金融市場

ハイライト 中国の鋼材需要の急増を受け、建築およびインフラプロジェクトが今年完了するにつれて上海鉄鋼先物が今月初めに5,200人民元/MT弱の史上高近くまで上昇したことから、銅価格はさらに上昇すると見込まれます（今週のチャート）。 銅は今年および来年にかけて実需ベースでの需給不足を記録し、在庫がさらに減少するとともに中国および世界的に銅スクラップの需要を押し上げるでしょう。 銅価格の上昇が続けば、現在の市場での口先介入が需要と価格上昇を抑えられない場合、中国の膨大な国家保有銅在庫（約200万MTと推定される）の一部を当局が放出する可能性があります。 強い鋼材マージンと製鉄所に対する新たな環境規制が高品位鉄鉱石（65% Fe）需要を押し上げており、同品は今週初めに約223ドル/MT弱の史上高を付けました。ベンチマークの鉄鉱石価格（62% Fe）は今週10年ぶり高値で取引され、約190ドル/MT手前でした。 当社は2021年12月の銅価格予想を4.50ドル/lbから5.00ドル/lbに引き上げます。さらに、本日の取引終了時に2022年物CME/COMEX銅をロングし、2023年物CME/COMEX銅をショートするポジションを取ります。より急峻なバックワーデーションを見込んでの取組みです。 特集 中国の唐山（Tangshan）製鉄拠点における汚染削減のための製鉄所稼働率の最大30%削減という政府指示は、建設およびインフラのブームに対応する既に逼迫した市場をさらに引き締めることになります（チャート2）。このブームは鋼材価格、そして結果的に鉄鉱石価格を急騰させました（チャート3）。過去と同様に、これが銅の強気相場の次の局面の舞台を整えます。 今週のチャート 鋼材の急騰が銅価格の更なる上昇を予告 鉄鋼の急騰は銅価格のさらなる上昇を示唆する 鉄鋼の急騰は銅価格のさらなる上昇を示唆する 当社のモデルでは、特に鉄筋（リバー）価格と銅価格の間に強い関係があることが今週のチャートで確認できます。鋼材は建築・インフラプロジェクトの前段階で使われ（鉄筋で補強されたコンクリートや圧延コイル製品など）、その後、完成したプロジェクトには銅が使われます（配線や配管の形で）。 チャート2 銅の強気相場は続く 銅の強気相場は続く 銅の強気相場は続く 建設・建築ブームに加え、製造業の継続的な回復が銅価格の追い風となり、2021年後半の世界的な活動回復がこれをさらに増幅します。チャート4は名目GDP水準と銅価格の関係を示しています。重要なのは、アジア（中国を含む）およびアジア以外の経済成長が銅価格とコインテグレーション（共積分）関係にあることで、すなわち経済成長と工業コモディティは長期的な均衡を共有しており、それが同時変動を説明します。 チャート3 鋼材ブームが鉄鉱石価格を押し上げる 鉄鋼ブームが鉄鉱石価格を押し上げる 鉄鋼ブームが鉄鉱石価格を押し上げる メディア報道はしばしば、中国の政府支出をGDP比で注目しがちです（例：社会融資総額のGDP比）。しかし商品価格動向を説明しようとする際に経済要因が除外されがちです。中国政府が民間部門（財・サービス面）をさらに拡大することに成功すれば、オーガニックな経済成長が中国のコモディティ需要を説明する上でより重要になります。 チャート4 世界経済の成長が銅価格を押し上げる 世界的な経済成長が銅価格を押し上げる 世界的な経済成長が銅価格を押し上げる 当社の銅モデルでは、名目中国GDP、新興アジア（EMアジア）GDPおよびアジア以外の新興国（EM）GDPに加え、鋼材と鉄鉱石価格が銅価格と共積分関係にあることが分かります。これは純粋な経済学的観点から期待される結果です。一方で、これらの工業用コモディティ価格と中国の名目GDPに対する社会融資総額の割合との間には共積分関係（経済的な共動性や共通トレンド）は見られません。これらのモデルにより、銅価格の説明や予測に役立たない偽の関係を回避できます。 チャート5 鉄鉱石・銅の需要はグリーン・エネルギーの整備で増加する 鉄鋼価格の急騰で銅が上昇 鉄鋼価格の急騰で銅が上昇 チャート6 再生可能エネルギーが新規増分発電を主導 銅、鉄鋼価格の急騰を受け上昇へ 銅、鉄鋼価格の急騰を受け上昇へ 長期的には、当社が過去の調査報告で指摘してきたように、分散型再生可能発電の導入、よりレジリエントな電力網、電気自動車（EV）への移行は、鉄鉱石や鋼材といったばら積み需要、および特に銅のようなベースメタルの需要成長の主要な源泉となります（チャート5）。1 すでに再生可能エネルギーは、世界の電力網に追加される新規増分発電の中で最も高い成長セグメントを占めています（チャート6）。 銅供給の増加にはより高い価格が必要 銅供給は短期（2022年末まで）では需要に対応するのが困難であり、再生可能エネルギーとEVの整備は大半がこれから始まる段階にあります。つまり中期（2025年末まで）および長期（2050年）において、需要を満たすためにはかなりの新供給を開発する必要があります。 短期的には、精錬銅の供給面、特に製錬所が半精製品として精製し製造入力にする凝縮物（コンデンセート）レベルが極めて低下しており、中国の製錬所におけるトリートメント料・精製料（TC/RC）の長期的な急落からも確認できます（チャート7）。先週およそ22ドル/MTで、これらの手数料は2013年に中国でのベンチマークTC/RC指数が開始されて以来の最低水準でした（reuters.comによる）。2 チャート7 供給減少で銅のTC/RCが低下、価格を押し上げる 銅のTCRCsが供給減で下落し、価格を押し上げる 銅のTCRCsが供給減で下落し、価格を押し上げる 銅の供給事情はチャート8にも表れており、年次の供給と需要を残高に換算すると、これが在庫市場を介して調整されます。国際銅研究グループ（ICSG）は、鉱山生産は昨年も前年並みで推移し、精銅供給はわずか1.5%の増加にとどまったと推定しています。 チャート8 実需の不足が銅在庫を引き下げる... 現物不足が銅在庫を取り崩す… 現物不足が銅在庫を取り崩す… ICSGの推定によれば消費は2.2%増加し、中国の保税倉庫在庫を調整後の今年の実需ベースの不足は456千MTが見込まれます。これで銅市場は4年連続の実需不足となり、2017年以降の平均不足は約414千MTです。その結果、在庫が再び供給ギャップを埋める頼みとなり、世界の在庫は前年比約25%減と低水準で今後も減少し続けるでしょう（チャート9）。 鉱業の設備投資が弱く、銅鉱石の品位が低下しているため、相当程度の新投資を促すにはより高い価格が必要です（チャート10）。しかし、これらプロジェクトのリードタイムは最良のケースでも5年であるため、鉱山会社は近い将来に最終投資判断を下してプロジェクトを承認する必要があります（チャート11）。 チャート9 ...結果として4年続く実需不足で在庫は低水準 …4年にわたる現物不足を経て低い …4年にわたる現物不足を経て低い チャート10 弱い投資と低下する鉱石品位を是正するにはより高い銅価格が必要 弱い設備投資と鉱石品位の低下を是正するには、銅価格のさらなる上昇が必要だ 弱い設備投資と鉱石品位の低下を是正するには、銅価格のさらなる上昇が必要だ チャート11 新規鉱山稼働までのリードタイムは短縮中だが時間は限られる 銅、鉄鋼価格の急騰で上昇へ 銅、鉄鋼価格の急騰で上昇へ 投資への含意 当社が銅に注目するのは、銅があらゆる再生可能技術に関わり、電気自動車（EV）にとっても重要であり、特にこの技術が広く普及した場合にその重要性が増すという単純な事実によります（チャート12）。 当社は短期・中期・長期の投資期間にわたり銅供給の課題が続くと予想しています。短期対応として、当社は2020年9月10日に2021年12月物銅をロングすることを推奨しており、このポジションは現在39.2%の含み益です。中長期をカバーするために、当社はS&P グローバル GSCI コモディティ・インデックスおよびiShares GSCI コモディティ ダイナミック ロール ストラテジー ETF（COMT）をそれぞれ2017年12月7日と2021年3月12日に推奨しており、これらは現時点でそれぞれ-2.3%および-0.8%となっています。 チャート12 電気自動車の普及が新たな銅需要を生む 鉄鋼価格の急騰で銅が上昇へ 鉄鋼価格の急騰で銅が上昇へ 本日の取引終了時に、上記の銅の需給ストーリーに基づく中期的な機会を捉えるために、2022年物CME/COMEX銅先物をロングし、2023年物CME/COMEX銅先物をショートするポジションを構築します。市場のさらなる引き締まりにより在庫が取り崩され、銅先物カーブのバックワーデーションがより急峻になると予想しています。 短期・中期・長期の当社ポジションに対する主なリスクは、世界的にCOVID-19パンデミックを抑制できないことであり、これは短期的なリスクだと考えています。第二のリスクは、中国国家備蓄局（別名：国家鉱物備蓄局）が保有する戦略的な銅コンセントレート備蓄の大規模放出です。後者のリスクに関して、同局の実際の保有量は不明ですが、約200万MTの範囲にあると考えられています。3 結論： 当社は工業用コモディティ、特に銅に対して強気の立場を維持します。 ロバート・P・ライアン チーフ・コモディティ＆エネルギー・ストラテジスト rryan@bcaresearch.com   コモディティ概要 エネルギー： 強気 米国エネルギー情報局（EIA）によれば、テキサス州は2022年末までに約10GWのユーティリティ規模の太陽光発電を追加する見込みです。テキサスは2020年に本格的に太陽光市場に参入し、2.5GWを導入しました。