Anyway You Want It
Happy Friday,
Written or spoken word, we have it. TPWIM's POV available via an in depth ETF.com interview with Summit Roy as well as a 10 Questions in 10 Minutes MarketDesk podcast with Ben Phillips. Both feature CIO Jay Pelosky & cover a lot of ground, including current AA and top ETF holdings. Enjoy!
Lots to muse over as coronavirus concerns continue to bubble.
New virus cases in China continue to decline sharply while US Industrials report close to 100% of China plants up & running at roughly 50% capacity, expecting to ramp to 100% thru March. China stocks up roughly 4% on the week.
Growing pan Asian virus cases are rattling markets & leading to increased fiscal efforts (SK, Singapore) to offset the feared economic hit. Note Feb mtd SK exports +12% y/y, suggesting global growth pick up into virus fears.
Expect more fiscal talk at the G-20 meeting this weekend.
US rates continue to reflect safe haven bids, leading to negative real rates in the US; the last negative real rate stretch was in the 1970s… current nominal 10 yr UST levels have proven to be the bottom several times.
USD rally while rates fall and deficits expand is a little disconcerting - current DXY level marks top of recent range. Yen no longer a safe haven while growth concerns undermine Euro.
The move to Green is having unexpected effects, including turning Utilities into “Growth” stocks (ICLN anyone). That combined with the low rate revaluation boost to the Growth/tech segment (the biggest portions of ESG ETFs) have caused Growth to rally even more.
The results: YTD Growth - Value perf spread the biggest in decades. Tech valuation spread vs SPY widest since 2009 while BofA notes “full capitulation into deflation assets”.
By the way did you see the rising amount of Activism in Japan where the PE firms are circling as well as the Italian Bank M&A in Europe? Pay attn!
Speaking of Europe, JPM just noted that European Q4 EPS ex energy at +6% was better than US ex energy while February Composite PMI best in 6 months.
Net-net, we continue to expect the virus impact will be sharp & short lived; consequently, the growth rebound should be sharp as inventory rebuild could be epic, leading to many of current cross asset relationships to unwind, including an ESG whack through the Growth segment.
TGIF & and Have yourself a weekend!
TPW Investment Management Team
