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What Brexit Is All About: Taxation Without Representation
I want to continue the Brexit conversation from last week. With only six days left before U.K. voters head to the polls, expectations of which side might win are beginning to shift toward the “Brexiteers,” while betting markets are still putting money on the “stay” campaign. However, the probability of victory for those who favor keeping their European Union membership has weakened rather remarkably in the last month, falling from over 80 percent in mid-May to around 62 percent today, according to BCA Research.
Global Economic Perspective: June
Our view is that the US economy remains on course to pick up over the rest of this year, despite May’s disappointing payroll report, which helped persuade the US Federal Reserve (Fed) to hold back temporarily from raising rates at its June meeting. We do not place too much importance on this single piece of data and believe the economy’s robust fundamentals are likely to fulfill the Fed’s criteria for tightening monetary policy fairly soon.
Investing in Europe? Might Want to Include Some Knowledge Leaders. Just Sayin’.
by Jennifer Thomson of GaveKal Capital,
Year-to-date (on an equal-weighted basis), the average stock in our DM EMEA universe is down more than 3%–led by the usual suspects (Italy, Portugal, Spain, and Ireland), of course.
June Market Outlook Update
by Jim McDonald of Northern Trust,
It appears that, once again, the Federal Reserve’s hopes to raise interest rates are being stymied by the economy. Just last month the Fed’s minutes showed a predisposition to raise rates soon, and Chair Janet Yellen said it would probably raise rates “in coming months” should the data continue to meet expectations.
The Trade Facilitation and Trade Enforcement Act
Obama recently signed the Trade Facilitation and Trade Enforcement Act, a broad refresh of US trade laws. Title VII concerns exchange rate and economic policies. The earlier law from 1988 required the Treasury to determine if a nation was manipulating its exchange rate. In reality, being designated a manipulator didn’t trigger significant penalties. In this report, we discuss the history of exchange rate issues in trade, the new legislation and its potential impact on US trading partners. We review the reserve currency role and explain why this role almost precludes any effective trade policy designed to punish foreign trade practices, reflecting on the new law in light of the current political situation in the US.
Consumer Staples Breaking Out to New Highs
by Eric Bush of GaveKal Capital,
While overall developed market stocks remain approximately 7% below May 2015 highs, the consumer staples sector continues to power forward to new highs. The GKCI Developed Markets Consumer Staples Index is now 6% higher than it was in May 2015. The Developed Markets Asia Consumer Staples Index is particularly strong as it is now over 10% higher than it was in May 2015.
Equal Opportunity Needed
by Sherwood Zhang of Matthews Asia,
A little-known pastime I enjoy is browsing Chinese recruitment websites that feature job postings in China. I believe this is one of the many ways in which fundamental investors can remotely conduct due diligence on China’s economy and corporate sector. I often check to see what positions companies are hiring for, in which cities, and whether companies are indeed hiring in line with strategies that have been presented to investors by management.
Are We Nearing the End of the EU Experiment?
If you’re a serious investor—and because you’re reading this, I have to assume that you are—gold is looking more and more like a crucial trade. Only two weeks remain before United Kingdom voters decide on whether the country will continue to be a member of the European Union (EU) or become the first-ever to leave it. The “Brexit,” as it’s come to be known, is arguably the most consequential political event of 2016—perhaps even more so than the U.S. presidential election in November—with far-reaching implications.
Is India the New China?
Make no mistake, China’s oil demand is still massive, second only to the U.S. But it has begun to contract in recent months, and there to offset the difference is India, who is expected to have the fastest growing demand for crude between now and 2040, according to the International Energy Agency (IEA).
Your Portfolio Design: Assume the Fetal Position
by John Mauldin of Mauldin Economics,
Sometimes you can go through that process and still end up bearish on almost everything. Richard Fisher seems to be in that camp. Asked in our final wrap-up panel Friday morning how his own portfolio was positioned, Fisher answered with one word: “Fetal.” And while his answer got a general laugh and a lot of pushback on the final panel from Niall Ferguson, who thinks he sees the beginning of an inflection point, it seemed a pretty good summary of the conference.
"Like Us" in Asia
by Shafiq Arghandiwal of Matthews Asia,
Earlier this year while traveling in Asia for both work and pleasure, I had the opportunity to catch up on some technological trends I enjoy following, and to compare social media and mobile usage between Hong Kong, Thailand and the Philippines.
Made in China: China’s Evolving Export Role in the Global Economy
by Nick Niziolek of Calamos Investments,
Infrastructure buildout is one of the key themes driving long-term growth opportunities, especially in emerging markets. We’re seeing a range of government initiatives to promote infrastructure spending, including in Indonesia, India, and the Philippines. However, the single most important of the infrastructure initiatives underway is likely China’s One Belt, One Road project (OBOR).