EIAは今後2年間で年平均約5GWを追加すると見ており、総太陽光容量は約15GW弱になる見込みです。この新規容量の約30%は米国で最も生産性の高い油田があるパーミアン盆地で建設される予定です。比較として、米国の太陽光発電の主要生産州であるカリフォルニアはEIAによれば3.2GWの新規太陽光容量を追加します（チャート13）。2022年末までに、新規太陽光発電の約3分の1がテキサスで追加される見込みで、同州はすでに国内で最大の風力発電地でもあります。風力の発電可能性は夜間に高く、太陽は昼間に最も豊富です。 貴金属： 強気 パラジウム価格は水曜日に約2,876ドル/ozで取引され、2020年2月の過去最高2,875.50ドル/ozを上回り3,000ドル/ozに迫っています。これは世界最大のパラジウム生産者であるロシアの金属メーカー、ノリリスクの生産見通し引き下げが続いているためです（チャート14）。同社は今週、以前の見通しを更新し、鉱山の浸水により銅・ニッケル・パラジウムの鉱山生産が今年最大20%減少する可能性があるとしました。パラジウムはガソリン車の触媒に使われ、世界がCOVID-19由来の需要破壊と自動車の供給を制限している半導体不足から回復するにつれて、自動車販売の回復が見込まれます。加えて、白金族金属（PGM）の生産は南アフリカの電力供給の不安定さにより妨げられており、国内の電力大手が需給調整のために計画停電を実施せざるを得ない状況です。当社は2020年4月23日にパラジウムのロングを推奨して以降、同金属のロングを維持しており、このポジションは35.6%の含み益です。 チャート13 鉄鋼価格の急騰で銅が上昇へ 鉄鋼価格の急騰で銅が上昇へ チャート14 パラジウム価格 パラジウム価格     脚注 1     例として当社が2020年11月26日に発表したレポート「Renewables, China's FYP Underpin Metals Demand」（再生可能エネルギー：中国の五カ年計画が金属需要を支える）をご覧ください。‌ ces.bcaresearch.comで入手可能です。   2     reuters.comに掲載された2021年4月14日付の記事「RPT-COLUMN-Copper smelter terms at rock bottom as mine squeeze hits: Andy Home」を参照してください。この記事は、鉱山と製錬所間の直接取引が10ドル/MT程度まで報告されたことを指摘しており、銅の実需サイドが現状いかに逼迫しているかを示しています。 3    reuters.comに掲載された2021年4月20日付の記事「Column: Supercycle or China cycle? Funds wait for Dr Copper's call」をご覧ください。    投資見解とテーマ 推奨 戦略的推奨 戦術的トレード コモディティ価格と取組の参考表 2021年にクローズしたトレード クローズ済みトレードの要約 より高いインフレが到来 より高いインフレが到来

特別レポート

BCAリサーチの グローバル・アセット・アロケーション（GAA）フォーラム は5月18日にオンラインで開催されます。私たちはCIOや資産配分担当者にとって重要な課題について議論する優れた講演者陣を揃えました。ポートフォリオ構築、ファクター投資、オルタナティブ投資、ESGに関する最新の考え方が含まれます。基調講演はKPAアドバイザリーの創設者であり、『The Future of Pension Management: Integrating Design, Governance and Investing』（2016）を含む投資運用に関する多数の著書の著者であるKeith Ambachtsheerが務めます。彼のプレゼンテーションに続き、CDPQのMaxime Aucoin、OPTrustのJames Davis、ドレクセル大学エンダウメントのCatherine UlozasらトップCIOによるパネルディスカッションが行われます。 本イベントはGAA購読者に対しては無料で、購読者はフルアジェンダを確認し、こちらから登録できます。その他の方はこちらからお申し込みください。5月18日に、刺激的で有益な一日の議論にご参加いただけることを願っています。 ハイライト ここ数年の投資家による利回り追求は、レバレッジド・ローンを魅力的な投資とみなす要因となりました。 低ボラティリティと魅力的なリスク調整後リターンを特徴とするレバレッジド・ローンは、ポートフォリオに付加価値をもたらす可能性があります。 レバレッジド・ローンは、金利上昇局面と魅力的なバリュエーションがそろった出発点では（例えばハイイールド債などの）固定金利債をアウトパフォームする傾向があります。現在は後者の基準のみが当てはまります。 しかしリスクは存在します。コベナント・ライト債の増加や企業部門のレバレッジ上昇が特に懸念されます。 今後6〜12カ月では、金利が大幅に上昇するとは予想しておらず、この資産クラスは短期的にはやや魅力に欠けるでしょう。 それでも長期的な見通しは魅力的です。今後数年でインフレが上昇すれば金利も上昇する可能性が高くなります。 特集 超金融緩和的な金融政策、低金利、そしてフィクスト・インカム系リスク資産のバリュエーションが魅力的でない現況において、投資家は従来のフィクスト・インカム手段を超えて検討し、リスク許容度を引き上げるほか選択肢がありません。 このスペシャルレポートでは、レバレッジド・ローン市場の仕組みを整理します。過去のリスク・リターン特性を分析し、レバレッジド・ローンと他の資産を比較します。また、金融市場のストレス期や金利・インフレ上昇局面でのパフォーマンスも評価します。最後に、レバレッジド・ローン保有に伴うリスクについて論じます。 レバレッジド・ローンとは何か？ レバレッジド・ローンは、サブインベストメントグレードの企業向けに行われるシンジケートローンの一種です。一般に、これらの企業は多額の負債を抱え、格付けは低い傾向があります。シンジケートローンは、1行または複数の商業銀行や投資銀行によって組成、アレンジ、管理されます。1 これらのローンの大部分はシニア担保付きのローンであり、変動金利がベースで、主にLIBORにリスクプレミアム（一般に150〜200bp以上）を上乗せして設定されます。これはリスクの大きさを反映するとともに、非銀行系の機関投資家を呼び込む目的があります。これらのローンの金利は短期金利の変化を反映して定期的に調整されるため、金利上昇を懸念する投資家にとっては利点となります。 レバレッジド・ローンを分類する定義にはばらつきがあります。ある者は借り手のリスクや格付けに基づいてグループ化します。別の者はデット・トゥ・キャピタルやデット・トゥ・EBITDAといったレバレッジ指標を重視します。さらに、発行時のスプレッドや資金調達の目的（M&Aの資金調達、レバレッジド・バイアウト（LBO）、既存債務のリファイナンス、一般的な資金調達など）で分類する場合もあります。 過去5年間で、米国で発行されたレバレッジド・ローンの約50%がリファイナンス目的でした（図表1、パネル1）。3つのカテゴリのうち、LBO資金は最もリスクが高いと見なされ、そのことはより高いスプレッドに反映されています（図表1、パネル2）。レバレッジド・ローン市場は、1980年代中盤にM&A活動が急増したことで特に人気を博しました（図表2）。 Chart 1 Uses Of Leveraged Loans レバレッジド・ローンへの投資は今が適切な時期ですか？ レバレッジド・ローンへの投資は今が適切な時期ですか？ Chart 2 The Boom In Corporate Activity In The 1980s Fueled Leveraged Loan Growth 1980年代の企業活動のブームがレバレッジド・ローンの成長を押し上げた 1980年代の企業活動のブームがレバレッジド・ローンの成長を押し上げた 一般的に二つの代表的なファイナンス形態があります：2 タームローン： 一定の返済スケジュールに基づいて借入金を返済するという契約です。これらのローンは主に非銀行主体によって提供されます。 リボルビング・ファシリティ：繰り返し借入れと返済が可能なローンの一種です。これらのローンは主に銀行が組成し保有します。 レバレッジド・ローン市場の規模に関する推計は、用いられる基準や定義によって異なります。過去十年の初めからの急速な成長を経て、レバレッジド・ローン市場の規模は2020年第2四半期時点で1.2兆ドル超と推定されています。3 とはいえ、これは企業債務全体のごく一部に過ぎません（企業債市場の規模の約15%に相当します）が、主要市場参加者間の相互関係や市場における銀行の役割が、米国財務長官Janet Yellenやデット投資家のHoward Marks、国際機関である国際決済銀行（BIS）などの注目を集めています。彼らの懸念は、特に「コベナント・ライト（cov-lite）」ローンの発行増加、ローン契約におけるEBITDAの定義の不一致、「EBITDAアドバック」の使用拡大、4およびレバレッジド・ローンの格付けの精度に集中しています。5 これらの懸念の一部は「リスク」セクションで論じます。 Table 1 Risky Loans Are Mainly Held By Non-Bank Entities… レバレッジド・ローンは今が適切な時期ですか？ レバレッジド・ローンは今が適切な時期ですか？ 