the Shanghai Composite, and increase weightings into Indian, Brazilian and Russian equities for Q2 2015. European equities remain cheapest on an absolute basis and and the relative valuation discount to bonds has improved over the past months, particularly since the ECB started QE. The much weaker Euro in combination with with much lower commodity prices for champion European industrial manufacturing and luxury manufacturers companies will help exports and increase earnings in 2015 beyond consensus estimates. European equities with much higher dividend yields than anywhere still offer much better risk-adjusted total returns. We see increasing M&A activities to be a big theme in Europe and help drive equity prices higher. However, Q2 in Europe, like in Japan and the US represents the period of seasonal weakness, and will offer better buying opportunities ahead.
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Morning Market Commentary & Weekly Charts
International events will influence financial markets including the election in Israel and evolution of events in Greece. Economic news globally this week is expected to show a mild improvement relative to comparable reports released at the same time in February. US economic focus this week is on the FOMC meeting and news conference on Wednesday. In the US, stocks drifted lower on Friday as investors jockey for position ahead of this week’s FOMC meeting. FOMC meetings where a quarterly press conference has followed are thought to be the most probable time for the Fed to announce its first rate increase; the next opportunity won’t be until June 17, therefore it is no wonder that investors have been reacting in the equity, currency, and treasury markets much more
significantly than past meetings.
Morning Market Commentary
US 30-year treasuries peaked at the end of January following test of trend line resistance; since the price of the 30-year treasury bond has traded lower by around 7%, now testing the middle line of the long-term rising trend channel. We are assuming the price trades to the lower limit of the rising range, a decline of around 13% (to $130) from present levels is still implied.
Morning Market Commentary & Weekly Charts
We are not fearful of a Fed rate hike, as that is typically good for stocks given that it means the economy is in good shape and stocks stay on the uptick for 2-3 years after. Plus, worldwide government bond competition will lead more investors to US Treasuries to keep a lid on rates and thus continue to make stocks look attractive by comparison. Our views for 2015 (as for 2014) of the global investment world differ substantially from consensus, and applied by other investors on Friday. Yet when level heads prevail, however, it may take the market 3 – 4 months, as it has
in the past years, we think that more people will come around to our investment views and conclusions. As such, we believe that this is a buyable dip for US 10-Year government bonds with higher highs on the way for 2015. For now, US bonds are still more attractive to investors than US stocks.
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Morning Market Commentary & Weekly Charts
We continue to advise investors to increase allocations towards Japanese equities and towards the $NIKK in particular, as we see the structural changes made by Abe’s government gaining traction and delivering tangible results, and Japanese investors increasing exposure into domestic equities. Historically, the N-225 is in a period of seasonal strength from January until early April (in part due to fiscal year end {March 31st} window dressing related performance).
As we had been expecting, European benchmarks have been outperforming US benchmarks since the beginning of the year, mainly due to the much lower valuations attracting investors (P/E; P/CF; much higher dividend yields) but also benefiting from the accommodative monetary policies enacted by the ECB. We see increasingly technical evidence of the strength in European equity markets set to continue, following historic seasonal strength patterns that run through to the start of May, which is coinciding with the end of annual dividend pay-out period.
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Morning Market Commentary & Weekly Charts
Equities globally rallied on today, boosted by news that Greece has reached a deal to secure a loan extension with its creditors. The German DAX 30 and the Dow Jones Industrial Average charted a new all-time closing high, following the S&P 500 Index and Russell 2000 Index, which charted all-time highs earlier in the week.
Morning Market Commentary & Weekly Charts
Treasury bond prices are vulnerable to further technically corrective declines, particularly given that we are in the midst of the period of seasonal weakness for the asset class; negative seasonal tendencies persist through April. However, over the past 30 years, each time the long-term treasury bond has met up with this rising level of resistance, stocks have generally performed well in the months and years that have followed. However, we continue to advise investors to trade bonds according to their long-term trend channel dynamics. We see nothing fundamentally having changed over the past 2 months for that trend to change.
Morning Market Commentary & Weekly Charts
Stocks are trading at extremely high valuations against a backdrop of slowing economic growth and rising global financial and geopolitical instability. Market cap to GDP ratio is currently at twice its historical average. The Shiller Cyclically Adjusted P/E Ratio (CAPE) is at 1.7x its historical average. The forward P/E ratio of the S&P 500 is currently 16x versus an historical average of 14x .