The combination of dollar weakness, much more attractive valuations, and expectations of a recovery in revenues should see international stocks recover relative to the U.S. Positive announcements on the vaccine front have provided the trigger for recent international equity outperformance. The VEU tracks the FTSE All World Ex-U.S. and represents a low-cost option for investors…
The FTSE100 offers a high dividend yield and scope for strong dividend growth, suggesting leveraged long positions are warranted amid the backdrop of deeply negative real bond yields. From a historical perspective the current dividend yield of 4.0% is consistent with 10-year total returns of over 10% annually. A repeat of such a performance looks…
Current market conditions share numerous similarities with major market peaks of the past, with added headwinds in the form of deteriorating long-term growth prospects and the potential for civil unrest. We believe investors should expect little over 2% annual real returns over the long term should valuations remain at current levels. For real return prospects…
Energy sector weakness over recent years rivals the crashes seen Tech in 2000-2002 and Financials in 2007-2009. Energy’s share of the overall market has declined 87% since the 2008 peak. Current dynamics are in stark contrast to 2008/09 when peak oil supply and rising oil demand were widely expected to drive oil prices higher and…
The link between equity prices and monetary and fiscal policy is often misunderstood, with investors currently focusing only on the direct positive effects and ignoring the indirect negative effects. All else equal, reduced interest and tax payments and higher inflation tend to lift nominal earnings while the former provides support to valuation multiples. However, such…
The U.S. dollar has become highly correlated with U.S. stocks over recent months. The 100-day rolling correlation between the SPX and the DXY is currently the most negative on record. Recent U.S. equity weakness has put renewed upside pressure on the dollar, but we will likely need to see considerably more equity weakness for the…
The sharp drop in precious metals prices over the past week has provided us with another opportunity to scale in in anticipation of the longer-term bull market. While lower near-term prices look likely, the fundamental outlook continues to improve which should enable gold, silver, and platinum to post higher lows over the coming weeks and…
The Singapore stock market offers a great example of where loose monetary policy has failed to prevent prospective returns from rising to attractive levels. The country outsources its monetary policy to the U.S. so should be attractive to investors looking to buy stocks as a way of benefitting from easy Fed policy. The dividend yield…
The Japanese yen remains far and away the most attractive currency in the developed market space owing to its relatively high and rising real yields. USDJPY is likely to trade well below 100 and potentially below 90 over the coming months as the yen acts as a store of value amid widespread global currency debasement.…
We expect energy stocks to act as a relative safe haven amid a collapse in tech stocks which should see XLE double versus the NDX over the next 12 months. The historical correlation between XLE and energy prices suggests that the energy sector’s share of the SPX should be almost 3x higher than it is…