Cross-Asset Strategist & Quantitative Analyst, Pennock Idea Hub

Cam Hui

Cam Hui has been professionally involved in the financial markets since 1985 in a variety of roles, both as a quantitative equity portfolio manager and as a sell-side analyst. He graduated with a degree in Computer Science from the University of British Columbia in 1980 and obtained his CFA Charter in 1989.

Cross-Asset Strategist & Quantitative Analyst

Pennock Idea Hub

We are creators of independent equity research. The Pennock Idea Hub team are veterans of the investment industry. Much of our team has spent their careers at Merrill Lynch, Deutsche Bank, RBC Capital Markets and Wood Gundy. We have taken every aspect of research back to the studs and returned to first principles. The Pennock Idea Hub marries the interests of the sell and buy side. 

We offer the best research for institutional investors by:

-Only publishing research from veteran analysts
-Eliminate the inherent conflicts of the traditional sell and buy side relationship
-Ensure our team is always accessible; collaboration with clients nurtures our collective success

Cross-Asset & Quantitative Research

Cross Asset Strategy

How expensive are U.S. equities? Fed Governor Lael Brainard warned about “stretched valuations” in the <a href="https://www.federalreserve.gov/publications/brainard-statement-20210506.htm" target="_blank" rel="noopener">preamble to the May 2021 Financial Stability Report</a>:Vulnerabilities associated with elevated risk appetite are rising. Valuations across a range of asset classes have continued to rise from levels that were already elevated late last year...The combination of stretched valuations with very high levels of corporate indebtedness bear watching because of the potential to amplify the effects of a re-pricing event.By most measures, the market is highly extended. To make a long story short, the market looks expensive on a price to anything multiple. By the most liberal estimates, the stock market also appears somewhere between fairly valued and expensive based on the equity risk premium.<a href="http://blog.yardeni.com/2021/04/running-of-bulls.html" target="_blank" rel="noopener">Ed Yardeni</a> recognizes the valuation headwinds, but argued that MMT + TINA = MAMU, where MMT = Modern Monetary Theory, TINA = There Is No Alternative (to stocks), and MAMU = Mother of All Melt-Ups. This is a bull market, and fiscal and monetary policy matter more in defining the market’s upside potential.The combination of these factors leads to the following conclusions:<ul>
<li>The equity bull has a long way to run.</li>
<li>The cyclical recovery is bullish for value-oriented and cyclically sensitive sectors like financials, industrials, consumer discretionary (excluding high flyers like AMZN and TSLA), energy and materials.</li>
<li>Secular growth in green infrastructure is poised to benefit mining (see <a href="https://www.smartkarma.com/insights/a-value-industry-that-s-about-to-be-the-next-best-thing" target="_blank" rel="noopener">A “Value” Industry That’s About To Be the "Next Best Thing"</a>).</li>
<li>Balanced fund investors need to be prepared for greater volatility and re-think portfolio construction in an era of rising bond yields (see <a href="https://www.smartkarma.com/insights/60-40-resilience-in-an-inflation-age" target="_blank" rel="noopener">60/40 Resilience in An Inflation Era</a>).</li>
</ul>

How expensive are U.S. equities? Fed Governor Lael Brainard warned about “stretched valuations” in the preamble to the May 2021 Financial Stability Report:Vulnerabilities associated with elevated risk appetite are rising. Valuations across a range of asset classes have continued to rise from levels that were already elevated late last year...The combination of stretched valuations with very high levels of corporate indebtedness bear watching because of the potential to amplify the effects of a re-pricing event.By most measures, the market is highly extended. To make a long story short, the market looks expensive on a price to anything multiple. By the most liberal estimates, the stock market also appears somewhere between fairly valued and expensive based on the equity risk premium.Ed Yardeni recognizes the valuation headwinds, but argued that MMT + TINA = MAMU, where MMT = Modern Monetary Theory, TINA = There Is No Alternative (to stocks), and MAMU = Mother of All Melt-Ups. This is a bull market, and fiscal and monetary policy matter more in defining the market’s upside potential.The combination of these factors leads to the following conclusions:
The equity bull has a long way to run.
The cyclical recovery is bullish for value-oriented and cyclically sensitive sectors like financials, industrials, consumer discretionary (excluding high flyers like AMZN and TSLA), energy and materials.
Secular growth in green infrastructure is poised to benefit mining (see A “Value” Industry That’s About To Be the "Next Best Thing").
Balanced fund investors need to be prepared for greater volatility and re-think portfolio construction in an era of rising bond yields (see 60/40 Resilience in An Inflation Era).


Do Valuations Matter Anymore?