Category Archives: Strategy
Global Weekly FI & Forex Strategy Update
The IMF announced today that it expects global growth this year of 3.5%, down from 3.7% in 2018 and from the 3.7% it had forecast for 2019 back in October, and is trimming the growth outlook for the Euro-zone currency to 1.6% from 1.8%, but for now, keeping its prediction for US growth this year unchanged at 2.5%. Growth in emergingmarket countries is forecast to slow to 4.5% from 4.6% in 2018. The IMF expects the Chinese economy to grow 6.2% this year, down from 6.6% in 2018 and slowest since 1990.
Global Equities Strategy Update
As long as those issues weigh on investors’ minds, we see it hard for global equities markets and commodities to rise from current levels.
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..
Global Equities Strategy Update
All in all, given the rosy forecasters needing to sober up a bit and revise forecast down for the next 2 – 3 years, we do not see the FED likely to continue to tighten its monetary stance to keep inflation in check, which would tighten global financial conditions and could trigger further emerging-market capital outflows and currency depreciation, and implicitly a prolonged USD appreciation, which neither the US policymakers nor the consumer
Global Equities Strategy Update
We now are expecting for the global economy to expand 3.6% in 2018, which, if confirmed, would represent the strongest expansion in seven years.
Fixed Income & Currencies Strategy Update
Q3 global growth likely slowed as trade war fears intensify, and following Q2’s strong showing. A preliminary Q3 GDP estimate for the global economy put y-o-y growth at 3.3%
Weekly Currencies & Fixed Income Strategy Update
The USD continued to show short-term momentum signs of rolling over after entering its seasonal period of weakness at the beginning of July
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 Global Equities Strategy Update
Now for 4 weeks that we have been heeding our clients to reduce global equities
exposure and increase exposure towards US 10-Year Treasuries and towards
commodities and Oil (WTI, we are keeping our $78 high price target for 2018 for now) in particular, to no surprise that the sell-side herd is following our advice slowly but surely and getting increasingly more negative on equities.
Weekly Global Equities Strategy Update
Now, that we are in the middle of May, investors should reevaluate their current
holdings, and pay close attention to the seasonal forces that likely will come into play in the short term. We are advising investors to invest along the seasonal trends
Weekly Global Equities Strategy Update
Technical pressures were most prominent in late trading on Friday. Although global equity markets already have reached intermediate oversold levels, they have yet to
show signs of bottoming.
Global Fixed Income Strategy Update
Seasonally, April is the last strong month for equity benchmarks, before the “Sell
in May & Go away” period of seasonal weakness for equities occurs,
Weekly Global Equities Strategy Update
Momentum indicators are hinting of further weakness ahead, investors should
get ready for wild swings in this index, particularly this coming week, and
beyond.
2018 Q2 Global Markets Outlook & Investment Strategy
Global economy to advance at 3.8% to 4.1% GDP in 2018, +3.7% in Q2
Global inflation to remain under 5%, US under 2.2%, EU under 2% for all of 2018
US economy to remain on target 2.5% in Q2, consumer driven, partly due to embedded US$ strength continuing to weigh on trade, tourism, FDI
Weekly Global Equities Strategy Update
Technical pressures were most prominent in late trading on Friday. Although global equity markets already have reached intermediate oversold levels, they have yet to
show signs of bottoming.
Weekly Global Equities Strategy Update
Y-t-d, $9.8Bn has flowed into tech stocks, and $7.3Bn into financials, while $41Bn
has flowed into emerging markets and $31Bn into Japan. Nevertheless, shares
around the world were stuck on their worst run since November earlier today, as
caution gripped traders in a week in which the Federal Reserve is likely to raise
US interest rates and perhaps signal as many as three more hikes lie in store this
year. A near 1% drop for Europe’s main bourses, amid a flurry of gloomy EU
company news and weaker Wall Street futures meant MSCI’s World index was
down for a fifth day running.
Weekly Currencies Strategy & Charts
In economic news, US retail sales fell for a third straight month in February as
households cut back on purchases of motor vehicles and other big-ticket items. The
Commerce Department said retail sales fell 0.1% last month against consensus
expectations of a +0.3% monthly rise.
Weekly Global Equities Strategy Update
World equity markets and economic sensitive sectors entered on schedule their
second strongest period of seasonal strength in the year from the beginning of
March to the first week in May. (Strongest period is from mid-October to the first
week in January).