過去数十年で、レバレッジド・ローン市場への資本供給における銀行の役割は縮小し、ミューチュアルファンド、ヘッジファンド、保険会社、アセットマネージャーなどの非銀行貸し手に置き換えられてきました。6 Shared National Credit（SNC）プログラムのデータは、米国において非銀行主体が非投資適格のタームローンの約83%を保有していることを示しています（表1）。7 また、イングランド銀行（BoE）の推計によれば、世界のレバレッジド・ローン残高（同行の推計で約3.4兆ドル）の約4分の1がCLOを通じて保有され、残りの約半分が非銀行機関によって保有されています。8 さらに、これらの非銀行機関がCLOのかなりの部分、特にリスクの高いトランシェを保有しています。とはいえ、銀行がレバレッジド・ローンに全くエクスポージャーがないわけではありません。銀行は主にCLOの最上位であるAAAトランシェやインベストメントグレードのローンに投資しています。10 よりリスクの高い格付けのローンはCLO、ミューチュアルファンド、ヘッジファンドなどの貸し手によって保有されています（図表3）。11 Chart 3 …Particularly Those Rated Below BB レバレッジド・ローンは今が買い時ですか？ レバレッジド・ローンは今が買い時ですか？ 過去のリスクとリターン Chart 4 Leveraged Loans' Relative Performance Moves With Interest Rates レバレッジド・ローンの相対パフォーマンスは金利と連動して変動する レバレッジド・ローンの相対パフォーマンスは金利と連動して変動する 1997年以降、レバレッジド・ローンは年率換算で4.9%のリターンを記録しており、これは米国債を25ベーシスポイント上回り、米国のインベストメントグレード債およびハイイールド債よりそれぞれ約100bpおよび200bp下回っています。同期間で米国株式には年率換算で約400bpのアンダーパフォームとなっています。過去20年間の金利低下が、レバレッジド・ローンが固定金利の同業資産に対してアンダーパフォームした主な理由と考えられます。レバレッジド・ローンの投資適格債に対する相対的パフォーマンスは、国債利回りの推移と密接に連動してきました（図表4）。ハイイールド債に対する相対パフォーマンスでも同様の傾向が見られますが、関係はやや明確ではありません。 しかし、リスク調整後のリターンでは、ボラティリティの低さによりレバレッジド・ローンは株式やハイイールド社債をアウトパフォームしました（表2）。それでも、尖度が高いことを考慮すると、ボラティリティは過小評価されている可能性が高いと考えます。大きな負の歪度と過剰な尖度は、大幅なマイナスリターンの確率が高いことを示唆している可能性があります（図表5）。   Table 2 Historical Risk-Return Characteristics レバレッジド・ローンは今が適切な時期か？ レバレッジド・ローンは今が適切な時期か？ Chart 5 Leveraged Loans' Returns Exhibit High Kurtosis And Negative Skewness レバレッジド・ローンのリターンは高い尖度と負の歪度を示す レバレッジド・ローンのリターンは高い尖度と負の歪度を示す なぜ投資家はレバレッジド・ローンを検討すべきか？ Chart 6 Rising Rates Support Higher Return From Leveraged Loans... 金利上昇はレバレッジド・ローンのより高いリターンを後押しする... 金利上昇はレバレッジド・ローンのより高いリターンを後押しする... 当社の米国債ストラテジストは、特定の条件が整うとレバレッジド・ローンが固定金利のハイイールド債をアウトパフォームする確率が高まることを示しています。特に、バリュエーションがローンに有利に傾いており、かつ国債利回りが上昇している場合です。13 現在は後者の基準のみが当てはまります。 年初来では、レバレッジド・ローンは2.2%のリターンを記録しており、これは米国債の-3.2%、インベストメントグレード債の-3.4%、ハイイールド債の1.6%、新興国国債の-3.4%より高い成績です（図表6）。同期間中、国債利回りは65ベーシスポイント上昇しました。 国債利回りが上昇する局面では、資金フローがこの資産クラスに向かう傾向があることが分かります（図表7）。さらに興味深いのは、フォワードカーブで織り込まれている以上に翌12カ月で国債利回りが上昇する場合、レバレッジド・ローンはジャンク債をアウトパフォームするという点です（図表8）。 Chart 7 ...As Well As Increased Fund Flows …およびファンドフローの増加 …およびファンドフローの増加 Chart 8 Leveraged Loans Will Benefit If Interest Rates Rise By More Than What Is Discounted In The Forward Curve レバレッジド・ローンは、金利がフォワード・カーブに織り込まれている以上に上昇すれば恩恵を受ける レバレッジド・ローンは、金利がフォワード・カーブに織り込まれている以上に上昇すれば恩恵を受ける     しかし現時点では、5年物の1年フォワードが現在の5年物国債利回りより約40ベーシスポイント高くなっており、これは今後6〜12カ月で金利が大幅に上昇する可能性は低いという当社見解と一致します。インフレは今後数カ月の一時的なスパイクを除き抑制されたままであり、少なくとも雇用が賃金に上方圧力をかける水準に戻るまでは目立った上昇は見込みにくいと考えます。これは2023年以前には起こりにくいでしょう。 金融政策の今後の軌跡や長期利回りの変化も重要な検討要素です。FRBはドットプロットを通じて2024年以前のFF金利引き上げを示唆していませんが、市場はインフレ圧力を懸念し、より早期の利上げを織り込みつつあります。当社は、労働市場が今後12カ月で「最大限の雇用」に戻らない限り、市場が期待するより早くFRBが利上げを行う可能性は低いと考えています。 レバレッジド・ローンの利回りは、データのほとんどの期間でハイイールド債の利回りより低く推移しています（2020年初のみ例外）。これは、レバレッジド・ローンが企業の資本構成において優先的地位（シニア）にあるため、利回りが低くなるのは理にかなっています。加えて、両市場のセクター構成も影響します：レバレッジド・ローンはテクノロジーや通信セクターへのエクスポージャーが高く、エネルギーセクターへの配分は過去7年の平均で1%程度と限定的です。一方、ハイイールドの固定金利債ではエネルギーの比重は平均13%でした（図表9）。これは、2014/2015年の原油暴落時に利回り差が-3%以下に縮小した際に特に顕著でした（図表10）。 Chart 9 Leveraged Loans’ Sector Weightings レバレッジド・ローンは今が適切な時期ですか？ レバレッジド・ローンは今が適切な時期ですか？ Chart 10 Loan Spreads Are Not Looking Attractive ローン・スプレッドは魅力的に見えない ローン・スプレッドは魅力的に見えない Chart 11 Recent Investor Demand Pushed Up Leveraged Loan Prices 最近の投資家需要がレバレッジド・ローンの価格を押し上げた 最近の投資家需要がレバレッジド・ローンの価格を押し上げた 利回り差はその後上昇傾向にあり、現状の価格水準では上値余地は限られるかもしれません。投資家需要の急増は新規発行のレバレッジド・ローンの利回りを押し下げ、レバレッジド・ローンの平均ビッド価格はパンデミック前の高値を上回りました（図表11）。 次節では、景気後退やその他の金融市場ストレス期におけるレバレッジド・ローンの挙動を分析します。   金融市場のストレス 危機時のパフォーマンス インデックスの歴史が短いため、取り上げられるのは過去3回の景気後退（ドットコム・バブル崩壊、世界金融危機（GFC）、COVID-19リセッション）に限られます。さらに2013年のテーパリング・タンタラムと2014/2015年の原油価格ショックも分析対象としました。 いずれの場合も、レバレッジド・ローンは下落し、他のフィクスト・インカム資産クラスとともに回復しました。テーパリング・タンタラムはレバレッジド・ローンにとって最も好条件で、10年物国債利回りは4か月で100ベーシスポイント上昇しました（図表12）。 表3は、金利上昇局面が金利低下局面よりもレバレッジド・ローンにとって良好な環境であることを示しています。さらに、FRBの引き締め・緩和サイクルの期間も検討しましたが、緩和サイクルのタイミングは景気後退と重複することが多く、レバレッジド・ローンのパフォーマンスを押し下げています。 当社はまた、インフレの影響を当社のインフレヘッジに関するスペシャルレポートのフレームワークを用いて評価しました。14 そのレポートはインフレを4つの四分位（レジーム）に分解しています：2.3%未満、2.3〜3.3%の間、3.3〜4.9%の間、4.9%以上。分析にはインフレが低下している期間も加えました。ただし、4.9%を超える期間は1回しか観測されなかった点に注意します。 Chart 12 Leveraged Loans Fared Well In Periods Of Credit- And Sector-Specific Distress レバレッジド・ローンは、クレジットおよびセクター特有のストレス期間において良好に推移した。 