An optimistic start to the week is threatened, with stock futures leaning lower. Some point to a top regulatory official in China, who has warned of the formation of bubbles in the US and European markets and elsewhere.
Whether you are anxious or at ease, ours call of the day, from Julien Bittel, multi-asset fund manager at Pictet Asset Management, now offers unique advice for everyone: diversify that portfolio.
Bittel’s worries stem, in part, from what he believes there is no bad news at prices anywhere now. “We feel the extremely speculative data that is happening now, that there could be a race to the exit, similar to what we witnessed in 1987, where you know that the market can fall rapidly by 30% … in two months,” he said. he for MarketWatch interview.
In a storm of charts, he goes through his point of view, starting with equity assessments, which he observes with some opinion on earnings “are about to explode above.” Its chart below contains a series of valuation values that have been closely correlated with anticipated returns since the early 1980s.
“Now, what you can see here is that, at current valuation values, this would suggest that the return on equity will be about 29% year-on-year, 12 months ahead,” he said. Although by March, annual yields should increase by about 55%.
The following graph from Bittel shows a compound equity valuation score – currently in the 98th percentile. “So when it’s high, you know valuations are very expensive,” he said. Another way of looking at it, “only 1.4% of the time in the last 40 years shares have been so expensive” based on this measure.
Rising bond yields, which have affected financial markets, are the subject of the following chart. “Here’s the US 10Y-2Y yield curve, it’s currently 130 basis points from the curve reversal lows in August 2019,” Bittel said. An inversion refers when maturities with longer data produce less than those with shorter data.
The last three times occurred in August 1990, February 2001 and November 2007 and “historically, this degree of reversal of the yield curve after growth has resulted in a turning point for the stock markets,” he said. he.
Gathering a few more, the following shows the goods with the highest purchase since March 2008 (see 14-day relative strength index). For those assets to outperform, “the dollar must continue to weaken, and the global growth momentum must catch up,” he said.
But he believes a stronger dollar could be a big surprise for investors this year. The chart below follows an analogue from the end of 2017-2018 and shows that “the train will officially leave the station in March”.
Finally, he is concerned about this chart showing the company’s most confident executives of the past 17 years. As in, I can not become more optimistic.
Two things he considers likely that many investors are not doing: a stronger dollar by the end of the second quarter and the surprisingly declining global growth momentum in the second half of 2021. “The real deadlock for me is the impact it could have on the rebate trade, “he said.
Thus, diversification is Bittel’s advice, through a product with several sets that offers several shares and bonds, which will benefit in periods of surprise growth, but also to cover against the bad things that happen.
markets
ES00 futures,
YM00,
NQ00,
slips after Monday’s session. European stocks SXXP,
are on the rise, while Asian markets have ended mostly smaller, following the bubble warning from Guo Shuqing, head of China’s Banking and Insurance Regulatory Commission. CL00 oil prices,
are smaller, the DXY dollar,
is higher, and bitcoin BTCUSD,
prices rise.
Buzz
Shares of the Target TGT retailer,
climbs after better-than-expected sales. In the same sector, Kohl’s KSS shares,
are growing according to its results. Hewlett Packard Enterprises HPE Information Technology Group,
will report after closing.
Shares of Zoom ZM,
are on the rise after the video communications group reported adjusted earnings nearly 10 times higher due to demand for COVID-19 services related to the pandemic.
All Apple Apple AAPL,
stores are open for business for the first time in almost a year.
A senior World Health Organization official has warned against declaring victory over the pandemic by the end of this year. That’s because global coronavirus cases rose for the first time in seven weeks last week.
Random readings
Singer Taylor Swift is unhappy with Netflix’s NFLX,
“Ginny and Georgia.”
Two fruits, three vegetables a day = a longer life.
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