Weekly Global Equities Strategy Update
We see increasing risks for countries such as China,Japan, Germany, France, and Middle Eastern countries easily reduce parts of their over allocated holdings in US bond investments, in the case where they were not winning any compromises from Washington.
Weekly Global Equities Strategy Update
We see any weakness in European equities to provide investors with a buying
opportunity for a seasonal trade in these sectors into spring. Energy and oil
service stocks began showing technical signs of outperformance late last week,
an encouraging technical sign prior to entering their period of seasonal strength.
FX & Commodities Outlook
Two weeks ago the World Bank has forecast prices to increase modestly in 2018 for
almost all energy and non-energy commodities, with the exception of fertilizers, metals and minerals. The World Bank now sees Oil (WTI) to average $56/barrel in 2018, a 6% rise from $53/barrel in 2017, still significantly below our 2018 price target of $78 for WTI.
Weekly Global Equities Strategy Update
In the US, US economic news this week is quiet. Focus is on FOMC meeting minutes
following appointment of a new Fed chief. Short term political uncertainties remain,
including North Korean “sabre rattling”, struggling NAFTA negotiations, possibly another shut-down of the US government and increased scrutiny by special council on Russia’s influence on the Presidential election。 Continue reading
Weekly Global Equities Strategy Update
Foreign investors are still tremendously underweight in Japanese equities, both
on a trade weighted and an overall GDP-weighted basis, and we think there is
room for significant further upward momentum in the short-medium term. We
continue advising to use those for long-term asset allocation build-ups to
overweight Japanese equities on a relative basis, as we do see more value in
Japanese equities still at current valuations than in the US.
Weekly Commodities Strategy & Charts
We maintain our global GDP forecasts for 2018 of 3.8%, and hence why we see the price dynamics for commodities in general, but particularly for the oil and energy markets to remain very bullish.
Weekly Global Equities Strategy Update
2017 had been a record year for global equities. And, as we were correctly predicting, foreign equity indices had outperformed the US major indices again substantially, not even currency adjusted, as we also forecasted a decline of the USD by -8% to -10% for 2017. The USD ended up losing -8.5% in 2017.
Weekly Global Equities Strategy Update
We like to reiterate our positive stance on Japanese equities, combined with
partial hedging of the Yen, as the BoJ’s continued easing, and the potential to
drive it lower against major currencies including the US$, Euro, and AUD, are
fundamentally very attractive, and also will benefit from a seasonal period of
strength until end of March (end of fiscal year 2017).
Weekly Commodities Strategy & Charts
We maintain our global GDP forecasts for 2017 of 3.4%, and at 3.8% for 2018, and hence why we see the price dynamics for commodities in general, but particularly for the oil and energy markets to remain very bullish.
Weekly Global Equities Strategy & Charts Update
We continue seeing better value still in Asian and EU stocks, and continue
recommending for investors to overweight equities in both areas relative to US
equities and likely achieve higher returns until year-end 2017 and into Q1 of 2018.
Weekly Global Equities Strategy & Charts Update
Financial markets this week will focus on the US November Employment report to be released on Friday. Short-term political uncertainties remain, including North Korean “sabre rattling” and increased scrutiny by special council on Russia’s influence on the Presidential election.Globally, most of the broadly based equity indices closed at or near all-time highs on Friday.
Weekly Commodities Strategy & Charts
We maintain our global GDP forecasts for 2017 of 3.1%, and at 3.3% for 2018, and hence why we see the price dynamics for commodities in general, but particularly for the oil and energy markets to remain very bullish.
Weekly Global Equities Strategy & 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 year-end 2017.
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, 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.
Investment Strategy Update
We continue recommending for investors to reduce equity positions in G-10
markets into the last rally before the summer, as we are forecasting for a -12% to
-15% decline in European and US stocks to materialize.
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 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
Q2 end target of 1.18, and our 2017 EUR/USD target of 1.18 – 1.20.
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
($TNX), and into EU and EM currencies and equities, which form a tactical Asset
allocation call has been spot on so far in the current quarter.
Weekly Investment Strategy & Charts
We see European stocks will likely rally for another short period, until they reach the zenith of annual dividends paid out in mid-May. We recommend for investors to start reducing equity positions into the last rally before the summer, as we are forecasting for a -12% to -15% decline in European and US stocks to materialize once the period of seasonal strength for this asset class will pivot into their strongest period of seasonal weakness from May to October.
