Don't Look Now

Happy Friday,

First, we want to say how saddened we are to hear of the passing of Envestnet’s CEO and Co-founder Jud Bergman and his wife Mary Miller-Bergman. There are not enough words to describe Jud and how important he has been in our industry.

To the markets, what a start to the month & the Q! It's worth noting that bad October starts (-1% on day one) tend to end well - both for the month (+3.7% avg) and thru YE (+7.2% avg).

Political news is front & center - I was asked to handicap the 2020 Pres race on BTV earlier this week - Said I had no insight there but that what I was watching (& think you should too) is how 2020 EPS estimates make it through Q3 results season. 

For all the recession angst, 2020 S&P 500 EPS estimates remain at +10% vs +11% at 6/30 - the analyst community has yet to buy into the recession call.

Also filed under the “don't look now” category is the US yield curve which has been steepening and 2/10 yr UST spread is the widest since early August… could the Fed be in process of achieving its curve steepening objective?

Speaking of politics it's worth noting that if impeachment goes forward it will be the first time a President's party controls the Senate; watch the Pres approval #s for the tell - if they fall more Republicans might be willing to break away.

PMIs were also in the news on both sides of the Atlantic with both Manuf and Services weaker than expected. We tweeted a neat JPM graphic (follow us @tpwim) showing how the current Manuf PMI regime (under 51 and declining) has the poorest return profile while the next stage (under 51 and rising) offers 4-5x the return profile… that return differential is worth playing for folks.

A few other data points worthy of note: ACWX outperforming S&P this week and since the beginning of August - also note US Value has outperformed US Growth over the past 1,3 & 6 months (mostly due to the sharp move last month). The shift from US to ROW and from Growth to Value are essentially the same moves. 

Given how stretched these relationships are regime shifts are likely to be significant and multi-year in nature -  just when a 10 year run of US outperformance has convinced clients that it's the only game in town.

We hope you enjoy the new video Musings - let us know what you think.

TGIF for sure - enjoy the Fall weekend!

Jay and Jamie