レバレッジド・ローンは、クレジットおよびセクター特有のストレス期間において良好に推移した。   Table 3 Leveraged Loans’ Performance During Different Rate Cycles… レバレッジド・ローンは今が適切なタイミングですか？ レバレッジド・ローンは今が適切なタイミングですか？ Table 4 …And Inflation Regimes レバレッジド・ローンは今が適切な時期ですか？ レバレッジド・ローンは今が適切な時期ですか？ インフレの第1・第2四分位における期間では、レバレッジド・ローンは絶対リターンで最も高い年率平均リターン（それぞれ8.1%と10%）を記録しました。これらのレジームでは政策金利が低く、堅調な成長を受けて債券利回りが上昇し始めるため、理にかなった結果です。ただし、これらの期間ではレバレッジド・ローンは固定金利債に対してアンダーパフォームしました。 インフレ率が3.3%を上回るのは、経済が過熱し成長が鈍化し始める環境を示します。このレジームでは、レバレッジド・ローンはハイイールド債に対して年率換算で1.5%上回りました。インフレが低下する期間でも、レバレッジド・ローンは適度にプラスの年率リターンを示しました（表4）。   リスク Chart 13 Corporate Health Has Worsened... 企業の健全性は悪化しています... 企業の健全性は悪化しています... レバレッジド・ローン市場の成長は複数のトレンドを反映していますが、最も重要なのは企業レバレッジの全般的な上昇です。これは金利低下と安価な資金の利用可能性の増大によって促進されました。非金融企業の負債対資産比率は企業レバレッジを示す指標であり、20年ぶりの高水準にあります（図表13、パネル1）。これは企業セクター全体の健全性、特に企業が負債をサービスする能力に関する懸念を高めます。利息負担能力の中央値はGFC時と同水準付近にあり、この指標は第25パーセンタイルの企業ではマイナスにさえなっており、そのバケットに属する企業は利息支払いを維持する資金が不足していることを意味します（図表13、パネル2）。 レバレッジド・ローン市場のトレンドも同様の構図を示しています。最も高いレバレッジ、すなわちデット・トゥ・EBITDA比率が6倍以上の企業による新規発行ローンのシェアは新高値に達し、2020年第3四半期には新規ローンの37%に達しました（図表14）。 Chart 14 …Even For Leveraged Lending レバレッジド・ローンに投資するのに、今は適切な時期ですか？ レバレッジド・ローンに投資するのに、今は適切な時期ですか？ Chart 15 Cov-Lite Issuances Make Up Almost 80% Of New Issuances レバレッジド・ローンへの投資は今が適切な時期ですか？ レバレッジド・ローンへの投資は今が適切な時期ですか？ 資本の供給者にも一因があります。信用基準が劣化しているにもかかわらず、資金を求める企業は大半が資金を調達できています。コベナント・ライト構造（従来のローンで見られる保護的なコベナントを欠くローン）の割合は増加を続け、現在では新規発行のほぼ80%を占めています（図表15）。 コベナント・ライト債は通常、レバレッジや利息カバレッジ比率などの特定の比率を維持することを求めるメンテナンス・コベナントを持ちません。15 代わりに、発行体が追加の負債を負うなど特定の行動を取りたい場合にのみ満たす必要があるインカレンス・コベナントを特徴とします。16 この信用条件の緩和は、特にCLO買い手やその他の非銀行系機関投資家による需要増加という低利回り環境下の需要拡大の機能であることが大半です。 一部の指摘では、レバレッジド・ローン市場の脆弱性が金融システム全体に混乱を引き起こす可能性があると警鐘を鳴らしています。特にGFCの記憶や、銀行がローンを組成するが簿外に配分する「オリジネート・トゥ・ディストリビュート」モデルに関する懸念は、クレジットのリスクある拡大につながり新たな金融危機を誘発するという見方に結び付けられています。 Chart 16 Leveraged Loans Have Higher Average Credit Ratings… レバレッジド・ローンにとって今は適切なタイミングですか？ レバレッジド・ローンにとって今は適切なタイミングですか？ 我々はこの懐疑論に全面的には同意しません。銀行のレバレッジド・ローンへのエクスポージャーは主にCLOの最上位トランシェを通じたものです。銀行の流動性要件はGFC以降増加しており、したがってローン市場で問題が発生した場合でも伝播は最小限にとどまるはずです。米国政府会計検査院（GAO）による最近の報告も、レバレッジド・レンディングが金融安定性に対して重大な脅威をもたらしているという証拠は見つからなかったとしています。17 さらに、ほとんどのレバレッジド・ローンは第1担保権（ファースト・リーン）であり、資本構成上のシニア担保位置にあります。平均格付けはハイイールド債より高く（図表16）、デフォルト率も低めです（図表17）。また、5年平均の回収率は63%とシニア無担保債の40%を上回っています（図表18）。 Chart 17 ...Lower Default Rates... ...より低いデフォルト率、... ...より低いデフォルト率、... Chart 18 ...And Higher Recovery Rates Than High-Yield Bonds ...そしてハイイールドボンドよりも高い回収率 ...そしてハイイールドボンドよりも高い回収率   結論 超低金利とリスク資産のバリュエーションが行き過ぎた状況下で、レバレッジド・ローンは投資家にとって興味深いアセットクラスとして浮上しています。 ボラティリティが低いため、レバレッジド・ローンは歴史的に固定金利のハイイールド債よりも高いリスク調整後リターンを生み出してきました。ただし、尖度が高いことからボラティリティは過小評価されている可能性があります。 歴史的には、国債利回りの上昇と魅力的なバリュエーションの出発点がレバレッジド・ローンのアウトパフォーマンスのシグナルとなっていました。現在はその二つの基準のうち一つのみが整っています。 今後6〜12カ月は金利が大幅に上昇するとは考えておらず、この資産クラスは短期的にはやや魅力に欠けます。 しかし中長期的な見通しは魅力的です。今後2〜3年でインフレとそれに伴う金利上昇が進めば、レバレッジド・ローンへの適度な配分は投資家にとって有用なヘッジとなる可能性があります。   Amr Hanafy シニアアナリスト amrh@bcaresearch.com   脚注 1 “LCD Loan Primer – Syndicated Loans: The Market and the Mechanics,” S&P Global Market Intelligence を参照してください。 2 “Leverage Lending FAQ & Fact Sheet,” SIFMA, 2019年2月を参照してください。 3 “Federal Reserve Financial Stability Report,” 2020年11月を参照してください。 4 “EBITDA add backs”は費用やコスト削減分を収益に加算するもので、借り手の返済能力を過大に見積もる可能性があります。 5 Todd Vermilyea, “Perspectives On Leveraged Lending,” The Loan Syndications and Trading Association 23rd Annual Conference, New York, 2018年10月24日を参照してください。 6 “Global Financial Stability Report: Vulnerabilities in a Maturing Credit Cycle, Chapter 1,” IMF, 2019年4月を参照してください。 7 SNCプログラムは、複数の金融機関が共有する最大かつ最も複雑な信用をレビュー・評価するための政府間プログラムです。SNCプログラムは、連邦準備制度理事会（FRB）、連邦預金保険公社（FDIC）、および通貨監督庁（OCC）という3つの連邦銀行規制機関間の政府間協定により運営されています。 8 “Financial Stability Report,” Bank of England, 2020年8月を参照してください。 9 CLOは、特別目的事業体が発行するアセットバック証券で、レバレッジド・ローンのポートフォリオを取得します。 10 “Turns Out Leveraged Loans Aren’t a Systemic Risk After All,” Bank Policy Institute, 2020年2月8日を参照してください。 11 Seung Jung Lee, Dan Li, Ralf R. Meisenzahl, and Martin J. Sicilian, “The U.S. Syndicated Term Loan Market: Who holds what and when?”, 2019年11月25日を参照してください。 12 本レポートでは、米ドル建ての機関投資家向けレバレッジド・ローンポートフォリオの時価加重パフォーマンスを追跡するS&P/LSTA Leveraged Loan Indexを使用しています。 