Founder and Strategist, Entext Economics & Strategy

Sean Maher

Founder and Strategist

Entext Economics & Strategy

Entext provides institutional investors with distinctive, actionable asset allocation and thematic research, which typically challenges the market consensus. Our clients range from credit, equity and multi-asset hedge and pension funds to family offices and sovereign funds. 
 
We focus on identifying key inflection points in macro data and relative asset performance amid the 'groupthink'  and confirmation bias that characterizes most investment bank analysis.

Macro Driven Investment Insight

Macroeconomics

<ul><li>The view a year ago was that the USD rally would reverse as US reflation euphoria faded, 10-yr Treasuries were more likely to test 2% than 3 and to overweight global tech and materials.</li><li>The stance was overweight EM, Japan and Europe - like the bullish oil view, Japan belatedly delivered in Q4 but remains the only major market not to have seen multiple expansion.</li><li>Belated recognition of the Asian challenge to US tech dominance and the capitulation of leading macro funds in markets characterized by a low volatility ‘melt up’ were striking trends this year.</li><li>Japan and Europe should close their valuation discount with the US (on 14.5x forward versus 18.5x); Japan still has the best DM earnings momentum as well as pay-out ratio upside. </li><li>A global business investment surge would be reflationary – in 2016, investment growth fell under 2% y/y but is now running at above 4% and accelerating - thematic exposure remains attractive.</li><li>While core inflation is lagging, the US, Eurozone and particularly Japanese economies are growing above potential – theoretical ‘output gaps’ are closing fast and inflation risks skewed to the upside.</li><li>A sharper than anticipated China slowdown, US ‘national security’ trade measures as well as fears of a faster QE unwind imply markets will be more volatile and asset dispersion will rise.</li><li>Policy normalization will pressure DM yields 50bps plus higher, but the prospect that China’s capital markets could within a decade overtake the US will start to become a focus for asset allocation.</li></ul>

The view a year ago was that the USD rally would reverse as US reflation euphoria faded, 10-yr Treasuries were more likely to test 2% than 3 and to overweight global tech and materials.The stance was overweight EM, Japan and Europe - like the bullish oil view, Japan belatedly delivered in Q4 but remains the only major market not to have seen multiple expansion.Belated recognition of the Asian challenge to US tech dominance and the capitulation of leading macro funds in markets characterized by a low volatility ‘melt up’ were striking trends this year.Japan and Europe should close their valuation discount with the US (on 14.5x forward versus 18.5x); Japan still has the best DM earnings momentum as well as pay-out ratio upside. A global business investment surge would be reflationary – in 2016, investment growth fell under 2% y/y but is now running at above 4% and accelerating - thematic exposure remains attractive.While core inflation is lagging, the US, Eurozone and particularly Japanese economies are growing above potential – theoretical ‘output gaps’ are closing fast and inflation risks skewed to the upside.A sharper than anticipated China slowdown, US ‘national security’ trade measures as well as fears of a faster QE unwind imply markets will be more volatile and asset dispersion will rise.Policy normalization will pressure DM yields 50bps plus higher, but the prospect that China’s capital markets could within a decade overtake the US will start to become a focus for asset allocation.

2018 Outlook: Part 2 – Global Investment Cycle Turning?

United Kingdom

iShares MSCI Europe UCITS ETF EUR (Dist) is an open-end, UCITS compliant exchange traded fund incorporated in Ireland. The Fund aims to track the performance of the MSCI Europe Index. The MSCI Europe Index offers exposure to stocks from developed European countries. The fund distributes income received to shareholders.

iShares MSCI Europe UCITS ETF (IMEU LN)

2018 Outlook: Part 2 – Global Investment Cycle Turning?

The view a year ago was that the USD rally would reverse as US reflation euphoria faded, 10-yr Treasuries were more likely to test 2% than 3 and...

Sean Maher