US Recession May Be Shorter Than Expected

The official dating body for US recessions, the NBER, announced last month the US reached the peak of its expansion in February and is now contracting. The NBER defines a recession as “a significant decline in economic activity spread across the economy, normally...

Revisiting Lessons from China 2015 Market Rescue

The collision of two powerful and opposing forces has created an uncertain outlook for equity markets. Aggressive stimulus from the Fed – which Powell says has “no limits” – has caused the monetary base to surge relative to the equity market cap (top-left...

Breadth and Level of Stock P/E’s Remains High

The overvaluation from long-term averages for US stocks in recent years has been well known to equity investors. Unfortunately, valuations give you no information on timing – they tell you how far you’re likely to fall, but not when. The virus, specifically the...

Narrative Shift Depends on Virus

Earlier this month, the S&P and gold both collapsed on the same trading day, which is extremely rare. The top-left chart shows that in the past 20 years, the only times gold was down more than 3% while the S&P is down more than 5% was last week and back in...

High Dividend Yield Strategies Require Care

Falling yields across the developed market world have posed greater hurdles for investors with yield and income targets. As the spread between bond yields and equity dividend-yields diverge, these investors move up the risk spectrum to meet their targets. As such, we...

A Brief Bout of Market Optimism

This post was taken from our December 4th weekly report. We wrote last week about the absence of bottoming signals for the S&P. From a price perspective, there was little to suggest a sustainable rally was on the cards, as few of the usual signs of selling...

Flatter Yield Curves a Headwind for Risk Assets

The US and global yield curves steepened briefly last summer and steepened further after Trump’s election, but it has been rolling over almost all year. This has a negative read through to growth and key risk assets. The yield curve is one of the key things we track...

Equities and Margins

P/E expansion has been an important driver of US equity returns in recent years. The left chart shows the disaggregation of returns in 5 year blocks going back to 1996. As we can see, in the years 2011-2016, 55% points of the 79% return of the S&P in that period...