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23 March 2021
Video commentary for March 22nd 2021
A link to today's video commentary is posted in the Subscriber's Area.
Some of the topics discussed include: Nasdaq rebounds as Treasuries show a modicum of steady trading, Turkish Lira volatile takes a toll on Eurozone banks, gold and oil steady, Japan weak, China steady, commodity producers steady.
Of Cigars, Contrarians, Nerds and Herds
Thanks to Iain Little for this edition of his Global Thematic Diary series. Here is a section:
Attitudes to risk have changed. In one month, investors have relegated Covid 19 and its mutant strains to the side[1]lines. They now obsess over inflation and a shaky bond market. Those who feared an equity bubble in February, spurred on by strident warnings from market opinion formers like Jeremy Grantham and Ray Dalio, have diminished in number and are keeping their heads down.
Anyone following 10 year USD bond prices will not be surprised. The move from 0.5% in August to 1.60% in March, a near tripling, has spooked bond buyers, with a consequent hit to gold, highly priced technology shares and other interest rate sensitive assets. But a more subtle and longer term conclusion may be drawn.
If sentiment is indeed registering such a confident attitude to growth and risk, it is reasonable to assume that investment positions are now largely in place to reflect that view. If so, the next concern of the market will be its nemesis: growth below expectations. Those investors who are now positioning investments excessively on the side of recovery, value or laggard stock sectors like banks may need to think twice before abandoning their long held commitment to healthcare, FMCG, e-commerce and technology. We are positioning client portfolios accordingly.
As Mark Twain once said: “if you find yourself on the side of the majority, it is time to pause and reflect”.
A link to the full note is posted in the Subscriber's Area. The reflation trend is increasingly being priced in and only a robust recovery will satisfy expectations for what it will entail for company earnings. The challenge for markets is the majority of people making English language predictions are sitting in the places with the most advanced vaccination programs.
Investment Implications of a Shorter Cycle
Thanks to a subscriber for this report from Morgan Stanley which may be of interest.
A link to the full report is posted in the Subscriber's Area.
The long expansions we have seen over the last decades have been followed by very sharp corrections with one sector or another crashing to previously unimaginable lows. That begs the question if a potential return to shorter cycles will result is less excess and shallower reactions? There is not a great deal of evidence to support that contention unfortunately.
Eoin's personal portfolio: stock market index short closed
One of the most commonly asked questions by subscribers is how to find details of my open traders. To make it easier I will simply repost the latest summary daily until there is a change.
Germany to Sell Record Debt of Up to $576 Billion in 2021
This article from Bloomberg may be of interest to subscribers. Here is a section:
The final decision on next year’s budget will be taken by the government that takes charge of Europe’s biggest economy after Chancellor Angela Merkel steps aside following the election.
Merkel’s conservative CDU/CSU bloc is on track to lead the next administration and favors a return to frugality once the coronavirus recedes, while Scholz’s struggling SPD and the surging Greens have pledged to invest billions in technology and tackling climate change.
As things stand, Merkel’s bloc could form a coalition with the Greens, though the outcome is far from certain with discontent increasing among citizens weary of virus restrictions and unhappy with the slow pace of Germany’s Covid-19 vaccine rollout.
With the contagion rate on the rise again, Merkel is holding talks with cabinet ministers and regional leaders later on Monday to decide the next steps in the government’s pandemic strategy.
Generally speaking, the junior member of a coalition government comes out worse off after entering government. That’s because voters had faith in them to deliver on their promises, but the sacrifices they have to make to enter power mean their primary goals are unrealisable. At the same time the senior partner takes credit for any successes.
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