Couture Chinois
by Patricia Huang of Matthews Asia,
Just a few decades ago, a challenge to becoming a fashion designer in China was that most people equated that to being a seamstress. But in China's burgeoning world of fashion, local designers now seek to replace the mantra of “Made in China” with “Designed in China.”
Mentorship and The Smartest Man
by Byron Wien of Blackstone,
There will be no essay on The Smartest Man in Europe this year. My good friend and mentor Edgar de Picciotto, Chairman of Union Bancaire Privée in Geneva, has passed away; he was 86. I met him during the 1980s when I was at Morgan Stanley and he was a regular attendee at our global client conference at Lyford Cay in the Bahamas. I came to know him well when we were both Supervisory Directors of Soros Fund Management and met for several days twice a year in Europe (Soros was an offshore fund.) When I started writing about him in 2002, I chose not to reveal his name to protect his privacy. I did, however, have a shirt made with the legend “Smartest Man in Europe” and gave it to him, but he told me he only wore it around his swimming pool.
Can the TPP Save the Global Economy?
According to the Peterson Institute for International Economics (PIIE), the TPP “will increase annual real incomes in the United States by $131 billion, or 0.5 percent of GDP, and annual exports by $357 billion, or 9.1 percent of exports, by 2030.” For all member nations, the deal is expected to add $492 billion in real income.
Creating Value via Innovation
by Michael J. Oh of Matthews Asia,
Considering Asia's vast consumer market—which by 2020 is expected to have a middle class of about 1.7 billion, and its impressive spending power—the region's middle class population is significant for many reasons. It is now willing, and able, to pay a premium for pioneering, high-quality products and in recent years, we have witnessed many innovative companies meet the demand created by rising disposable incomes and improving lifestyles. All this bodes well for a virtuous cycle of further innovation.
Sykes-Picot: 100 Years Later
Last week marked the 100th anniversary of the Sykes-Picot Agreement, which divided the disintegrating Ottoman Empire territories in the Middle East into British- and French-controlled areas following WWI. One hundred years after the agreement, the effects of the borders continue to reverberate as the region remains unstable. The Middle East has a rich and complex history that could fill several volumes of books. Although we will give a condensed overview of the region’s long history, we focus on the WWI time period, specifically the circumstances that led to the Sykes-Picot Agreement.
The Rest of the Americas: Reprise
by Jack Rivkin of Altegris Advisors,
We are continuing our review of what has happened since we laid out our expectations in our Perspectives at the beginning of the year. We had a view that one could find all manner of investment opportunities, long and short, without moving beyond the continents of the Americas. Given the volatility of the markets and the currency and commodity movements since then it is time to take a fresh look—particularly at the rest of the Americas. Below is a reprise of our expectations and our update of how the expectations have changed. Commodity and Currency movements as well as specific governance issues may cause a greater dispersion in results for the rest of the year.
May Market Outlook Update
by Jim McDonald of Northern Trust,
Something’s gotta give. The global growth environment remains subpar — stable but at a disappointingly sluggish pace. Central bankers, where possible, continue to ease policy, but the financial market reaction is increasingly unpredictable. In this environment, the predominant theme this year has been a bounce back in the most beaten-down assets — including commodities and emerging markets.
Consumer Staples are Overbought in the Short-Run but the Trend Remains Positive
by Eric Bush of GaveKal Capital,
Developed market consumer staple stocks are up a health 5.5% in 2016 compared to an 80 bps decline for developed market equities in general. Looking at consumer staples, across a variety of regions, it seems that this group is probably overbought in the short-term. However, the overall trend remains very positive as consumer staples is the only sector that is breaking out to new highs.
On My Radar: Champions of Conviction
“Invest in good companies, don’t use leverage, invest in liquid investments, don’t do private deals and light a candle and pray for a positive outcome.”
-Leon Cooperman, Omega
“Debt drains away vital resources from economic growth. Fighting a debt crisis with more debt is doomed to failure, yet that is not only what global central banks did during the crisis but long after markets stabilized (though the crisis never truly ended, just slowed). This was an epic policy failure that continues today.”
-Michael Lewitt, The Credit Strategist
Weekly Market Summary
by Urban Carmel of The Fat Pitch,
Over the past year, earnings for the S&P have declined 12%. Earnings have declined 5 quarters in a row. Even excluding the troubled energy sector, valuations now are as high (or higher) than in 2007. It's no wonder that there has been little net gain in the S&P since late 2014. Does the dire state of corporate sales and profit growth signal an imminent recession? This post takes a sector-level view in order to address that question. In all likelihood, the answer is no.
The Plaza Accord Cannot be Reincarnated
by Carl Tannenbaum of Northern Trust,
Thirty-one years ago, the finance ministers from Japan, France, West Germany, Britain and the United States met to synchronize economic policy in support of global objectives. The “Plaza Accord” set the stage for significant shifts in world markets.
