Macro Digest: There has been an equity earthquake!
Chief Investment Officer
What: Momentum stocks “collapsing” vs. Value stock rising – A move which is an equity earthquake
Why: US interest rates have shifted up by 20 bps to 35 bps in a few days – a highly unusual move considering that FOMC is next week and a minimum of 25 bps cut is fully priced in
Action: Creates negative bias in momentum big names (NASDAQ) – UNDERWEIGHT – while we like OVERWEIGHT value stocks (VLUE:BATS)
Value stocks = Banks, Mining companies & Energy mainly
Momentum = Technology, Entertainment, consumer stables
Value is cheap – dirt cheap – and now the forceful move up in US interest rates has made “models” buy value and sell momentum as value stocks is similar to being long interest rates (through banks) while rising cost of capital “destroys” high duration assets discounted capital value. Elementary, Dr. Watson?
Read: Our own Peter Garnry has been on the ball: https://www.home.saxo/insights/content-hub/articles/2019/09/11/equities-rebound-on-positive-trade-news
From Peter’s piece today….
FED expected moved over the next six quarter gone from a cut of 80 bps to now only 36 bps….
US yields moved up +25 bps last three days creating “havoc” in Momentum vs. Value
Here is outright VALUE vs. Momentum….!!!
Here we chart TLT:xnas vs VLUE:bats (SaxoTrader)
Value stock is cheap – extremely cheap:
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.