Head of Equity Strategy
Summary: After a wretched end to 2018, equities have been on a roll so far in the new year. The upcoming earnings season might just extend that rally further, despite growing signs of fragility in the wider economy.
The Q4 earnings season kicks off on Monday with Citigroup reporting its latest batch of figures. This earnings season may be more important than usual given the disastrous Q4 for global equities. Uncertainty remains high and the outlook has definitely deteriorated with especially China and Europe leading the declines. Today’s Sweden House Price Index (Dec) showed further deterioration in what is now the country's worst housing decline since the early 1990s.
We observe weakness in other housing markets across all continents. On top of that, high yield bond issuances have been stopped completely for 41 straight days. Targa Resources may break the stalemate in the US high yield market if it succeeds in its $1.5bn bond offering on Thursday. With global equities rallying since late December, and especially after Fed chair Jerome Powell's speech on January 4 signalling a looser stance on balance sheet reduction, as well as and optimism over US-China trade deal, a better than expected earnings season could help extend the rally a couple of percentage points more.
Share buybacks are still intact
Despite a volatile Q4 and rapidly falling share prices, S&P 500 companies were not afraid of using the ammunition on their balance sheets to buy back their own shares. The index divisor capturing the changes in the stock capital is still rapidly falling as a function of the enormous shares buyback programmes. Q4 2018 saw the biggest decline in the index divisor since Q2 2016. In European equity markets there is not the same engine as the index divisor is not continuing to decline. This obviously reflects the lower growth, lower profitability and less robust condition of European companies compared to US companies.
A new fragmented world order can render some of today's infrastructure obselete, but it also calls for massive new investments across the globe, which requires a new set of strategic and tactical investment strategies.
Steen Jakobsen,
Chief Investment Officer
As globalisation turns to fragmentation, China seems set on playing a role in the global economy, while simultaneously working towards proofing its own economic situation from external shocks and crises.
Redmond Wong,
Market Strategist
The recent bank runs and ensuing challenges are reminicent of something we've seen before. Will it end like the S&L crises of 1986 and 1995?
Chris Dembik,
Head of Macroeconomic Research
Equity markets need to recalibrate to another - fragmented - global world. What's your view on equities in this market - are they going up or down?
Peter Garnry,
Head of Equity Strategy
With every development comes new opportunites, some of which could be in India. Have you considered the country as a part of your diversification strategy?
Charu Chanana,
Market Strategist
A collar is an option strategy that allows some protection while maintaining some upside potential. What investment would you like to use a collar strategy for?
Hans Oudshoorn,
Trainer Academy
There are arguments to be made for many commodities to have upside. Which are you paying the most attention to this quarter?
Ole S. Hansen,
Head of Commodity Strategy
In a very challenging macro environment, which currencies do you think will come out on top?
John J. Hardy,
Head of FX Strategy
