Global Macro Strategist
Summary: Morning APAC Global Macro & Cross-Asset Snapshot
(Note that these are solely the views and opinions of KVP, and do not constitute any trade or investment recommendations.)
Happy Macro Wed 23 Oct 2019
Cross-Asset wise we hand a pullback in the S&P 2996 -0.36%, as well as down session in Europe. Yet nothing to dramatic in regards to moves across other asset classes, USTs are still round 1.75% levels, dollar had a slight +20% tick up to the DXY 97.53 lvls (EUR & GBP pullback) & Gold 1487 popped by +0.21%.
Facebook 182.34 -3.91% was on the backfoot of a combination of weaker markets, as well as coalition of states conducting a Facebook antitrust investigation into everybody’s favourite ‘your privacy & data for sale’ & ‘election fixer franchise’.
Post watching Billions, KVP shut eye would be a ‘touch’ affected, if he had 47 US Attorney Generals gunning for him. Best way to “really” start to pivot out of this is for Zuc to step down, senior execs to move on & that board to be reshuffled – they still don’t get it. That’s the thing about money, profitable & influence enterprises, at +$22bn in earnings for 2018 & at close to 3bn monthly users (Facebook, WhatsApp, Instagram, Messenger) – you can afford to not get it for a while, perhaps even forever.
Just to give you context, here are some countries’ who’s GDP are less than FB’s earning last year: Botswana, Senegal, Cambodia, Malo, Jamica, Mozambique, Namibia, Congo
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On US equites & earnings in general: Boeing will be very interesting today, as the 737 Max saga continues. KVP remembers having a lunch a few months back with a full-fledged career pilot who used to be in the air force, & now flies some of the biggest commercial planes, let’s call him Top Gun.
Long & short of it, I asked Top Gun how does someone who is in the business of flying aircraft see the whole 737 Max software stumble? It was basically pretty clear from day one, that corners had been cut & that there were a lot of red flags, there are normally 3 fail-safe systems in place with everything in the cockpit [flying is basically a series of checks & checks on checks] & post the max software upgrade that got down to 1 fail-safe. Meaning you don’t know you are in trouble until its too late.
i.e. KVP’s read, this was systematic error in how everything was conducted & not some rogue operator mistake – and this no doubt extends into other companies & industries.
The only thing that Boeing has going for them, is a big deal at the end of the day… with all due respect to the Brazilians & Chinese… its still predominantly a global Duopoly market between the Europeans (Airbus) & the Americans (Boeing)…
That a tough current to swim against & being a global macro padawan, KVP likes to swim with the current. Now if he was an event driven, stock specific kind of investor maybe it’s a different call. And yes we need more competition not just in aircraft, but tech & retail – the likes of FB, Google, Amazon, Apple have an unprecedented structural influence on how societies are functioning.
Later on today we’ll also hear from Tech favs. Tesla, Microsoft, as well as some big global industrial players such as Caterpillar that may give a better feel of how global growth is faring.
Have a great day out there.
Today:
Other:
Bond. Long Bond(s)
With real rates being too positive, we see three scenarios: Opportunity to lock in rates at cycle high, government overreach to keep the economy afloat or a complete reset of the economy.
Steen Jakobsen,
Chief Investment Officer
Is a bond bull market ahead? Inflation still poses a risk for investors, but the moment for increasing duration to your portfolio may be approaching towards the end of the year, when central banks might be forced to cut interest rates.
Althea Spinozzi,
Senior Fixed Income Strategist
The furious rate hike cycle has brought gains in the US dollar, but with stagflation risks in Europe and the UK and weakness in the Chinese economy, USD may have more room to run. But a strong dollar could also have repercussions for US growth, emerging markets and commodity prices.
Charu Chanana,
Market Strategist
With the cost of capital rising painfully, stagflation fears are back, illuminating the fragile state of the green transformation, while giving a tailwind to nuclear power, and threatening the growth of AI-related stocks.
Peter Garnry,
Head of Equity Strategy
With supply tightness not only in energy but all commodities, the momentum in commodity prices may continue, pressuring central banks to lower real rates. That could be a good setup for precious metals, including gold, silver and potentially platinum as well.
Ole S. Hansen,
Head of Commodity Strategy
As the pandemic showed, even the US Treasury can experience seismic shifts. With the government increasing the pace of issuing bonds to support fiscal spending, the complex Treasury market and regulatory constraints could spark a liquidity event.
Redmond Wong,
Market Strategist
The tide has turned for bonds. Given the current yields, bonds have become an attractive investment, with added benefits including lower risk than stocks, increased diversification and a steady stream of income unaffected by economic changes.
Peter Siks,
Investment Coach
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