US macro

A very similar note to those written over the past few days. But, it is a message worth keeping in mind.

Certainly there is some negative high frequency data (monthly, weekly) out for the US.

ISM Services, out overnight, shown below, is looking very similar…

to ISM Manufacturing (i.e. rolling over, shown below)…

and the weekly initial jobless claims data is on the way up.

Equally, this is why we’ve got the “recession scare”, commensurate with risk-off. For the moment, it is unfortunately indistinguishable from the Fed’s stated intent / desired outcome of restraining growth and hitting the financial conditions channel.

Our view: there are good reasons to be bearish (the above) and good reasons to be bullish (valuations, general labour market strength, belief that supply chains and the magic of capitalism work, trust that the Fed ultimately is a good manager of the economy, and will back off on tightening appropriately as and when required).

We bought equities on various market dislocations (EU equities post UKR-RUS, EM post China tech/property crackdown, Japan post the Yen collapse, S&P500 when it joined the sell-off), and in each instance, those markets were some 18-24% off at the time…

…but it is unclear if that will, in hindsight, prove “too soon”.

Equally, we’ve got a portfolio that is 30% fixed income, with much of the recent fixed income purchases at yields closer to 4% (AGBs mainly) and that gives tremendous firepower if corporate earnings and profit margins roll over from here (e.g. the market multiple has de-rated, materially, causing P/E compression, but if EPS goes south, we likely face weaker markets from here).

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.

Receive our investment insights

Something went wrong. Please check your entries and try again.