'And upside down in air were towers'
Chief Investment Officer
Summary: Valuations are overextended and the outlook is dim. As such, I'm fairly confident markets will be supported.
The nervousness that we are seeing this week in the wake of President Trump's latest trade war ripostes falls into the False Stabilisation scenario. After all, everything had been priced to perfection on a narrative of falling policy rates, which of course cannot fuel any real uptick in economic activity beyond a rise in 'feel-good' sentiment.
The risk this week is that the market is figuring out that any deal between China and the US will exist on paper only.
Look around the world: the tension between China and the US continues to ratchet higher. Looking ahead to June's World Trade Organisation summit in Japan, where many observers expect an anti-WTO broadside from Washington, and the horizon is cloudy at best.
In the US, yes, Trump is playing to his domestic base, but this can be effective. He is currently enjoying his strongest approval numbers in years, with Gallup showing the president at 46%, exceeding even President Obama's approval rate at this point in his first term. That said, the position leaves Trump vulnerable as well; with the 2020 vote drawing closer, he cannot and will not continue his aggressive path on this front if the market continues to tank.
The Federal reserve, in our view, will move the rate cut forward/up. We know from the past few years that every time the market corrects by 7-10%, the Fed changes tone and direction.
I don't like current valuations. I don't like the current outlook.
And I'm pretty confident that the market will be supported/bought no matter what the outcome of Friday's trade talks.
The worse the headlines, the larger the policy response.
I suggest buying Nasdaq calls.
Quarterly Outlook Q2 2022
Quarterly Outlook Q2 2022: The End Game has arrived
- Shocks from covid and the war in Ukraine have forced the global financial and political world to change, but what will the end game be?
Productivity and innovation have never been more importantAs the world economy hits physical limits and central banks tighten their belts, could equities be facing a 10-15% downside?
The great EUR recovery and the difficulty of trading itIf the terrible fog of war hopefully lifts soon, the conditions are promising for the euro to reprice significantly higher.
Tight commodity markets – turbocharged by war and sanctionsWith supply already tight, commodities keep powering on. But will it last for yet another quarter?
Between a rock and a hard placeGeopolitical concerns will add upward price pressures and fears of slower growth, while volatility will remain elevated.
The Great ErosionInflation is everywhere and central banks try to combat it. But will they get it under control in time?
Australian investing: Six considerations amid triple Rs: rising rates, record inflation and likely recessionWhile global financial markets are struggling in an uncertain world, the commodity-heavy Australian ASX index is poised to keep a positive momentum.
Cybersecurity – the rush to catch up with realityWith the invasion of Ukraine, governments and private companies are rushing to reinforce their cyber defenses.
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