Global markets

A bullish tilt

Brent Donnelly, of Spectra markets, has a nice summary of how he sees the newish news of the past month.

I agree with a lot there.

Some vague preamble.

A fund managers job is usually in tension. First, you want to be fairly paranoid, with a good imagination for how things might go wrong, because your job is to protect client capital, which means doing something; the happy catchphrase doesn’t arise through doing nothing.

Second, you need a healthy degree of optimism, because over the long run, nominal aggregates go up, and until we live in some sort of Ian M Banks sci-fi world of infinite/unlimited resources, owners of scarce capital should accrue a commensurate return over time, and you don’t want the market to compound away from you.

So, the above points from Brent sit in the “good reasons to be bullish” camp, even as we worry about the Fed overtightening.

I think there’s a material amount of “the Fed says it will keep rates very tight for a long time” because the Fed wants to be certain that the door to unanchored inflation stays shut, even if it doesn’t plan on keeping policy that tight for that long.

It knows it can “change stance” quite quickly, as it did back in November 2021, and the market has to correctly front run that change.

Here, for the bullish view, you are fighting the Fed, somewhat, but, you’ve got good reason to do so, because you think the Fed is playing a funny sort of game, a game of chicken.

Anyway, lets leave it there. Writing detailed thought pieces on the 12th of Jan is usually a losing strategy in terms of readership, but the Spectra framing was worth sharing.

Global PE

There’s more to life than a simple PE.

But, given that we didn’t have the “deindustrialisation of Europe”, along with the feared earnings collapse, and are post a near 20% rally in European equities, it’s worth noting that the forward PE is still only ~12x.

Markets ex-US are still pretty good value, all in all.

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