Morgan Stanley skriver i en analyse, at nødhjælpspakkerne under coronakrisen er helt anderledes end under finanskrisen. Da hjælpen rammer bredt i samfundet, kan det give inflation, og det giver helt nye muligheder for investorer, som skal begynde at tænke på det, der ikke er indlysende.
Uddrag fra Morgen Stanley:
Asset prices often reflect the obvious before it becomes obvious. So the question for investors now is, “What is the market thinking about that’s not obvious?”
At this point, everyone understands we are now in a recession and that it will likely be the steepest recession any of us have ever experienced. As market strategists, we have to understand that asset prices reflect the obvious before it’s obvious. So the question now is, “what is the market thinking about that’s not obvious?”
While this is a difficult exercise, we must stretch our minds at times like this when things appear so one-sided. Rarely have we witnessed positioning, sentiment, and valuation so extreme. Could things get worse from here economically? Of course. Could health concerns about the coronavirus deteriorate further? It’s possible. However, there are other things the market may be beginning to think about that aren’t so obvious. The most notable being inflation.
First, while the policy response to the recession from the Fed and Congress has been extraordinary, it’s also different in its composition from what we’ve experienced in the past. The size of the QE program this time is running at a pace that’s three times as great as what we got after the financial crisis. This time they are going all in from the get-go and they are going much bigger and directly into credit markets.
Meanwhile, the fiscal stimulus from Congress has also been more forthcoming than during the financial crisis. This is due to the fact that we are in a health crisis in which there are no perceived bad actors. Perhaps more importantly, this fiscal stimulus is going directly to the low and middle income consumer and small business owner. This is very different than in 2008, when the fiscal stimulus didn’t really trickle down to these cohorts that are more inclined to spend it. The bottom line is that QE plus fiscal austerity and bank regulation is deflationary. And so that’s what we got the past decade. This time we’re getting QE plus very targeted fiscal stimulus and potentially bank deregulation.
Second, let’s not forget some of those other inflationary developments of the past five years. Populism, which has driven minimum wage legislation, and nationalism, which has led to tariffs and a trend toward deglobalization. Now, a pandemic will likely further disrupt and permanently add costs to the global supply chains. When combined with the largest peacetime fiscal stimulus in history and a fed that is willing to fund it with quantitative easing, we are left with the best chance for an inflationary regime shift in the last 20 years.
This leads me to my final point for the week. Recessions typically mark the end of bear markets. And in this case, a bear market that’s been ongoing for two years, not two months. They also bring about leadership change in financial markets as investors realize a new cycle is beginning, just as the old one is ending. This means stocks and assets levered to accelerating growth or what we call “early cycle,” or “cyclicals.” Of course, this bear market has been tough in the end, leaving even high quality defensive assets undervalued too.
Investors need to be open minded to a barbell for stock portfolios today, consisting of quality stocks on sale, which we call the “best of the best,” paired with cyclical companies that can make it through the recession and benefit fully from the recovery that could be robust given the amount of fiscal and monetary stimulus this time.
It also suggests that the 35-year bond bull market may finally be ending. While this has implications for bond investments, it also supports the new leadership in equity markets just described. The bottom line is investors need to be open-minded to things that aren’t obvious and begin to position for them before they are.
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