13 US Bond Strategy Report, “The Price Of Safety,” 2015年1月27日を参照してください。 14 Global Asset Allocation Special Report, “Investors’ Guide To Inflation Hedging: How To Invest When Inflation Rises,” 2019年5月22日を参照してください。 15 Eric Goodison and Margot Wagner, Paul, Weiss, Rifkind, Wharton & Garrison Llp, “Covenant-Lite Loans: Overview,” 2019年8月を参照してください。 16 Scott Essexx, Alexander Ott, Partners Group, “The Current State Of The Leveraged Loan Market: Are There Echoes Of The 2008 Subprime Market?”, 2019年3月を参照してください。 17 “Financial Stability: Agencies Have Not Found Leveraged Lending To Significantly Threaten Stability But Remain Cautious Amid Pandemic,” United States Government Accountability Office, 2020年12月を参照してください。

来週のストラテジー・レポートの代わりに、初回のカウンターポイント・ウェブキャスト『メガテーマ、差し迫るショック、そして注目トレード』を発表します。ご参加いただければ幸いです。 ハイライト 標準的な経済理論では、貨幣は完全に代替可能であると想定します。しかし実務では、人々は収入と貯蓄というメンタル・アカウントに異なる感情を結び付けるため、貨幣は代替可能ではありません。これは「メンタル・アカウンティング・バイアス」として知られています。 メンタル・アカウンティング・バイアスは、パンデミック期に蓄積された大量の貯蓄を消費に回すよりも、債務返済に使う可能性が高いことを意味します。 メンタル・アカウンティング・バイアスはまた、高利回りの株式に対して過剰な支払いをしていることを意味します。 長期投資家は銀行を避けるべきであり、「バリュー」も避けるべきです。 正しく計算すると、株式リスクプレミアムは現在ほとんど存在しません。 米国の長期債利回りは、上方に動くよりも下方に動く余地の方がはるかに大きいです。 フラクタルトレード候補：株式対債券、PKR、およびニュージーランド株式。 特集 今週のチャート 消費は賃金で説明される… 消費は賃金によって説明される... 消費は賃金によって説明される... 今週のチャート …給付金では説明されない ...景気刺激策による給付金ではない ...景気刺激策による給付金ではない 多くの経済学者は、経済が完全に再開されれば、パンデミック期に家計に蓄積された大量の貯蓄が家計支出の津波を引き起こすと予測しています。 しかし、この予測をするのに適切なのは経済学者ではありません。家計が蓄積した貯蓄を使うかどうかの答えは、心理学の領域に属します。 お金を使うかどうかはどの「メンタル・アカウント」に属しているかによる 私たちは 債券市場における大きな異常 で、収入から支出する傾向は高い一方で、富から支出する傾向は低いと指摘しました。つまり、未消化の収入が消費に回るかどうかは、世帯がそれを追加の収入とみなすか追加の富とみなすかによって決まるということです。 これにより次の疑問が生じます。どうしてお金を使うかどうかの判断が、それを収入と分類するか富と分類するかによって左右されるのでしょうか？答えは心理学、すなわち「メンタル・アカウンティング・バイアス」として知られる現象にあります。 ノーベル賞受賞の心理学者ダニエル・カーネマンは、私たちはお金をさまざまなアカウントに分類しており、それらは時に物理的であり、時に単に心の中だけのものであると指摘しています。そして、私たちがこれらのアカウントから支出する意欲には明確な階層が存在します。 私たちの「メンタル・アカウント」から支出する意欲には明確な階層があります。 階層の最上位には月々の賃金があり、次に当座（チェック）口座の資金が続きます。これらの「収入」アカウントからは支出しやすいのです。階層のさらに下には貯蓄口座や投資ポートフォリオがあります。これらの「貯蓄」または「富」のアカウントからは支出しにくいのです。 標準的な経済理論は貨幣が完全に代替可能だと仮定するため、当座口座の1ポンドは貯蓄口座の1ポンドと何の違いもないとします。しかし実務では、人々は収入と貯蓄のメンタル・アカウントに異なる感情を結び付けるため、貨幣は代替可能ではありません。 賃金や当座口座から貯蓄口座に資金を移すと、その資金を支出する意欲は崩れます。これが、消費が収入のメンタル・アカウントを支配する賃金に密接に追随する一方で、主に貯蓄のメンタル・アカウントに入る給付金とは意味のある関連がない理由を説明します（今週のチャートおよびチャートI-2）。 Chart I-2 給付金は消費傾向に有意な影響を与えなかった 景気刺激策による現金給付は消費動向に有意な影響を与えなかった 景気刺激策による現金給付は消費動向に有意な影響を与えなかった 貯蓄のメンタル・アカウントから支出することには消極的でも、貯蓄を使って債務を返済することには積極的です。実際、貯蓄と債務の間にあるこの感情的な結びつきを踏まえ、多くの貸し手は貯蓄口座を住宅ローン債務と相殺する住宅ローン商品の提供を行っています。 これらを総合すると、パンデミック期に蓄積された家計貯蓄の在庫は、消費動向を押し上げる可能性は低く、むしろ家計債務の削減に使われる可能性が高いということになります。そうなれば、最近の公的債務の一部は民間債務の返済に回るだけであり、1990年代の日本で起きたことと同様の展開となるでしょう（チャートI-3）。 Chart I-3 日本では公的債務が結局民間債務の返済に回った 日本では、公的債務が結局、民間債務の返済に充てられた 日本では、公的債務が結局、民間債務の返済に充てられた これは銀行の資産成長にとって問題です。 「バリュー」は価値をもたらさない メンタル・アカウンティング・バイアスは、近年の金融市場で支配的な現象であるいわゆる「利回りの追求」も説明します。一見すると利回りの追求は理にかなっているように見えますが、利回りと値上がり（キャピタル・アプリシエーション）を区別すること自体が非合理的なのです。 収入と富の関係と同様に、投資の利回りから得られるお金と値上がりから得られるお金は（税制が同等であると仮定すれば）完全に代替可能です。しかし実際には、多くの投資家は利回りと値上がりを別々のメンタル・アカウントに割り当て、投資の利回りを支出用のお金、資本の増加を貯蓄用のお金と分類します。 したがって、たとえばリタイアした投資家のように、資産が支出用のメンタル・アカウントに資金を生み出すことを望む投資家は、利回りを生む投資に対して非合理的なバイアスを持ちます。一方、資産を貯蓄のメンタル・アカウントで増やしたい投資家は、値上がりを生む投資に偏ります。繰り返しますが、資金は本来代替可能であるため、これらのメンタル・アカウントは非合理的です。 通常の状況下では、これらの非合理的なバイアスは問題になりません。なぜなら、支出用と貯蓄用の両方のメンタル・アカウントに適した投資先が十分に存在していたからです。しかし近年では、かつて支出用アカウントに安全なインカムを供給していた現金や国債といった資産はもはやそうしていません。 したがって、その後の利回りを求める殺到の中で、インカム志向の投資家は危険なトンネルビジョンに陥っています。株式の将来のトータルリターンではなく利回りに固執することで、利回り追求型の投資家は高利回りの株式に対して過剰に支払いを行い、長期的な富を犠牲にしています。 株式の将来のトータルリターンではなく利回りに固執することで、投資家は高利回り株に過剰に支払っている。 一例を挙げます。グローバルな金融株のフォワード・利益利回りが8％であることは、ヘルスケアの5％やテクノロジーの3.5％よりもはるかに割安に見えるかもしれません。しかし本当に重要なのは、そのフォワード・利益利回りが将来のトータルリターンにどのように変換されるかです。この観点から見ると、金融株の見かけ上の割安さは幻影であることがわかります。 金融危機後のフォワード・利益利回りと将来リターンの関係を用いると、高利回りの金融株は、ごく最近まで低利回りのテクノロジーよりも低いリターンをもたらすように価格付けされていました。現在でも金融株は、低利回りのヘルスケアよりも低いリターンをもたらすように価格付けされています。ヘルスケアと同じ長期リターンを提供するためには、金融株のバリュエーションは20％下落する必要があります（チャート I-4 - チャート I-6）。 Chart I-4 金融株の8％予想利益利回り = 2％の見込みリターン 金融セクターの利益利回り8％＝見込みリターン2％ 金融セクターの利益利回り8％＝見込みリターン2％ Chart I-5 ヘルスケアの5％予想利益利回り = 8％の見込みリターン ヘルスケアのアーニングス・イールド5パーセント＝見込みリターン8パーセント ヘルスケアのアーニングス・イールド5パーセント＝見込みリターン8パーセント Chart I-6 テクノロジーは割高 テックは割高 テックは割高 したがって、メンタル・アカウンティング・バイアスは銀行にとって二重の打撃となります。