Note Précis September 5,2019: Not Time for Heroics – We see the present as being no time for heroics on investment. Current politics seem fractious and on a knife edge. Misjudgments would be costly for markets and growth. Only some pressure points include internally in Italy, Brazil and Britain as countries; Britain and Europe as well as for Japan and South Korea in intertrade; China and the United States over global trade as well as ongoing stress across the Levant to Iran to South Asia.
Momentum dispositions in capital markets continue, whether via algorithmic trading, ETF activity or more classical forms. Much has been made about central bank activity and quantitative ease. Negative yields have spread well beyond Japan and Switzerland to now many European sovereign bond areas. Private capital also attempts to immunize pension related liabilities with intent to hold assets to maturity. However, such intent has yet to be tested were fixed income yields to rise. Afterall, investment portfolios have long been marked to market. Emotions could yet overcome the objectives of long term immunization and thus give rise to herd behavior.
In equity markets, the present widespread discourse has been on rationalizing movements as being a derivative of that of fixed income yields. Inter day and intraday equity market swings have been large even as consensus earnings expectations are reduced. At present valuations in equities, we see fallacy in suggestions that sentiment is bearish and hence a contrary indicator. We believe instead that the political environment as well corporate assessments, individually and globally indicate a more selective security process to be underway.
StrategeInvest’s independent consultancy operates as Subodh Kumar & Associates. The views represented are those of the analyst at the date noted. They do not represent investment advice for which the reader should consult their investment and/or tax advisers. Any hyperlinks are for information only and not represented as accurate. E.o.e.