As noted, the setup I just outlined above if it comes to pass will present near and pressing upside risk to inflation… and that will come at a time where global growth reacceleration risk is starting to become a reality + as the chart below shows the Great Disinflation has stalled.I don’t think we get a repeat in magnitude of the 2021/22 surge in inflation, but we are clearly into the higher-for-longer rate of inflation timeline, and that’s going to have important implications for the path of monetary policy, bond yields, and ultimately both yield sensitive assets and the stockmarket as a whole if things end up getting disruptive.So I am advocating a cautious stance on equities given they are so overvalued, a cautiously optimistic stance on bonds (they are cheap), and a highly bullish stan

Commodities have become a forgotten asset class — they fell into a cyclical bear market after peaking back in 2022, and with other assets faring much better I guess it kind of makes sense that investors have begun to ignore this corner of the market.But things are changing and it’s time to remember commodities, because commodities will remember us!First, straight into the chart: it shows the historical seasonal pattern of commodity prices (diversified GSCI Light-energy index) and WTI crude oil $Micro WTI Crude Oil - main 2503(MCLmain)$ .More to the point: it’s showing a seasonal tendency for strength in H1 for commodities — this is a big deal for a couple of reasons...And before you go on about the fallibility of seasonality (and it is fallib

Earnings Share of Super Sectors:  staying with the topic of earnings and percentage shares, this chart shows the earnings share/weight of the 3 core “super sectors” of the S&P 500 $.SPX(.SPX)$ . And there are some very interesting cyclical and structural themes here.First, I’ve grouped the main GICS sectors into “super sectors” to reflect previous changes in sector classifications and economic/market realities. They are: Defensives = Utilities, Consumer Staples, Healthcare; Tech (+tech related) = Information Technology, Communication Services (~45% Facebook $Meta Platforms, Inc.(META)$ & Google $Alphabet(GOOG)$

For the past decade it seems all roads across the Global capital markets have lead to America. And in all fairness this has been entirely the right path to travel, at least when it comes to investment returns.After staring into the abyss in 2008/09, a great reset in valuations across US asset classes set the scene for great opportunity to come from great crisis.A few other things did, in hindsight, go very well for America throughout this period. There was massive and prolonged monetary stimulus from the Federal Reserve (along with fiscal stimulus in the early stages of the economic recovery), capital flight from Europe as it dealt with rolling crises, and there was also a literal and metaphorical striking of oil (the shale oil boom, and striking tech stock oil with the rise and global dom

Learnings and conclusions from this week’s charts:Market breadth is undergoing a regime change (bearish).Election cycle seasonality is ranging and volatile in Q1.Retail speculators just went all-in on stocks.The US index is becoming more concentrated (just like RoW).Margin expansion has been more a feat of financial vs tech innovation.Overall, as noted there appears to be a bearish regime change underway in the US stockmarket. This comes after an extended strong bull-run, and amidst numerous late-cycle signals showing up. This week we explore these changes and a few other key issues around market structure and fundamentals.As we head towards political regime change, it seems the market is also in the process of undergoing a regime change. S&P500 $

You might have seen those charts of US vs global relative price performance (i.e. the black line in the chart below), showing how extreme it has become. But the red line shows that there is a fundamental reason for the direction of travel in the black line.Yes US stock prices have significantly outperformed vs global stocks, but US earnings have also significantly outperformed vs global (the red line).There are 2 key takeaways in this chart: first, the black line while correct in direction of travel given fundamentals, has substantially overshot (this is why when you look at just about every measure of valuations, it’s clear that US stocks trade at a major premium vs global stocks).Second, for global stocks to turn the corner and start outperforming vs US, you need more than just cheap rel

A couple of weeks ago we looked at US Tech vs non-tech earnings… this time we are looking at US vs non-US earnings — the results are surprisingly unsurprising, but very important for global investors to take note.The first thing that stands out is the trends: US earnings have been trending higher throughout the last 30-years, but rest-of-world earnings have been traveling through a highly cyclical range over the past 15-years.More recently, global earnings have been declining (makes sense given the economic slowdown and challenging economic conditions in China/EM and Europe).This stands in contrast to the US which has seen a strong, albeit narrow (tech-driven) cyclical upturn in earnings off the 2022 lows.A natural question would be: will the gap between them close or narrow?Here’s a coupl

Brief note this week as a lull between Christmas feasting and family time fun presents an opportunity to share what I reckon might be one of the most interesting charts of the year.The blue line is probably no surprise — US tech stock prices have been powering ahead driven by a mix of hype and fundamentals (earnings).We probably all know by now how much of the strength in the S&P 500 index has been driven by big tech, but this also carries across to earnings.On the other hand, non-tech stock earnings have seen almost a 3-year period of stagnation. In real CPI adjusted terms it’s a full-on earnings recession (the below chart is in nominal terms). No wonder ex-tech have been lagging behind. And no wonder tech have been leading the charge.But I’ll leave you with an open question before I

The Credit Market & the Stock Market are in agreement……and being competing claims in the capital structure — that seems like an unlikely set of words. But the reality is both equity and credit investors have bid their respective asset valuations rare heights.The chart below shows both Credit Spreads + Stockmarket Valuations are more than 1 Standard Deviation expensive.If you eyeball the chart it becomes pretty obvious pretty quickly what that means.You don’t see many readings at that level, and whenever you do it’s either late in the cycle or just before something bad happens.Being a contrarian indicator, when valuations reach extremes it tells you everyone is thinking the same. That means there are not many more minds left to join that consensus and add to buying flows, but in contras