銀行の資産成長に問題をもたらし、投資家が高利回り株に過剰に支払う原因にもなります。これが投資の究極の逆説を生み出します。『バリュー』の定義的特徴は、それ自体が価値を提供しないということです！ 長期投資家は銀行を避け、またバリューを避けるべきです。 米国債利回りは上方より下方に動く余地が大きい 前述の分析は、株式の適正な評価アプローチ、特に株式リスクプレミアム、すなわち高品質債券に対する株式の将来の超過リターンに関して重要な含意を持ちます。 よくある誤ったアプローチは、株式のフォワード利益利回りから10年債利回りを引くことです。米国のフォワード利益利回りを4.5％とすると、名目債利回り1.5％に対して株式リスクプレミアムは余裕のある3％、あるいは実質債利回り-1％に対しては非常に余裕のある5.5％であると示唆されます。 このアプローチの明白な誤りは、リンゴとオレンジを引き算している点です。10年債利回りは今後10年間にその債券から受け取るリターンです。しかし先に見たように、フォワード利益利回りは今後10年間に株式から受け取るリターンではありません。 リンゴ同士を比較するためには、まずフォワード利益利回りを将来的な10年のトータルリターンに変換する必要があります。現在の変換値は名目で2％のリターン（チャート I-7 - チャート I-8）、実質で0％のリターン（チャート I-9 - チャート I-10）となります。これらを名目・実質の債利回りと比較すると、株式リスクプレミアムはほとんど存在しないことがわかります。 Chart I-7 利益利回りを予想名目リターンに変換すると… 利益利回りを将来の名目リターンに変換する... 利益利回りを将来の名目リターンに変換する... Chart I-8 …株式リスクプレミアムがほとんど存在しないことがわかる ...株式リスクプレミアムがほとんど存在しないことを見出す ...株式リスクプレミアムがほとんど存在しないことを見出す Chart I-9 利益利回りを予想実質リターンに変換すると… アーニングス・イールドを将来の実質リターンに換算する... アーニングス・イールドを将来の実質リターンに換算する... Chart I-10 …株式リスクプレミアムがほとんど存在しないことがわかる ...株式リスクプレミアムがほとんど存在しないことを示す ...株式リスクプレミアムがほとんど存在しないことを示す ほとんど存在しない株式リスクプレミアムは、株式が高く評価されていることを意味し、またこの高い評価は債利回りが大きく上昇しないことに依存しています。さらに、評価が高いのは株式だけではありません。私たちが The Road To Inflation Ends At Deflation で指摘したように、300兆ドルにのぼる世界の不動産の評価もまた、債利回りが大きく上昇しないことに大きく依存しています。 株式は高く評価されており、その高い評価は債利回りが大きく上昇しないことに依存している。 結論として、現在の水準から見ると、米国の長期債利回りは上昇するよりも下落する余地の方がはるかに大きいと考えます。 カウンタートレンド反転の候補 パンデミック安以来の株式対債券の力強いラリーは、2013年のブルランの終わりや2020年初めのベアランの終わりに見られたようなフラクタル的な脆弱性のポイントに達しています（チャート I-11）。したがって現在のラリーは一服する局面にあります。 Chart I-11 株式対債券のラリーは一服の局面にある エクイティ対ボンドのラリーは小休止が見込まれる エクイティ対ボンドのラリーは小休止が見込まれる アジア太平洋地域では、最近のパキスタン・ルピーの強いパフォーマンスはカウンタートレンドの売りに脆弱であることに注意しています（チャート I-12）。 Chart I-12 PKRはアンダーウェイト PKRをアンダーウェイト PKRをアンダーウェイト 最後に、非常にディフェンシブなニュージーランド株式市場は過去1年で大きくアンダーパフォームしました。しかし、130日と65日の両方のフラクタル構造における脆弱性は、カウンタートレンドでアウトパフォームする準備が整っていることを示唆しています（チャート I-13）。 Chart I-13 ニュージーランドをオーバーウェイト ニュージーランドをオーバーウェイト ニュージーランドをオーバーウェイト したがって、今週の推奨は世界に対してニュージーランドをオーバーウェイトとし、利食い目標と対称的なストップロスを4％に設定することです。   Dhaval Joshi チーフ・ストラテジスト dhaval@bcaresearch.com フラクタル・トレーディング・システム フラクタルトレード 6か月の推奨 構造的な推奨 クローズド・フラクタルトレード クローズド・トレード 資産パフォーマンス 株式市場パフォーマンス   注目指標 - 債券利回り Chart II-1 注目指標 - 債券利回り - ユーロ圏 注目すべき指標 - 債券利回り - ユーロ圏 注目すべき指標 - 債券利回り - ユーロ圏 Chart II-2 注目指標 - 債券利回り - ユーロ圏を除く欧州 注目すべき指標 - 債券利回り - ユーロ圏を除く欧州 注目すべき指標 - 債券利回り - ユーロ圏を除く欧州 Chart II-3 注目指標 - 債券利回り - アジア 注目指標 - 債券利回り - アジア 注目指標 - 債券利回り - アジア Chart II-4 注目指標 - 債券利回り - その他の先進国 注目指標 - 債券利回り - その他先進国 注目指標 - 債券利回り - その他先進国   注目指標 - 金利見通し Chart II-5 注目指標 - 金利見通し 注目すべき指標 - 金利見通し 注目すべき指標 - 金利見通し Chart II-6 注目指標 - 金利見通し 注目すべき指標 - 金利見通し 注目すべき指標 - 金利見通し Chart II-7 注目指標 - 金利見通し 注目すべき指標 - 金利見通し 注目すべき指標 - 金利見通し Chart II-8 注目指標 - 金利見通し 注目すべき指標 - 金利見通し 注目すべき指標 - 金利見通し    

ハイライト 継続中かつ予想される財政・金融刺激策とCOVID-19対策の進展を受けた世界成長の強まりは、主要データ提供者による今年の石油需要前提を押し上げています。 当社は本月の需給バランスで2021年の世界需要見積りを64万b/d引き上げて98.25mm b/dとし、OPEC 2.0が脆弱な回復を乱さないようにブレント価格を$60/bbl付近に保つための必要な調整を行うと想定しています。 当社の2022年および2023年のブレント予測はそれぞれ$65/bbl、$75/bblで維持します。 コモディティ市場は、米国、ロシア、中国およびそれらの関係国・同盟国を巻き込む武力衝突の高まる確率を無視しています。ロシアはウクライナ国境に軍を集結させ、米国に干渉するなと警告しました。中国はフィリピン沖に戦艦を集結させ、台湾の防空識別圏への侵入を続けており、米軍を緊張させています。意図的あるいは偶発的な交戦が発生すれば石油価格は急騰します。 価格は上下双方にリスクがあふれています。武力衝突のリスクに加え、ワクチン配布の加速は回復を前倒しし、当社予測を超える価格上昇をもたらす可能性があります。一方で、ブラジル、インド、欧州での死亡者数および入院者数の上昇が示すように、COVID-19によるロックダウン再発の下振れリスクは依然として存在します（今週のチャート）。 特集 石油需要推計—当社の推計も含め—は、主要経済におけるCOVID-19の抑制に向けた測定可能な進展と、特に米国発の潤沢な財政・金融刺激策を受けて回復しています。1 IMFのGDP上方修正を受け、本月の需給バランスで当社は2021年の世界需要見積りを64万b/d引き上げて98.25mm b/dとしました。当社のモデリングでは、脆弱な回復を損なわないようにブレント価格を$60/bbl付近に保つために、サウジアラビア王国（KSA）とロシアが主導する生産者連合であるOPEC 2.0が必要な調整を行うと想定しています。 通常とは異なり、石油需要回復の初期段階は先進国市場（DM）がけん引すると見ています。先進国の代理としてOECDの石油消費を用いています（チャート2）。その後、来年以降は新興市場（EM）経済が再び成長を主導し、2023年にかけて続きます。 今週のチャート COVID-19の死者数・入院者数が世界的回復を脅かす 原油価格の上振れリスクが高まっている 原油価格の上振れリスクが高まっている チャート2 先進国（DM）の需要が今年急増 DMの需要が今年急増 DMの需要が今年急増 OPEC 2.0の余剰生産能力の吸収 当社はサウジアラビア王国（KSA）とロシアが主導する生産者連合であるOPEC 2.0を市場で支配的な生産者としてモデリングし続けています。今年予想する成長はOPEC 2.0の余剰生産能力のかなりの部分を吸収する見込みであり、その大半—約8mm b/dのうち約6mm b/d—がKSAにあります（チャート3）。 主要生産国の余剰生産能力は、米国のシェール生産者がリグと人員を動員して新規生産を集積ラインや主要パイプラインに導入するよりも速く、回復する需要に対応することを可能にします。 当社は米国のシェール生産者を市場価格を受け入れるコホート（価格受容群）としてモデル化しており、市場が許す限り生産すると想定しています。