US Macro slowing, US$ & 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$, US bonds and US equities are performing.
Weekly Investment Strategy & Charts
Headline prices in the US, UK and Europe are already at or above 2%. At the same time, seven central banks globally are still running negative interest rate policy (NIRP), while aggregate global quantitative easing continues to expand at breakneck speed. Looking ahead, we think central bank liquidity, the major factor that helped support risky assets during the post-crisis era, might peak by early 2018.
Weekly Investment Strategy & Charts
Looking ahead, we think central bank liquidity, the major factor that helped
support risky assets during the post-crisis era, might peak by early 2018.
2017 Q2 Global Markets Outlook & Investment Strategy
The global economy is still slowing, negatively affected by geo-political distress, but will accelerate in 1H 2017. +85% of the central banks are still supporting the
global economies by additional monetary stimulus. Productivity growth to improve due to labor, financial and product markets reforms in place, particl. Europe Investment to pick up (modernization of capital stock)
Weekly Investment Strategy & Charts
Given the AHCA defeat last Friday, financial markets have to re-assess reality versus wishful thinking. As we had been writing for the past 5 weeks, US assets (US$ 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.
Strategy Update US
It was just a week ago that we wrote how one can’t allow fears of a black swan event to worry oneself into inaction. We acknowledged the political uncertainty hanging over the market, noting that it would be resolved when voters went to the polls on November 8th. But what if it isn’t?
Macro Commentary & Strategy update
The better than expected 2.9% annualized gain in third-quarter GDP will provide all the justification that the Fed needs to raise rates in December.
Strategy Update US
The U.S. economy and the broader influences of the global economy don’t justify a rate hike now or in December, but the Fed is caught in a trap of its own making.
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).
Oil Update – oil
We’ve opined that the only way a coordinated production freeze can be reached is
if the major producers become convinced that they [and all the others] were maxed
out on capacity—making the implementation of a production freeze totally
irrelevant.
Strategy Update – US
Strategy Update Oil
WTI crude oil has failed to hold its pivot point ($44.73) on the weekly chart. Support exists around $41 on both the weekly and daily charts but if support fails to hold (and we believe that it won’t), WTI crude oil is immediately vulnerable technically to the mid-$30’s.
Strategy Update
What are we likely to see in the aftermath of Brexit?
The many implications for monetary policy can all be distilled down to one simple
thought: continued accommodative monetary policy by central banks globally.
US Investment Strategy update
Global bond yields plumbed new levels on Friday when concerns over global
growth re-emerged after the World Bank announced that it was cutting its global
growth forecast from January yet again—this time from 2.9% to 2.4% for 2016 and
from 3.1% to 2.8% for 2017.
Strategy Update – US
We suggest trimming equity exposure by taking profits in those sectors that have
outperformed over the past three months such as materials, mining and
industrials to build cash levels.
Investment Strategy Update
The significance of “Brexit” and its consequences on financial markets will surely intensify over the next 2 months. We are expecting volatility in all UK and EU asset classes, be it Foreign Exchange, Fixed Income and Equities to rise significantly before June 23rd.
APPLE SELL Commentary & Charts
AAPL shares fell more than -8% after the close in NY yesterday, to about $96 this morning in Frankfurt, and below our January 27th “Sell” on APL at $ 99.99. We reiterate our “Sell” on AAPL at the current price of $96/share.
Strategy Update US
The Federal Reserve has gone to great lengths to assure the public that the contemplated rise in interest rates will be gradual while the overall tenor of monetary policy remains accommodative. As proof, the Fed points to its balance sheet that hasn’t shrunk in size by continually rolling over maturing debt on its books. But if that’s so, why has the market been in such disarray since December’s rate hike? After all, liquidity is the lifeblood of the market and if liquidity is not being constrained shouldn’t risk assets continue to levitate higher? We believe that they would if that last statement was true. In reality, de facto tightening has been underway as liquidity is being drained from the system.
Strategy Update US Oil
Back on December 2nd we temporarily deviated from our long-standing negative view on oil when we wrote that “Absent a new catalyst to drive oil lower through the end of the year, we anticipate a rally in crude and oil-related stocks to emerge and suggest establishing trading positions in the days immediately prior to the December 16th Fed rate decision… Fears of rising production from Iraq, Iran and even Libya coupled with the lack of a new demand catalyst will likely return downward pressure on crude within weeks.