Misperceptions of Thailand
by Tarik Jaleel of Matthews Asia,
Thailand’s rapidly greying society discourages some investors. But while its population trend may necessitate a restructuring of its economy, some short- and long-term policies can improve the country’s basic infrastructure and more quickly foster the right environment to accommodate a more sustainable governance system.
China’s Slowing; So What? May 2016
by Byron Wien of Blackstone,
By this time there is not a business person in the western world who doesn’t know that the Chinese economy is not moving ahead at the torrid pace of five years ago. China has grown to become the second largest economy in the world and the law of large numbers is in its way. In the first quarter, it reported 4.5% real GDP growth, the lowest since 2010. In order to reach the annualized rate of 6.7%, growth in the next two quarters would need to be 7.4%, which seems hard to achieve. I have been projecting (guessing) overall Chinese real growth of 4.5% and arguing with clients and analysts about whether I am too low or too high. The real question is, how much does this matter?
Altitude Adjustment: Investing During a Period of Lower Returns and Higher Volatility
It can be difficult to adjust to the end of a good run. For years following the financial crisis of 2008, investors benefited from a rally in financial markets facilitated in part by expansionary policies of the Federal Reserve and other central banks around the globe.
The Plaza Accord Cannot be Reincarnated
by Carl Tannenbaum of Northern Trust,
Thirty-one years ago, the finance ministers from Japan, France, West Germany, Britain and the United States met to synchronize economic policy in support of global objectives. The “Plaza Accord” set the stage for significant shifts in world markets.
Quarterly Strategy Update: The End of Ricardian Growth?
by Steven Vannelli of GaveKal Capital,
This quarter, we explore the hypothesis that the modern era of Ricardian growth has ended. We further explore what this means for asset allocation and which types of stocks in particular should do well in this Ricardian hangover.
Dividend Boost from Korea
by Michael Han of Matthews Asia,
With President Park Geun-hye leading the way, South Korea has received the domestic investment boost it’s needed. This week, Portfolio Manager Michael Han explains what has led to the improvement of Korea’s corporate governance and why he’s optimistic about its future.
Thinking Broadly About Emerging Markets
by Raman Aylur Subramanian of MSCI,
The recent uptick in emerging market equities has left investors to wonder whether the gains might continue and to think anew about how to approach the segment. An emerging markets composite index has tended over time to capture diversified returns across multiple countries without adding additional risk, Raman Aylur Subramanian, MSCI's head of equity applied research, explains in his latest post.
Corporate Management: Discerning Opportunities and Risks in Asian Credit
by Raja Mukherji of PIMCO,
The annual movement of wildlife across the Serengeti-Mara ecosystem in Africa is one of the greatest spectacles in the natural world. The horizon fills with wildebeest, zebra, eland and gazelle migrating for fresh grass, tracked by Africa’s great predators.
April Market Outlook Update
by Jim McDonald of Northern Trust,
The renewed appetite for risk assets continued during the last month, maintaining the strong rally after global equities registered a 20% decline from their highs on February 11. After triggering risk aversion in January, the news out of China is beginning to show some positive effects from their multi-pronged policy approach. The markets have also been supported by more realistic utterances from the Federal Reserve. Not only has the full committee reduced their expectations closer to the market, Fed Chair Janet Yellen has gained some ground in convincing investors that she's in control of policy making at the Fed.
The Unprecedented Real Estate Bubble In China
Most economists and financial writers agree that the US has the strongest economy among the developed nations, even though we’re only growing at about 2%. Despite the slow growth, most don’t believe we are facing a recession anytime soon. However, most economists and financial writers also agree that a serious external shock could quickly throw the US economy into a recession and take most of the rest of the world with it.
Invest In Asia, Health Care To Reduce Your Correlation To Oil
by Eric Bush of GaveKal Capital,
We have written about the historically high current correlation between oil prices and stock prices several times recently (see here and here). Correlation between oil prices and stock prices continues to increase as the 65-day correlation and 200-day correlation are once again making new highs going back to 1980.
This Should End Talk of a Hard Landing
by Andy Rothman of Matthews Asia,
A modest credit stimulus and a housing market rebound led to a pick-up in investment and industrial activity during the first quarter of the year, and while that should end talk of a hard landing, the gradual deceleration of China’s economic growth will continue. Growth is driven increasingly by consumption and services as rebalancing proceeds, and that part of the economy—the largest part—continues to offer opportunities for investors.
Staying the Course
by Kenneth Lowe of Matthews Asia,
This is an era in which central bankers influence markets to an ever greater degree, high debt levels need to be dealt with, greater fiscal policy may become more commonplace and liberalization in Asia must continue apace to ensure that the region’s prior 20 years of solid economic and institutional development is continued into the next 20. But how do investors continue to strive to find those companies that can deliver, and potentially even further enhance, their positioning during such challenging times?
Results 2,901–2,950
of 4,282 found.
