12 Years of VP vs Noise
Sharing the ideas and experiences that have influenced our work
How Inflation Swindles the Equity Investor
Following on from our post last week about the concept of equity duration, it's a great time to revisit Warren Buffett's evergreen piece on inflation vs equities. The chart below shows in nominal terms the S&P 500 did okay through the 1970s, but investors lost...
The Importance of Equity Duration
We have seen much commentary that if US 10y yields go back to 2.5% or 3.0%, then equity markets suffer. We prefer a different way to looking at the problem. The key is what inflation is doing alongside any move in nominal yields. The below chart shows the % of the...
What to read to learn about macro?
I often get approached by university students or graduates asking me what books they should read to learn about macro or investing. I don't have a definitive answer, but I can share some books that have heavily influenced my personal journey. In general, I have found...
Wage Pressures Building
Our US leading indicators point to higher wage growth as employers pay up for better quality labour in the wake of the pandemic. A nascent rise in trade-union density suggests the wind is changing and that we may see more structural inflation risks coming from the...
US Overheating Risk
The Zarnowitz Rule states that the steeper the downturn, the sharper the upturn. This was on hold while Covid-related restrictions were in place, but now we should expect to see it in full flight, turbocharged by fiscal stimulus. Overheating risks are rising The US...
Reflation Sensation
Bloomberg and Google news trends show reflation headlines are everywhere. Widespread coverage is typically a sign that trends are starting to exhaust and that markets are due for a period of consolidation, before the next leg higher Our growth and liquidity LEIs...
Tracking the US’s Labour Market Recovery
The US labour market has pockets of tightness. However, it’s unlikely we’ll see rapidly rising household inflation-expectations until we see higher low-skilled wage growth and rising ex-transfer incomes Our indicators show that at this relatively early stage in the...
Crisis Management – Buying in a Bear Market
In the depths of the pandemic and market volatility in April 2020, we released a report for clients recommending screens of stocks that we thought would outperform even if the market had not continued rallying off the March lows. One year on, we review our...
Adding Back Central Bank Ambiguity
Central banks are adding more ambiguity back into their reaction functions. This points to higher global rate volatility After years of repression, rate volatility is beginning to rise. This is not only a reflection of greater macro-economic volatility, but -...