Strategy Update US Oil
We emphasize that this is a “trading call”. As the Euro short-covering rally runs its course, the dollar is likely to recover and stabilize for several weeks, if not longer. We anticipate a rally for oil and oil-related securities to resemble the sharp rise off the August bottom, which faded just as quickly as it began. Fears of rising production from Iraq, Iran and even Libya coupled with the lack of a new demand catalyst will likely return downward pressure on crude within weeks.
Strategy Update US Oil
We do not share the viewpoint that oil could hit $20 per barrel, as the Saudis not long ago would have us believe. Yet quite a few high profile commodity strategists would also have us believe that the price of oil has nowhere to go but down. There’s some irony in that statement since we’ve written since May that oil prices were headed lower in the near term and would make new yearly lows by October, which they did in August before rallying to, but failing to hold, the $50 level last month. But in our view volatility is likely to remain pervasive as prices head for an eventual unsuccessful retest of the August low of $38. However, longer term we believe that the bigger surprise is that oil prices could recover more strongly than indicated by industry executives or the futures market in 2016 as demand and supply fundamentals could rebalance more rapidly than currently anticipated by market participants. In the interim, oil prices will likely continue to frustrate bulls and bears alike.
2015 Q4 Global Investment Strategy
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.
Strategy Update & Charts
We are expecting for equities in Developed Markets to remain in a declining
pattern until October. Bullish opportunities between now and October will be
limited to a few select seasonal opportunities, visible by significant rotation in
favorable defensive sectors such as Utilities, moving higher while economic
sensitive sectors (e.g. Consumer Discretionary) are moving lower. Technical
parameters for world equity markets have turned negative. Short and
intermediate technical indicators for major equity markets and most sectors are
trending down, but already are approaching oversold levels. Once again, they
failed to move to multi-year highs after testing recent highs. Meanwhile, their
short-term momentum indicators continue to trend down.
Morning Market Commentary 2015 Global Equity Indices in danger of breaking
Global equity markets are in danger of breaking below major support levels, Global Bonds still outperforming.
CGI Strategy Update: US Oil
We’ve been writing since June that oil prices would continue to slide. In our last
update on July 13th, we lowered our near-term target for WTI crude to $46 per
barrel. We believe that oil prices will plumb new lows over the next two months. In our judgment, investing (or worse, speculating) in the energy sector today at current levels too closely resembles catching a falling knife. Wait for a better opportunity…it’s coming.
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Daimler 2Q15E Preview
Daimler shares’ long-term positive trend is intact. Daimler shares are in a short- term correction. The short-term technicals are still negative with RSI and MACD both negative. Daimler shares have downside risk towards the 50-day moving average of around EUR 75 a share. We are advising to accumulate Daimler shares at current levels. Our medium- term price target for Daimler shares is EUR 110.
China Strategy Update: Patience is a Chinese Virtue
The infallibility of the communist party and by extension its leadership is a core tenet of the mantra that the Chinese people have intoned as truth for decades. So the meltdown of China’s stock market over the past three weeks must have been viewed with consternation by Chinese investors as well as the average Chinese citizen watching from the sidelines since the populace was encouraged by Beijing to invest in the country’s own brand of capitalism. Failure to stop a sell-off would lead to a broadbased loss of confidence that could undermine the leadership’s reform efforts, the economy and potentially lead to social unrest—the biggest fear of the leadership. Consequently, the rest of the world’s angst over Beijing’s direct market intervention rather than allowing free market forces to clear markets is relegated to a far distant secondary concern by the country’s leaders.
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Energy Strategy Update: United States
Traders have been focused on domestic inventory oil storage levels that have been drawn down over the past few weeks. Continued drawdowns support higher prices. In their view, the inventory drawdown of the past few weeks reflects the early stage lag effect of production pressure as a consequence of declining drilling activity dating to last fall. Nonetheless, up to now, advancing technology is enabling U.S. oil production to remain at a record pace despite the declining well count. Traders are likely to be taken by surprise when inventory levels begin to rise within the next few weeks and push prices lower. In our judgment, any sell off in WTI crude due to a rise in inventory storage levels will prove temporary as the surge in imports subsides just as quickly. Oil-related stocks can be expected to decline in sympathy. As investor sentiment washes out, we would use such a pullback as a buying opportunity to establish positions in global oil producers (especially oversold domestic drillers) in anticipation of an earnings recovery (and subsequent increased merger & acquisition activity) on higher oil prices.
