Markets continue to advance, although a few warning signs are flashing...
Are we overdue a correction... or maybe a bit of this 👇
That's (kind of) what Deutsche Bank are looking for...
'expecting a significant consolidation in equities (-6% to -10%) as growth peaks over the next 3 months...'
equities have traded closely with indicators of cyclical macro growth such as the ISMs, which in turn typically peak around a year after the recession ends (around now)
DB expect equities to be well-supported by the acceleration in macro growth over the very near term, then pull back as growth peaks in the next few months...
Then rally back again towards the end of the year based on a 'Goldilocks' economic outlook of strong growth and contained inflation pressures...
There are definitely signs of exuberance 👇
But markets can remain irrational etc...
Let's presume Deutsche are correct... Where's the next theme?
JP Morgan - you're up guys!
Since our SMid Outlook published at the start of the year, we have argued that 2021 would be a stockpicker’s year, with timid gains for the broad equity market, but with SMid outperforming on the back of a benign macro-economic backdrop, and with big upside opportunities still hiding within the value part of the SMid universe
'A stockpickers year'
strong economic growth (thanks to easy YoY comps) pushing corporate margins higher and EPS growth into double digits... a backdrop that we believe should prevent equities from falling but with side being limited by already high valuations and rich growth expectations that appear to have nothing but downside...
Luckily for investors, one in every 5 SMid-Caps (across Pan-Europe and in most regions of the world) need to still rally >33% to get to pre COVID-19 highs… and we believe many will...
Thus we continue to recommend value investors focus on these recovery stories
Summing up, both JPM & DB see limited upside in broader indices, and there are signs of overexuberance...
Even the experts are getting jittery...
🔥 Hot and 🚫 Not
🔥 UK equities have lagged global peers: time to close that gap...?
The FTSE is pushing back towards those January highs...
Liberum: We are witnessing significant investment flows into UK equities.
In our view, this is a reflection of three factors:
i) UK equity markets remain substantially cheaper than their
European or American peers,
ii) thanks to a faster vaccine rollout, UK domestic earners are
less impacted by the pandemic than their international peers, and
iii) the sector composition of the UK market is such that it should perform better than its European peers both in times of rising inflation and the normalising inflation we expect to see in 2022 and beyond.
Makes sense, maybe the FTSE won't be such a bad index for a while...
🚫 Nasdaq Futures are broken...
3 days of solid advances (+1.6%, +1.7%, +2%) and now...?
Running out of juice - or just pausing for breath?
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Working from home & unintended consequences... 👇
OK, it's an extreme example but is WFH actually here to stay?
Remember when this thread was doing the rounds?
One of the key points: '~30% of the companies we talk to are getting rid of the office entirely and going remote-first...'
Which companies is he talking to...?
Reality Check: The pandemic has shown that it's possible to WFH and make it work, but is it optimal?
The big banks aren't keen and you can see why...
Jamie Dimon (CEO @JPM):
Goldman's CEO Solomon:
“This is not ideal for us and it’s not a new normal,”
“It’s an aberration that we are going to correct as quickly as possible.”
“I am very focused on the fact that I don’t want another class of young people arriving at Goldman Sachs in the summer remotely,”
I was mega-bullish on WFH when the pandemic hit, but I can't see it becoming the new normal...
I still think some work will be done remotely & the gig economy will continue to broaden into wider reaches of society, but ultimately we are social creatures and much of what we learn is through observation and imitation...
This is especially true for larger firms, where there's also the company culture to consider - how does that history and experience get passed down to new employees?
- The 'new normal'❌
- More working flexibility ✅
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