Founder & Chief Market Strategist - SAV Markets, SAV Markets

Shyam Devani

Founder & Chief Market Strategist - SAV Markets

Thematic (Sector/Industry)

Recent developments on the S&amp;P 500 Banks Index warns of further short term losses of more than 6% from current levels. The flattening of the US curve has likely played an important role here and that curve flattening may not be over quite yet.

Recent developments on the S&amp;P 500 Banks Index warns of further short term losses of more than 6% from current levels. The flattening of the US curve has likely played an important role here and that curve flattening may not be over quite yet.

Silver Point

Thomas J. Monaco

Independent Insight Provider

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

*Inflation Figures Are Wrong: The daily information be reported on inflation is simply wrong. There is actually an awful lot of inflation, and because central banks are controlling the narrative, we find the that the numbers are not being reported correctly. If energy, food, and housing costs are excluded from inflation reports, then inflation measurements are just wrong to begin with. Certainly, as consumers, we’d like to not be responsible for paying for food, energy, and housing; and*Stimulus Keeps Coming: 1Q21 GDP amounted to 6.4%, and 2Q21 GDP will be further boosted by the third round of stimulus checks. 1H21 should be boosted further by an expanded child tax care credit - becoming the fourth stimulus check of USD 110 bn - arguably even more effective if these monthly payments become a permanent source of income under President Biden’s tax plan. Infrastructure plan discussions are ongoing, and our belief is that nearly USD 2 tn in spending will be approved by Congress in late 1H21. The risk of a zero-to-negative GDP quarter for 1Q22 now becomes significant.

*Inflation Figures Are Wrong: The daily information be reported on inflation is simply wrong. There is actually an awful lot of inflation, and because central banks are controlling the narrative, we find the that the numbers are not being reported correctly. If energy, food, and housing costs are excluded from inflation reports, then inflation measurements are just wrong to begin with. Certainly, as consumers, we’d like to not be responsible for paying for food, energy, and housing; and*Stimulus Keeps Coming: 1Q21 GDP amounted to 6.4%, and 2Q21 GDP will be further boosted by the third round of stimulus checks. 1H21 should be boosted further by an expanded child tax care credit - becoming the fourth stimulus check of USD 110 bn - arguably even more effective if these monthly payments become a permanent source of income under President Biden’s tax plan. Infrastructure plan discussions are ongoing, and our belief is that nearly USD 2 tn in spending will be approved by Congress in late 1H21. The risk of a zero-to-negative GDP quarter for 1Q22 now becomes significant.

Global Economist, DeSaque Macro Research

Said Desaque

Global Economist

Delivering Global Macro Investment Insights

DeSaque Macro Research

DeSaque Macro Research Limited was formed by Said DeSaque in April 2012 with the view to delivering global macro investment insights aimed at providing new ideas to clients.

Said DeSaque has over 26 years of experience working as a professional economist in financial services. Prior to establishing DeSaque Macro Research, Said held positions as Senior Economist at Robert W Baird and William Blair. He began his career as a graduate at PaineWebber in 1986, where he eventually became Head of the London Economics Department.

Said takes a very keen interest in international relations, along with their implications for economic development. His research interests include the economic transformation of China and its implications for global capital markets, particularly in the United States. He is a member of Chatham House in London.

The US economy and capital markets have historically been Said’s main focus of attention. He frequently presents his views to institutional investors in diverse geographic locations. In recent years, Said has also been carefully monitoring economic developments in Asia, particularly China and Japan.

Macroeconomics

Based on the Federal Open Market Committee's (FOMC) estimate of the natural rate of unemployment, the current state of the US labour market should not present supply-related constraints to economic growth. President Bullard of the St. Louis Fed believes, however, that the labour market is tighter than popularly perceived due to people permanently leaving the workforce over the past year, as well as competition to attract workers in low value-added services.Supply-chain issues have been impacted the housing sector by reducing the available inventory of new homes for sale and raising  construction costs. Existing home prices have surged given the supply shortage of new homes, an outcome compounded by chronic labour shortages in the market for entry-level housing stock.Deteriorating housing affordability could eventually impact consumer price inflation (CPI) by persuading potential buyers to rent for longer, thereby driving up primary and, subsequently, owner-imputed rents. The FOMC will insist that any uptick in inflation is transient and, consequently, their focus will be on reducing unemployment, thereby potentially imparting the impression to investors that members are becoming more tolerant of higher inflation.Cyclical risks to the US economy have receded since the start of the year and equity market dynamics have discounted this outcome via the outperformance of value stocks versus their growth counterparts, particularly financials and energy. The continued ability of value to outperform growth will depend on the economy returning to the best possible semblance of pre-pandemic normality, but rising inflation could eventually pose a risk to the P/E multiples of all equities, irrespective of value and growth classifications.

