State of play
Happy New Year!
Well, it is a good start to the year for some of our longer running macro market themes.
First, the state of play. US 10yrs are finally looking to retake the highs of last year. The relentless prior flattening of the term spread pauses. Recall that the term spread is a good proxy for growth expectations (the long end) and monetary policy (the short end).
Commodities are still generally strong, although copper continues to plateau at these levels. Oil has recovered almost all of the Omicron related fall (which also included the “throat-clearing” threats about export bans and strategic petroleum reserve releases) as the disease has proved to be less dangerous than Delta (about 1/3rd lower hospitalisation rate, 1/6th less ICU rate, and proportionately lower death rate).
A hawkish Fed remains (the pivot back in November is a theme we’ve been writing about on a near weekly basis since), with the market less convinced it is a mistake now.
The spike in real yields is crunching tech and secular growth narratives, as we’ve long warned about, however, to be somewhat fair it is quite possibly less about modestly higher real yields and duration than it is about a simply unsustainable premium ascribed to stocks that are chuck full of expectation and exuberance.
Which is most visible in the Cathie Wood ARK Innovation fund.
We’ll keep the note short here. There’s plenty to write about, talk about, but we will (as we tend to) leave it to shorter notes, with greater frequency, that are easier to read/absorb/process.
Important Information: This document has been prepared by Aequitas Investment Partners ABN 92 644 165 266 (“Aequitas”, “our”, “we”), a Corporate Authorised Representative (no. 1284389) of C2 Financial Services, (Australian Financial Services Licensee no. 502171), and is for distribution within Australia to wholesale clients and financial advisers only.
This document is based on information available at the time of publishing, information which we believe is correct and any opinions, conclusions or forecasts are reasonably held or made as at the time of its compilation, but no warranty is made as to its accuracy, reliability or completeness. To the extent permitted by law, neither Aequitas nor any of its affiliates accept liability to any person for loss or damage arising from the use of the information herein.
Please note that past performance is not a reliable indicator of future performance.
General Advice Warning: This document has been prepared without taking into account your objectives, financial situation or needs, and therefore you should consider its appropriateness, having regard to your objectives, financial situation and needs. Before making any decision about whether to acquire a financial product, you should obtain and read the relevant Product Disclosure Statement (PDS) or Investor Directed Portfolio Service Guide (IDPS Guide) and consider talking to a financial adviser.
Taxation warning: Any taxation considerations are general and based on present taxation laws and may be subject to change. Aequitas is not a registered tax (financial) adviser under the Tax Agent Services Act 2009 and investors should seek tax advice from a registered tax agent or a registered tax (financial) adviser if they intend to rely on this information to satisfy the liabilities or obligations or claim entitlements that arise, or could arise, under a taxation law.