Macro Dragon: Keep Industrials on the Radar...
Summary: Macro Dragon = Cross-Asset Daily Views that could cover anything from tactical positioning, to long-term thematic investments, key events & inflection points in the markets, all with the objective of consistent wealth creation overtime.
Macro Dragon: Keep Industrials on the Radar....
Top of Mind…
- So this one is potentially a touch in the INIL camp – Invest Now, Investigate Later… which allows one to dip a toe into a theme, with the pros of not forgetting about it down the line – yet put it on your radar folks… its going to be big when the move comes…
- And yes, like Gold’s eventual (high probability) big break-out here, this is a question of when, not if…
- All this Fiscal spend globally in a C19 impacted world is going to continue – the current spend has been more like relief/stability packages at best. One cannot stimulate an economy that is not moving…
- So once again, we can say with high certainty (high probability) that the taps of fiscal policy will be like monetary policy open & loose for a very long time
- Fiscal almost certainly “ends” with infrastructure spend – this will be the paragon of saving the best for last (yes, should already have been out in force), as this will be the most powerful element of an already very strong element of a country’s policy
- A multi-trillion infrastructure spend will spur “real” demand globally & likely be set out of the US… be it before the election or with a future Trump or Biden presidency. For those who have been in the US & Europe – you know doubt have seen some of the 4th world infrastructure, bridges collapsing, pot holes the size of mini-craters, etc… its long overdue.
- Don’t know about you, yet if KVP has to pick his form of debt… he’d rather take $2-4 trillion of debt going into infrastructure, that will pay dividends for decades to come for a country (not to mention spur millions of jobs)… rather than another $2-4 trillion of wall street paper to protect the vested interests & buds of the Fed & treasury – and no, they don’t have to be exclusive, but clearly main street continues to be the undisputed 2nd class citizen, that all politicians & policy makers say they are serving, but in actuality are like a multi-decade underperforming hedge fund manager – they are charging you, for the privilege of underperforming on your capital (in this case tax payers money).
- Whilst focusing here on the US, this would be a global theme – i.e. more of Europe doing what Germany is going to do.
- Our Equity strategist Peter Garnry highlighted some of these names, yet there are also etfs like XLI – industrial etfs. Obviously energy, materials & likely A&D would also get massive structural bids, things like copper, iron ore, steel, concrete, sand, etc… would be in tremendous demand… so keep that in mind with the likes of Australia (AUD) & Chile (CLP)
- You can catch Garnry’s complete list here: US infrastructure stocks to watch on Trump’s $1tn stimulus boost
Summary: In today's equity note we show a basket of 30 US construction related stocks that could benefit from the potential new $1trn infrastructure plan by the Trump administration. This basket of stocks is high beta to the S&P 500 but has historically outperformed S&P 500. The basket has a lower net-debt-to-EBITDA than the market highlighting the industries' prudent financial management and valuations are generally in line with the market
On The Radar Today
Flash PMIs Tuesday across the board… remember RBNZ tmr Weds @ 10:00 SGT
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Latest Market Insights
Outrageous Predictions 2023: The War Economy
- The constantly growing global need for energy drives the world's richest to huddle up and launch a R&D project in a size the world hasn't seen since the Manhattan Project gave the US the first atomic bomb.
French President Macron resignsThe political stalemate in France and the rise of Marie Le Pen following the 2022 elections corners President Macron, forcing him to give up on politics and resign from his position. At least for now.
Gold rockets to USD 3,000 as central banks fail on inflation mandateAs markets and central banks realise that the idea that inflation is transitory is wrong, and that prices will remain higher for longer, gold is sent through the roof, hitting a price tag of USD 3,000
EU Army forces EU down path to full unionWith continued challenges in the region and a US military that isn't aggressively enacting its former role as global policeman, the European Union agrees to create its own armed forces, bringing the whole region closer.
A country agrees to ban all meat production by 2030In an effort to become one of the global leaders on the path to net-zero emissions, one country decides to not only put a heavy tax on meat, but to ban domestic production entirely.
UK holds UnBrexit referendumFollowing a recession and domestic pressure, the United Kingdom is thrown into political turmoil that will end with a vote to wind back Brexit.
Widespread price controls are introduced to cap official inflationHistory tells us that with the war economy comes rationing and price controls. And this time is no different, as policymakers introduce strict price controls that lead to a range of unintended consequences.
OPEC+ & Chindia walk out of the IMF, agree to trade with new reserve assetSanctions against Russia have caused widespread turmoil due to US Dollar moves in countries across the globe that don't consider the US an ally. To relieve themselves from this, they leave the IMF and create a new reserve asset.
USDJPY fixed to the USD at 200 as Japan overhauls financial systemFollowing the challenges that faced the Japanese Yen in 2022, the Bank of Japan attempts to keep the currency from sliding. Unsuccessful on the long-term, Japan will launch a reset of its entire financial system.
Tax haven ban kills private equityWith the war economy comes an increased focus on national interests and sovereign nations' ability to assert themselves. In that regard, the OECD countries turn their attention on tax havens and pull the big guns out, banning them altogether.