Uddrag fra Zerohedge/ Bank of America:
Yet where we have far more clarity, is in the fundamental picture, and unfortunately it is one of “peak” everything – from profits to economics, or as Hartnett notes “we just had a fabulous Q3 EPS season but global lead indicators say big deceleration ahead”:
1. The BofA global EPS model (driven by China FCI, Asia exports, global PMI, US yield curve) predicts slowdown from 30% today to H10% in Jan.
2. Asian IP growth lowest since Nov20
3. China HY issuance has essentially stopped (just 2 deals last month), as China HY spreads >2400 bps (widest since GFC);
4. ISM new orders turned negative in YoY% terms (highly correlated with soaring SOX index Chart 15).
Hence stagflation.
Finally, here are the trades that work as we transition into a new regime.
First, and going back to the core premise that we are currently in one massive bubble, Hartnett writes that according to history, the best way to hedge “bubble” is via “long leadership, long distressed” barbell, i.e. long leadership of bull (today thats FAANG, tech, PE) but also long distressed, cyclical plays (best examples today small cap value, EM) as performance-hungry investors forced to chase laggards. As a reminder, the only market that outperformed Nasdaq in the 1999 TMT bubble was bankrupt Russia.
Bubble timing aside, Hartnett says there are “three ways to make money- Macro (“only Fed & EPS matter”); Liquidity (“follow the money”); and Contrarian (“buy humiliation, sell hubris”). These three trades in question:
- Macro trades: long US$ (rates shock in H122 = tighter global financial conditions); long quality/defensives e.g. staples, telco, big pharma (EPS deceleration); long oil/energy (inflation); long MOVE & VIX; short copper & SOX (IP lower); short PE/broker dealers (wider credit spreads).
- Liquidity trades: long EAFE (EM exodus & US outperformance = flows to Europe/Japan); long financials (inflows remain strong); long small cap value (as hedge for US tech bubble – note interesting contrast in BofA Oct FMS foreign investor bullishness on tech, US = 77% of global tech, and US investor pessimism).
- Contrarian trades for 22: long small cap value (stagflation); long GT30 (recession); long EM (spring peak in US dollar); long CRE/CMBS (global reopening); short Nasdaq (rates & regulation