アメリカ合衆国

Underweight We have been adding cyclical exposure to the portfolio and lightening up on defensives and as a continuation of this shift we recently downgraded the S&P hypermarkets group to underweight. The economy is reopening and thus it no longer pays to seek refuge in safe haven hypermarket equities. In fact, most of the macro indicators we track suggest the recession is over that will sustain severe downward pressure on relative share prices. The chart on the right shows that the ISM manufacturing new orders subcomponent has slingshot from below 30 to north of 60, junk spreads are probing all-time lows, consumer confidence has troughed and small and medium enterprises hiring intentions are on the mend. Bottom Line: Trim the S&P hypermarkets index to underweight. The ticker symbols for the stocks in this index are: BLBG S5HYPC – WMT, COST. For more details, please refer to this Monday’s Weekly Report. ​​​​​​​

The frenetic rise in the forward multiple explains all of the SPX’s return year-to-date and then some as 12-month forward EPS have taken a beating. Equities are long duration assets and given the drubbing in the discount rate, the forward P/E multiple has done all the heavy lifting. The chart below puts some historical context to the S&P 500 forward P/E going back to 1979 using I/B/E/S data. Empirical evidence supports finance theory and shows that the 40-year bull market in bond prices has caused a structural upshift to the SPX forward P/E. The onus now falls on profits to make a comeback, and the jury is still out. The big risk remains a selloff in the bond market that triggers a cascading effect with investors fleeing highly valued tech growth stocks (which have been the pillar of the SPX’s recovery since the March lows) and redeploying capital in some beaten up deep cyclical areas. Such a transition will be tumultuous and likely serve as a catalyst for a much needed breather in the overall market. Bottom Line: While we remain cyclically bullish, a near-term correction is likely in the cards as markets are getting extremely stretched and complacent at a time when (geo)political risks are lurking in the background.