In today’s briefing:
- Suez Watch: Massively Rising Container Freight Rates, While Dry Bulk, LNG and Crude Rates More Muted
- Macro Regime Indicator: Liquidity is everything in January
- The Average Return Doesn’t Exist! – Most Professional Forecasters Will Be Wrong Again!
Suez Watch: Massively Rising Container Freight Rates, While Dry Bulk, LNG and Crude Rates More Muted
- Takeaways upfront: No container shipping through Suez towards Europe and price increases ahead; Energy and dry bulk shipping is still alive; Expect transportation and apparel to see price increases in Europe; Hedging 2024 portfolios with long Shipping bets and/or long Energy bets make increasing sense.
- Happy New Year everyone! Things are escalating in the Red Sea as shipping giants such as Maersk and Hapaq-Lloyd haven’t been convinced by the military efforts in the Red Sea and have now completely avoided transporting goods from Asia to Europe through the Red Sea.
- That can be seen in prices which have seen one-way traffic the last week. Freight rates are up >100% this week, and we hear from sources that Maersk is now suggesting an all-in rate of USD 6000 TEU.
Macro Regime Indicator: Liquidity is everything in January
- New month, new regime, which means a new asset allocation for the month ahead.
- The turn of the calendar once again calls for us to assess our outlook for the 3 main variables of interest: Liquidity, inflation and growth and feed them into our Regime Model and Asset Allocation tool that spits out the Sharpe Ratio optimizing portfolio given the assumptions about the variables of interest.
- Remember that you can feed the model with your own forecasts to see which baskets to put your eggs in.
The Average Return Doesn’t Exist! – Most Professional Forecasters Will Be Wrong Again!
- Professional forecasters, expecting a negative return of 2.5% on average for 2023, missed the S&P 500 Index by a whopping 26%.
- And based on their 2024 forecasts, with none of them daring to expect a return of 20% or more, there is an 85% likelihood that they will be wrong again.
- Another 20% return on the S&P 500 Index should definitely not be ruled out. Not based on historical return data nor in a bold macro environment.
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