2020年に9.22mm b/dまで落ち込んだ米国生産は、今年9.56mm b/d、2022年に10.65mm b/d、2023年に11.18mm b/dまで回復すると見ています（チャート4）。米国内コンチネンタル産（Lower 48）の生産成長はシェールが主導し、各年とも米国総生産の約80%を占める見込みです。 チャート3 コアOPEC 2.0の余剰生産能力がまず需要増に反応する OPEC 2.0のコア予備生産能力は需要の増加に最初に反応する OPEC 2.0のコア予備生産能力は需要の増加に最初に反応する チャート4 シェールは価格受容群における限界供給源 シェールは価格受容群における限界バレルである シェールは価格受容群における限界バレルである 供給面でのOPEC 2.0の支配的地位は、余剰生産能力が枯渇するまでは非連合生産者に経済的地代を奪われることを許さず、非連合生産者にとっては抑制要因となります。その後、価格受容群は資本を呼び込む能力が限られているため、内部留保から多くの探査・生産（E+P）活動を賄う可能性が高いと考えられます。株主は配当の維持・成長、あるいは株式買戻しによる資本還元を要求し続けるでしょう。これが収益性のある企業に生産成長を限定する要因になります。 当社はOPEC 2.0連合の生産規律が供給を需要のわずか下にとどめ、在庫が減少し続けるようにするだろうと見ています。これはCOVID-19パンデミックで需要が破壊されたにもかかわらず実際に起きたことです（チャート5）。これらのモデリング前提から、当社は供給と需要が2023年にかけて均衡へ向かって動き続けると予想しています（表1）。 チャート5 2021年の需給バランス 2021年の需給バランス 2021年の需給バランス 表1 BCA 世界原油 需給バランス（MMb/d、ベースケース） 原油価格の上方リスクが高まっている 原油価格の上方リスクが高まっている 当社はこの需給均衡化が恒常的な物理的不足を誘発し、在庫は2023年にかけて減少し続けると予想しています（チャート6）。在庫が取り崩されるにつれて、OPEC 2.0の支配的な生産者地位はブレントおよびWTIのフォワードカーブをバックワーデーションに保つことを可能にします（チャート7）。2 当社は2022年および2023年のブレント予測をそれぞれ$65/bbl、$75/bblで維持しています（チャート8）。 チャート6 OPEC 2.0の政策は供給を需要の下に置き続ける... OPEC 2.0政策は供給を需要より下回る水準に保ち続けている… OPEC 2.0政策は供給を需要より下回る水準に保ち続けている… チャート7 OECD在庫は2023年までに減少 OECD Inventories Fall to 2023 OECD Inventories Fall to 2023 チャート8 世界経済回復に伴いブレント予測は上昇 世界経済の回復に伴い、ブレントは上昇が予想される 世界経済の回復に伴い、ブレントは上昇が予想される 価格の両方向リスクが充満 当社見解には上振れおよび下振れのリスクが数多くあります。 上振れの例として、英国と米国のワクチン配布の立ち上げ方が示唆に富みます。 両国とも当初はつまづきました。特に米国は1月時点でも戦略が整っていないように見えました。米国が調達と配布を本格化させると接種率は急上昇し、現在では米国内で「通常の」独立記念日（Fourth of July）を迎える見通しにあるようです。英国は今週再開を開始しました。両国は2021年第3四半期に集団免疫を達成すると予想されています。3 調達と配布を誤ったEUは、英国と米国の教訓から利益を得て2021年第4四半期に集団免疫を達成するとマッキンゼーの調査は示しています。このスケジュールの前倒しは、より強い成長と当社予測を上回る石油価格につながるでしょう。 次の大きな課題は、パンデミックが加速し変異株の発生・拡散に理想的な環境を提供している新興経済地域（特にそのような地域）にワクチンを供給することです。ブラジル、インド、欧州での死亡者数・入院者数の上昇が示すように、大規模なCOVID-19によるロックダウンの再発リスクは依然として残ります。 戦の狼煙（Cry Havoc） 当社が見るもう一つの大きな上振れリスクは、米国、ロシア、中国およびそれらの関係国・同盟国を巻き込む武力衝突です。 現時点でコモディティ市場はこれらのリスクを無視しています。戦争のレベルには達していないにせよ、機動的な交戦―航空機が撃墜されたり南シナ海で艦船が交戦するような事態―の確率は日々高まっています。 これは驚くべきことではなく、当社の同僚であるBCAリサーチの地政学ストラテジー（Geopolitical Strategy）が最近指摘した通りです。4 実際、マット・ガートケン（Matt Gertken）が率いる当該サービスは、バイデン政権が就任直後からロシアと中国によってこの種の試練にさらされるだろうと警告していました。 ロシアはウクライナ国境に軍を集結させ、米国に干渉するなと警告しています。中国はフィリピン沿岸に軍艦を集結させ、台湾の防空識別圏への侵入を続けており、米軍を緊張させています。米露、米中間の政治対話はますます激しくなっており、近い将来に和らぐ兆しは見えません。意図的であれ偶発的であれ交戦が発生すれば戦争の遁走を許し、石油価格は一時的に急騰する可能性があります。 最後に、当社が想定するようにイランが核合意（すなわち共同包括的行動計画：JCPOA）を西側諸国と再締結できれば、イランは「正式な」石油輸出国としての復帰を余儀なくされ、OPEC 2.0はこれを受け入れざるを得なくなります。JCPOAは2018年に当時のトランプ大統領によって破棄されました。 これは困難を伴う可能性があります。当社は2014–16年の石油価格崩壊が、サウジが市場シェア戦争を仕掛けて価格を暴落させ、2010年末から2014年半ばにかけて続いた1バレル当たり$100超の価格をイランに許さないための行動だったと考えています。OPEC 2.0、特にKSAは米国–イラン交渉に公には関与していません。しかし2014年に開始された壊滅的な市場シェア戦争の後、KSAおよびOPEC 2.0はJCPOA後にイランの市場復帰を受け入れたことを想起する価値があります。   ロバート・P・ライアン チーフ コモディティ＆エネルギー・ストラテジスト rryan@bcaresearch.com アシュウィン・シャイアム リサーチアソシエイト コモディティ＆エネルギー戦略 ashwin.shyam@bcaresearch.com   コモディティ概況 エネルギー： 強気 ブレントとWTI価格は、EIAの週間石油在庫報告が2021年4月9週終わりで米国の原油・製品在庫が910万バレル減少したことを示した後に急騰しました。これは商業用原油と蒸留油在庫の大幅な取り崩し（それぞれ590万バレル、210万バレル）が主導しました。これらの取り崩しは過去一週間に主要データ機関（EIA、IEA、OPEC）による世界需要の概ね強気な上方修正を背景としています。これらの評価は、精製製品需要、すなわち「product supplied」が4月9週終わりで日量110万b/d跳ね上がったというEIAデータに裏付けられています。ジョンソン＆ジョンソンの接種問題という挫折があったにもかかわらずワクチン配布が勢いを増しており、在庫の取り崩しと需要改善が上昇の触媒となったようです。米ドルの弱含みや米国の実質金利低下も追い風になりました。 ベースメタル： 強気 今週初めニッケル価格は下落しました。中国の国営新華社通信が中国の李克強首相が上昇するコモディティ価格の中で原材料市場の規制強化の必要性を強調したと報じ、企業の業績に圧力がかかっているとのことでした（チャート9）。この発言は中国のトップ経済顧問である劉鶴が先週コモディティ価格の追跡を当局に求めた後に出たものです。ニッケル価格はこの報を受けて今週初めにトン当たり約$500下落し、ロンドン金属取引所の取引で火曜日終値時点で$16,114.5/MTで取引されていました。他のベースメタルはこのニュースの影響を受けませんでした。 貴金属： 強気 今週初めに発表された3月の米国インフレデータを受けて米ドルと10年物米国債利回りは低下しました。米国の消費者物価は約9年ぶりの大幅上昇を記録しました。インフレヘッジ需要と米ドル・債利回りの低下が金の購入における機会費用を下げたことが金価格を押し上げました（チャート10）。この不確実性と米国の財政刺激策によるインフレ圧力の高まりが金需要を増加させます。スポットのCOMEX金は火曜日終値で$1,746.20/ozで取引されていました。 穀物・ソフトコモディティ： 中立 USDAの報告によると、米国のトウモロコシ期末在庫は13.5億ブッシェルで、市場予想の13.9億ブッシェルや先月の省の1.50億ブッシェル推定を下回っています（agriculture.comの集計）。世界のトウモロコシ在庫は2.839億トンで、市場予想の2.845億トンおよび省の推定2.876億トンを下回りました。 チャート9 ベースメタルは強気に動く ベースメタルは強気になっている ベースメタルは強気になっている チャート10 金価格の上昇 金価格が上昇へ 金価格が上昇へ   脚注 1     当社が2021年4月8日に発表したUS-Russia Pipeline Standoff Could Push LNG Prices Higherをご覧ください。簡単に言えば、IMFは今年および来年の成長率見通しをそれぞれ6%と4.4%に引き上げ、2021年1月の更新時点と比べてほぼ1ポイントの上方修正を行いました。 