Sunday, 7 February 2016

Stories we should be thinking about

A few finance and related stories we need to be thinking about before Monday morning:

Macro matters:

Not the easiest week...

(sourced from here)

Of course there are a lot of pessimists out there from a macro perspective (link here). However note the low market sentiment currently.  Panic equals opportunity...


And correlations are high...providing dispersion opportunities for active position selectors: 
But is it that bad?  Why are US GDP estimates going up? (admittedly after a bad run)

Maybe something to do with those better wage numbers from Friday?  Important for the US economy given the 60%+ make-up of consumption in US GDP.  

(h/t @jbjakobsen)

Oil is going to be an important signal.  I like this week's Barron's front cover page which includes the wonderful mix of 'here comes $20 oil' and 'why oil should move back up to around $55 late this year'. Hedging their bets!!  In my view we end the year closer to the former than the latter. 

Of course not too much out of Asia this weekend due to the imminent onset of Chinese New Year.  I did note that Chinese reserves continued to fall (link here) but I would note the absolute residual level AND that this is a bit of a backwards variable.  

Talking about Chinese New Year will be markets 'go ape' in the year of the Monkey?  History suggests...maybe:

(h/t @callum_thomas) 

A couple of final macro stories:

Greece - keep watching the pension debate (link here)

Wealth inequality rising...

Grains out-of-favour...

Company-related observations:

Earnings backdrop mixed...

...and only utilities up YTD.  

I like this 'dogs of the Dow' outperformance observation by @HORANCapitalAdv

And the above does support insights here that defensives outperform in times of relative strife:

However - and as I have been writing up in the various Financial Orbit publications just extrapolating what has gone is dangerous.  Look at the the low sentiment / correlated world noted in the above macro charts and the role for individual equity opportunity is clear.  

On individual company news I see that the Sunday Times is running a story that HSBC will keep its domicile in the UK...

And finally...

Should follow some of these myself!
(h/t @forbes) 

Have a good week.  Don't forget to sign up for a free trial of my new macro, stocks and other reports (link here).

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