Friday, 18 October 2019 09:44

China’s Weak GDP Growth Send Shockwaves

(Beijing)

China’s newest GDP data has just come in and it is shockingly weak. Third quarter GDP growth was the lowest in has been since the early 1990s and appears to show the sting of US tariffs. Growth was just 6%, a major sign of the weakening state of the global economy. That is the same level of growth as in the late 1980s, though China’s economy is now far larger. Those paying attention will know that China’s economy grew at around 7-8% per year since the Crisis.


FINSUM: So this is an admitted 6%. Beijing keeps very tight control of its economic data, so it is not inconceivable that the real number is actually lower.

Published in Eq: Asia

(New York)

While a lot of sentiment is starting to look more positive, Deutsche Bank has just come out with the exact opposite opinion. The bank has gone on the record warning that a recession will arrive very shortly, and that stock prices should be at least 13% lower than they are. The bank’s chief global strategist said, “We are cautious on stocks. We would argue you want to be defensively positioned [and] we would argue that the U.S. equity market has run way, way ahead of growth”. He continued “Every time payrolls growth has gone below 1%, the U.S. has ended up in recession. We would argue the U.S. economy is dangerously close to...tipping into recession”. US jobs growth is currently at 1.3% and slowing.


FINSUM: This is a really bearish outlook from an investment bank, which tend to trend towards over-bullishness. We question the valuation argument, but this is certainly a view worth noting.

Published in Eq: Total Market
Tuesday, 17 September 2019 12:08

A Big Risk for REITs

(New York)

If you have been investing in REITs over the last few years, one of the key driving mantras has been the idea that one should move away from brick and mortar-oriented retail REITs and toward those that are more ecommerce-focused. In other words, buy REITs focused on warehouses, not those on malls. However, that arithmetic might be changing, as the big boom in warehousing is now facing headwinds because of the trade war. Recently was the first time in years that “the market didn’t lease to its full potential”, said a trade group in the space. The sector is “uniquely exposed to trade activity and manufacturing activity, which are very much impacted by the tariffs”.


FINSUM: To us this seems more likely to prove a short-term headwind than a long-term issue given the driving force behind warehouse growth is not actually tied to any trade policy, but a broader change in consumption patterns.

Published in Eq: Real Estate
Monday, 16 September 2019 13:47

The Bottom May Be Falling Out of Bonds

(New York)

Treasury bonds and their associated funds just had one of the worst periods on record. Specifically, they had their worst week since Trump was elected. The iShares 20+ Year Treasury Bond ETF fell 6.2% in a week, the sharpest drop since bond markets panicked on Trump’s surprise election. What is odd about the big drop is that the stock market remained relatively muted throughout. Usually, big losses in Treasuries come when there is a big risk-on rally in stock markets.


FINSUM: There has been a huge rally in bonds, and in the last week, a lot of the pessimism has faded from markets as economic data is relatively stable and trade war fears are ebbing. Accordingly, this could be the start of a real rout.

Published in Bonds: Treasuries
Friday, 13 September 2019 12:55

Why Another Big Bull Run May Be Starting

(New York)

In what we see as an encouraging sign with some good logic behind it, Credit Suisse has announced that it is going overweight equities despite the cautiousness of all the other big banks. Specifically, Credit Suisse’s wealth management division is going overweight stocks as it sees increased prospects of a US-China trade deal, diminishing political risk in the UK and Europe, and additional stimulus efforts by global central banks. Taken as a combined force, these are quite bullish considerations, says the bank. Credit Suisse had previously been neutral on equities, but the announcement came from the banks’ global Chief Investment Officer.


FINSUM: We are starting to agree with Credit Suisse on the bullishness. The whole market and economy seem to be re-entering the post-Crisis goldilocks phase where the economy was just weak enough for central banks to stimulate (boosting asset prices, but not weak enough to cause any real problems.

Published in Eq: Large Cap
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