Excited to present TPWIM’s Year Ahead Outlook: Reflation 2020

We remain on a Lower for Longer Global Growth Path which we believe can lead to Higher for Longer Global Stock Prices

Geopolitical uncertainty and recession fears have led investors to crowd into US equities and Growth/Defensive sectors & styles, marking perhaps the tail end of a decade long run of US/Growth Outperformance

Continued low growth & inflation suggest the Search for Yield can continue for another year

TPWIM’s Big Four Signposts guided us to our Fall Risk Asset Rally outlook and portfolio positioning

Let’s review the Big Four:

1.     Global Easing Cycle to continue.

2.     Global Growth Bottoming in process as Manuf PMIs inflect upward and service sector remains robust.

3.     US - China Trade Tiff to stabilize in a phase one/mini deal.

4.     Global Earnings Bottom as suggested by both revisions & outlook.

We expect the Fall Rally to morph into Reflation 2020 underpinned by global easing, fiscal stimulus & an industrial cycle rebound leading to positive surprises across: global growth, earnings growth & stock prices. Investors should buy the dips.

We favor Equity over Debt, Non US over US, Value over Growth, Cyclicals over Defensives, Credit over Sovereign, short duration over long, non $ over USD.

Where could we be wrong? US - China deal could fall apart; a hard Brexit could derail Europe’s nascent pickup; Manufacturing PMIs could reverse and decline, threatening the service sector and raising recession risk; Central Banks could shift back to tightening mode.

We look to 1995, 1998 & 2016-18 cycles for guidance on how things may play out.

Read More

Jay returns to BTV’s The Open to discuss how he sees TPWIM’s Fall Rally POV extending into 2020. He notes how the Trade Tiff is becoming less of a market issue as uncertainty ebbs while suggesting that should tariffs be rolled back the earnings effect could be significant. Jay makes the case that the bottoming in global growth is more important than the Trade talks and suggests a new corollary to our Lower for Longer Global Growth theme, namely that such an environment leads to Higher for Longer Global Stock Prices. Our focus remains on non-US DM equity, Value, and Cyclicals.

Read More

Nice tight clip from last night BTV Asian Open show where Jay lays out TPWIM’s Fall Risk Asset Rally playbook. He focuses on the Big Four signposts that guide our thesis: better geopolitical tone with trade talks & Brexit, better policy mix with global easing cycle and rising use of fiscal stimulus, Teflon like risk markets that have discounted plenty of bad news & an impending global growth bottom as Global Manuf PMIs bottom setting up regimes shifts across assets: from bonds to stocks, regions, from US to non US DM, styles, from Growth to Value and sectors from Defensives to Cyclicals.

Read More

OVERVIEW

The pace of action seems to be picking up as we enter Q4. Financial markets chopped a lot of wood in September as they did in August. Given the seasonally weak period and the stable nature of asset prices, one has to respect the Teflon like nature of current asset markets.

A Lower for Longer Global Growth Path remains our central theme. Our Big Four signposts remain constructive.

We expect to see positive catalysts during the quarter, perhaps on trade, perhaps on the global economic front and expect those catalysts to have positive implications for asset prices. We have added to the Cyclical nature of our portfolio solutions.

ECONOMICS

Developed economies are enjoying record low unemployment which has led to record highs in global consumer confidence, suggesting continued robust household spending over the next several quarters. No recession call here. 

The Global Manufacturing PMI appears to have bottomed & is turning up. We view the weak US ISM as a “catch down” to the rest of the world which is bottoming. 

POLITICS

A confluence of events suggests progress may be forthcoming on both US - China trade and Brexit. All the main actors: Pres Trump & Xi, PM Johnson, and the EU, can use a win. Risk assets would be big winners as well.

POLICY

Low inflation provides the cover for a continued global easing cycle while fiscal policy swings into action. Our Global Risk Nexus (GRN) work suggests progress on both the Economic & Policy front.

MARKETS

 

A long list of market positives offset concerns that Q4 19 will repeat last year’s horrid Q4. Central Banks’ easing rather than tightening, a better tone around trade and sharply lower rates all run counter to last year’s set up. 

The shift in global PMI regimes suggests reasonable asset upside, particularly among the non US & Value and Cyclical segments of global equity markets while also supporting credit over Govts & favoring commodities.

Read More

Full show of Jay on Bloomberg The Open. Go to minute 4:30 for great segment discussing how Q4 2019 will be different than Q4 2018 based on our Global Risk Nexus (GRN) research.

Read More

Overview: Markets chopped a lot of wood in August: EM’s Argentina collapse, tit for tat tariff hikes, RMB cracking 7, US yield curve inversion to name a few. Growth/Momentum factors ruled the roost for hedge funds and trend followers alike.

This sets up perfectly for a Fall risk asset rally with offsides positioning, horrible sentiment, improving seasonality coupled with full throated global easing, an uptick in Global PMIs, better technicals and cheap stocks relative to overbought and expensive bonds.

The catalyst could be a US - China trade deal in 2019, a prospect that seemed outlandish two weeks ago but very real today as both sides make nice. Another could be a Brexit deal, perhaps the only thing considered more unlikely than a trade deal. Focus on non US equity exposure, Cyclical sector & Value factor selection.

Economics: China’s L shaped recovery  demonstrates resolve in the US trade conflict, suggests China will neither sink nor save the global economy and shines a spotlight on Europe in general and Germany in particular as free riders on global demand.

Politics: Are we about to finally see Trump the deal maker? The weaker the US economy, the worse the polling numbers & the greater the need for a deal. Europe’s new leadership is a breadth of fresh air & how about that Italian own goal?

