Pura Vida
Happy Friday,
September looks like it will continue the up/down performance path with global equities up roughly 4-5% over the past month, bonds off 1-2% and Commodities up 5%.
Trump in Trouble? What else is new seems to be the financial market response to a formal impeachment inquiry. Good reminder that markets do not like surprises and this is no surprise.
The Q is what are the implications? Dysfunctional gridlock is a DC staple but might Trump Trouble lead to greater impetus for a skinny trade deal with China? Wins would seem even more important for Team Trump. 70th Anniversary of PRC founding next week - Principal level trade talks resume the week of the 7th.
Don't be alarmed if you start to read about US - EU trade tariffs all of a sudden. A WTO ruling will allow US to put tariffs on EU goods in retribution for EU state aid to Airbus. The EU is likely to retaliate.
Amidst some poor European data it’s worth noting the liquidity spigot is on with broad EU money growing at 6% y/y while private credit growth expands at 3% y/y…. Not that bad for the left for dead EU financials.
Speaking of left for dead how about any type of non US equity allocation? August outflows were among the largest in 3 yrs…
As one starts to think about 2020 and beyond it's tough to get clients to consider non US equity given the massive US equity outperformance since the GFC. Forward return forecasts however suggest better opportunities lie offshore… perhaps it's time to dust off the old past performance is not indicative of future returns?
Along the same lines the We implosion & Peloton’s pedal loss of an IPO coupled with signs of private capital pullback from China to Japan and beyond suggest some recent private vintages may not be the volatility smoothing performance winners current portfolios suggest they might be.
From the UK to Costa Rica and points in between… the TPWIM Friday Musings team wishes you a pleasant Fall weekend & a hearty & healthy Happy New Year to our friends celebrating Rosh Hashanah!
Jay and Jamie