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.
US Strategy Update: The Economy Finally Begins To Put Upward Pressure On Interest Rates
Workers typically don’t quit their job without an expectation of getting a better higher paying one and the number of quits has continued to trend higher over the past year with the largest rises concentrated in higher paying sectors such as durable goods manufacturing, finance & insurance and health care. The trend in quits and the surge in job openings bode well for a rise in real income.
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CGI USA Strategy Update
May’s strong auto sales have raised expectations for this Thursday’s May retail
sales report. Regardless as to what number prints for retail sales, we believe that the near
daily pattern of divergent (and often conflicting) economic data will remain the
status quo and contribute to a rise in daily volatility.
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CGI Morning Note & Weekly Charts
“The Federal Reserve should defer raising interest rates until there are greater signs of wage or price inflation than are currently evident”, the International Monetary Fund said today. The IMF now took the GDP growth outlook for the US down to 2.5%. This is still way above our 2015 forecast for the US of 2.2% GDP growth, which we are likely going to revise down in the coming months, if growth does not kick in massively in the current quarter, which we do not see in most of the aggregate data, which
we use in our assumptions.
IMF Says China’s Currency No Longer Undervalued
We noted in a previous report that the steeper the ascent, the deeper the correction. The Shanghai composite index has hit CGI’s target of 4,900 and is vulnerable to around 4,400 or even 4,100 should selling volume sustain itself after yesterday’s decline on record volume. Those with a short-term trading orientation may consider trimming positions or taking profits. However, we believe that the ‘A’ shares can still push higher after a period of consolidation. We reiterate that we believe the greater risk for long-term investors is one of not participating and missing out on China’s continued bull run.
See The Chinese Forest Through The Trees
Although domestic loan demand has been trending below expectations, further reductions in the RRR in conjunction with new monetary and fiscal policy initiatives could lead to resurgent economic activity. We believe that China has at least two more years to pursue aggressive stimulative monetary policy given the current state of the global economy and generally accommodative monetary policy enacted by most central banks. In our view, it will be at least that long before accommodative global monetary policy transitions to a tightening cycle. Meanwhile, the world is awash in rising central bank driven liquidity.
Don’t Buy The Avoid China Argument—Buy The Shares Instead
It’s no surprise that many commentators perpetually warn off potential investors in China shares. Those warnings have become even more strident after the 104% run up in the Shanghai Exchange over the past twelve months. Beijing is managing the impact of economic reform by selectively implementing additional monetary stimulus.
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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Strategy Update: China
China forecasts and estimates are likely to become very sloppy as government guidance begins to lose its quality of certainty that many forecasters have relied upon. The most important question has always been whether Premier Li Keqiang can implement the necessary reforms to ensure that the economy will grow in a long term sustainable manner. Foreign investors continue to flee from China. The media negatively impacts foreign investor sentiment by drawing negative conclusions as it highlights the slowest economic growth in more than two decades juxtaposed to the double digit growth of an earlier era; for them the glass is always half empty.
022315 – CGI Morning Market Commentary and Weekly Charts
Strategist CArlo Besenius reviews global equity, fixied income, currency and commodity markets.
CGI Morning Market Commentary. Dollar Double Top
021715 CGI Morning Market Commentary & Weekly Charts
Strategist Carlo Besenius’ weekly review of Equity, Fixed Income, Commodity and Currency markets
China’s New Normal
CGI 150211 Strategy Update- China’s New Normal
Strategist Steve Gluckstein’s insights on China’s economic prospects.
020415: CGI Daily Market Commentary
Strategist Carlo Besenius’ commentary on global markets. Focus on fixed income and energy.
020215: CGI Morning Market Commentary and Weekly Charts
Global Strategist Carlo Besenius reviews global equity, fixed income, commodity, and currency markets.
011615: CGI Market Insights: Real Wage Growth and Investment Implications
CGI 150116 Strategy Update- Wage Growth and Investment Implications
Global Strategist Steve Gluckstein discusses the implications of stagnant real wage growth on 2015 investment choices.
011315: CGI Global Strategy Update: 2015 Market Musings
01135- CGI Strategy Update- 2015 Market Musings
Global Strategist Steve Gluckstein provides his outlook for global markets and sectors in 2015.