Policy: Roughly 80% of the world’s Central Banks are in easing mode; fiscal policy is the topic du jour in Europe and being implemented in Asia. 

 

Markets: Fall Risk Asset Rally ahead - the factor crash in the first two weeks in September could rival the quant crash of 2008-9. Note its all one trade: long Growth/Momo, long duration UST, long USD - reversals are likely across assets and around the globe.

Stay frosty my friends.

Read More

Quick clip of Jay Pelosky on "Bloomberg The Open" discussing monetary policy and the issues facing global central banks in the new Lower for Longer world of rate .

Read More

Watch Jay lay out his view that a lot of bad news has hit the market and why fall is setting up to be more attractive then expected in the markets on "Bloomberg Asia Markets: The Open."

Read More

Watch Jay lay out his schoolyard bully analogy to describe what’s going on in fixed income markets around the globe on "Bloomberg Markets: The Open."

Read More

In this month’s As The Tri Polar World Turns, CIO Jay Pelosky analyzes the recent financial market volatility and asks whether one should hold to the Lower for Longer Global Growth path. He notes the tussle between Fixed Income’s school yard bullies and highlights how amidst all the trade drama earnings in both the US and Europe have come in better than expected. Bottom line: we don't see the duration rally as signaling recession and continue to expect a global growth bottom and higher equity prices in the months ahead.

• Economics:  Nascent Growth Pickup at Risk to Trade Tiff

• Politics:        Not a Great P/L for the President

• Policy:          Are Global CBs Truly Ineffective?

• Markets:       Hey, Remember Earnings?

Read More

Jay Pelosky CIO sat with Fabian A. Onetti Founder of Winston Capital Advisors who brings 30 years experience in banking with 24 at Morgan Stanley.

They discuss a few of their views for the world and markets.

Read More

Jay Pelosky, chief investment officer and co-founder at TPW Investment Management, Michael Purves, chief executive officer at Tallbacken Capital Advisors, and Mark Connors, global head of portfolio and risk advisory at Credit Suisse, discuss the lack of market consensus on the size of a potential Federal Reserve rate cut. They speak with Bloomberg's Jonathan Ferro on "Bloomberg Markets: The Open."

Read More

In this month’s As The Tri Polar World Turns, CIO Jay Pelosky looks into the 2nd Half and notes the potential for a risk asset melt up. He highlights that investor positioning: super bearish stocks and super bullish duration = being super bearish growth and lays out why we expect that to be revealed as wrong thinking as the year progresses.

•  Economics: Growth Bottom Ahead

• Politics:        The Debt Ceiling Rears Its Head 

• Policy:          Fed Pivot Complete

• Markets:       Positioning for Growth

Read More

The upcoming G20 Osaka meeting on June 28-29 will see Presidents Trump and Xi attempt to resolve the ongoing trade war between the world’s two largest economies.

This webinar was on 27th June where we look at the interplay between tariff costs and stimulus benefits in regards to China's growth profile, identify which sectors are most at risk from a prolonged trade dispute, examine the implications for the ROW and assess the cross-asset impact on global portfolios. 

• Trade Tariffs & Lower for Longer Growth World: How Can Global Investors Prepare?

• The 3 Ts: Trump, Trade & Tech - Making Value Great Again?

• TPWIM's 3 Step Risk Asset Process (RAP): Anticipate, Confirm, Re-Allocate

Read More

Jay joined Bloomberg Asia: Daybreak to examine market expectations for the upcoming G-20 meeting as well as what the 2nd half outlook for stocks

Read More

Yesterday morning Jay was on Bloomberg: The Open to examine market expectations for the upcoming G-20 meeting in Japan along with Michael Shaoul, CEO and chairman at Marketfield Asset Management, and Thierry Wizman, global interest rates and currency strategist at Macquarie.

Read More

Speakers

• Charles Myers, Chairman of Signum Global

• Jay Pelosky, Co-Founder & CIO, TPW investment Management 

 
Topics discussed:

• Outlook for Impeachment

• Implications for Debt Ceiling & Budget

• Trade Prospects: Punt, Pass or Kick?

• US Political Dysfunction & the Lower for Longer Global Growth Path

• The 3 Ts: Trump, Trade & Tech - Making Value Great Again?

Read More

In this month’s As The Tri Polar World Turns, CIO Jay Pelosky updates TPWIM’s view on the trade war and its implications for a “lower for longer global growth path”. He also reintroduces the concept of the 3Ts and asks if the combo of Trump, Trade and Tech will Make Value Great Again - an interesting question we think you will want to ponder.

Read More

This 30 min Real Vision interview allows TPWIM CIO Jay Pelosky the opportunity to lay out the: "Lower for Longer Global Growth Path”  theme underpinning TPWIM's current approach to the global cross asset markets. He begins with our Global Risk Nexus (GRN) Scoring System (as we do every portfolio meeting) and focuses on Potential Growth Rates ( PGR) and Neutral Rates of Interest (NRI) which underpin the thesis. He then covers the impact of the Fed’s pivot and China’s stimulus in supporting this thesis. Jay identifies how one should invest in a Lower for Longer world noting the focus on equity markets with room for multiple expansion, fixed income instruments that offer yield, currencies that benefit from a weak dollar and commodities that benefit from a growth bottom. He discusses the risks of a deeper trade war and lays out why Pres. Trump is unlikely to go the Full Monty (25% on all Chinese exports to the US)  on China tariffs. The video is a great example of TPWIM’s capabilities around original investment idea generation, independent cross asset thinking & institutional level analysis. We hope you find it of use.

Read More