Based on the Federal Open Market Committee's (FOMC) estimate of the natural rate of unemployment, the current state of the US labour market should not present supply-related constraints to economic growth. President Bullard of the St. Louis Fed believes, however, that the labour market is tighter than popularly perceived due to people permanently leaving the workforce over the past year, as well as competition to attract workers in low value-added services.Supply-chain issues have been impacted the housing sector by reducing the available inventory of new homes for sale and raising  construction costs. Existing home prices have surged given the supply shortage of new homes, an outcome compounded by chronic labour shortages in the market for entry-level housing stock.Deteriorating housing affordability could eventually impact consumer price inflation (CPI) by persuading potential buyers to rent for longer, thereby driving up primary and, subsequently, owner-imputed rents. The FOMC will insist that any uptick in inflation is transient and, consequently, their focus will be on reducing unemployment, thereby potentially imparting the impression to investors that members are becoming more tolerant of higher inflation.Cyclical risks to the US economy have receded since the start of the year and equity market dynamics have discounted this outcome via the outperformance of value stocks versus their growth counterparts, particularly financials and energy. The continued ability of value to outperform growth will depend on the economy returning to the best possible semblance of pre-pandemic normality, but rising inflation could eventually pose a risk to the P/E multiples of all equities, irrespective of value and growth classifications. 

Sector-Specific Labour Constraints Make Their Mark, as Fed Sticks to Policy Narrative

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

In last week's Compass we highlighted what we view as compelling signals that risk appetites are improving, which is bullish for the broad market. The trend of improving risk appetites has only continued over the past week and we are moving toward an outright bullish outlook.

In last week's Compass we highlighted what we view as compelling signals that risk appetites are improving, which is bullish for the broad market. The trend of improving risk appetites has only continued over the past week and we are moving toward an outright bullish outlook.

U.S. Equity Strategy: Small-Caps Re-Emerging As Leadership

Cross Asset Strategy

Is it still the time to be defensive on equities and have a notable allocation in Bonds as was described in the note from 11 May (see <a href="https://www.smartkarma.com/insights/us-equities-time-to-get-defensive" target="_blank" data-smartkarma-citation="insights:51332" rel="noopener">US Equities: Time to Get Defensive</a>)?Whichever chart we look at across markets - whether in fixed income, commodities, foreign exchange, or equities - the signs are clear…stay long bonds (Treasuries) in this environment for the short term.

Is it still the time to be defensive on equities and have a notable allocation in Bonds as was described in the note from 11 May (see US Equities: Time to Get Defensive)?Whichever chart we look at across markets - whether in fixed income, commodities, foreign exchange, or equities - the signs are clear…stay long bonds (Treasuries) in this environment for the short term.

United States

The S&P 500® is widely regarded as the best single gauge of large-cap U.S. equities and serves as the foundation for a wide range of investment products. The index includes 500 leading companies and captures approximately 80% coverage of available market capitalization.

S&P 500 INDEX (SPX INDEX)

S&P 500 Banks Index Breaks Key Levels

The recent correction down on the S&P 500 Banks Index has led to an important break which could see further losses of more than 6% from current...

Shyam Devani

The Fix Is In

US ECONOMY: Reported inflation is simply wrong, as central banks control the narrative. In addition, 2H21 should be boosted by an expanded child...

Thomas J. Monaco

Sector-Specific Labour Constraints Make Their Mark, as Fed Sticks to Policy Narrative

Current US labour market conditions should not present major growth constraints, despite shortages in leisure & hospitality, retailing and housing....

DeSaque Macro Research

U.S. Equity Strategy: Small-Caps Re-Emerging As Leadership

We continue to see compelling signals that suggest risk appetites are improving, which is bullish for the broad market. As a result, we are moving...

Vermilion Research

Bonds: All Charts Lead to Me

As we look across financial markets, there is an increasing degree of conviction that higher [US] bond prices and lower yields are likely to be...

Shyam Devani