2     バックワーデーションのフォワードカーブ—先物の期近価格が期先価格を上回る状態—は需給タイトさを示す市場のシグナルです。精製業者が将来よりも今の原油の入手を高く評価していることを意味します。これはちょうど投資家が明日引き渡される1ドル札に対して1ドルを支払うことを好み、1年後に引き渡される同じ1ドル札には今日98セントしか払わないかもしれないのと同じダイナミクスです。 3    マッキンゼー・アンド・カンパニーが2021年3月26日に発表したWhen will the COVID-19 pandemic end?をご参照ください。 4    BCAの地政学ストラテジーが2021年4月2日に発表した先見的な分析The Arsenal Of Democracyをご覧ください。同レポートは、バイデン政権は中国/台湾、ロシア、イラン、さらには北朝鮮に関する初期のストレス・テストに直面していると指摘しています。ゲーム理論は金融市場が台湾海峡での危機の60%の確率を無視できない理由を説明するのに役立ちます。全面戦争の確率は依然低いものの、台湾は世界で最も重要な地政学的リスクであり続けます。   投資見解とテーマ 推奨事項 戦略的推奨 タクティカルトレード コモディティ価格とプレイ参考表 2021年にクローズしたトレード クローズしたトレードの概要 より高いインフレが到来 より高いインフレが到来

Highlights On a timeframe of a few years, a net deflationary shock is a near-certainty even if we do not know its precise nature or its precise timing. Hence, investors must build such a deflationary shock or shocks into their long-term investment strategy. Specifically: The 10-year T-bond yield will ultimately reach zero, and the 30-year T-bond yield will ultimately reach 0.5 percent. For patient investors, this presents a mouth-watering 100 percent return on the long-duration T-bond. The structural bull market in equities will continue until T-bond yields reach their ultimate low. Patient equity investors should steer towards ‘growth’ sectors that will surge on the ultimate low in T-bond yields. Fractal trade shortlist: Taiwan versus China, Netherlands versus China, and Sweden versus Finland. Feature Chart I-1For Long-Term Investors, A Shock Is A Near-Certainty Predicting shocks is easy. The precise nature and timing of shocks is not predictable, but the statistical distribution of shocks is highly predictable. This means that the longer our investment timeframe, the more certain we are of encountering at least one shock – even if we cannot predict its precise nature or timing. Many economists and strategists blame their forecasting errors on shocks, such as the pandemic, which they point out are ‘unforecastable.’ Absent the shocks, they argue, their predictions of the economy and the markets would have turned out right. This is a valid excuse for short-term forecasting errors, but it is not a valid excuse for long-term forecasting errors. On a long-term horizon, encountering a major shock, or several major shocks, is a near-certainty. Hence, economists and strategists who are not incorporating the well-defined statistical distribution of shocks into their long-term investment forecasts and strategies are making a mistake. Individual Shocks Are Not Predictable In the 21 years of this century so far, there have been five shocks whose economic/financial consequences have been felt worldwide: the dot com bust (2000); the global financial crisis (2007/8); the euro debt crisis (2011/12); the emerging markets recession (2014/15); and the global pandemic (2020). To these we can add two wide-reaching political shocks: the Brexit vote (2016); and Donald Trump’s shock victory in the US presidential election (2016). In total, this constitutes seven shocks, four economic/financial, two political, and one natural (Chart I-2). Chart I-2The Seven Global Shocks Of The Century (So Far) Some people argue that economic/financial shocks are predictable, because they arise from vulnerabilities in the economy or financial markets, which should be easy to spot. Unfortunately, though such vulnerabilities are obvious in hindsight, the greatest economic minds cannot see them in real time. The greatest economic minds cannot see economic vulnerabilities. Infamously, on the eve of the global financial crisis, Ben Bernanke was insisting that “there’s not much indication that subprime mortgage issues have spread into the broader mortgage market.” Equally infamously, on the eve of the euro debt crisis, Mario Draghi was asking “what makes you think that the ECB must become lender of last resort to governments to keep the eurozone together?” (Chart I-3 and Chart I-4) Chart I-3Bernanke Couldn't See The GFC Chart I-4Draghi Couldn't See The Euro Debt Crisis Which begs the question, what is the current vulnerability that today’s great economic minds cannot see? As we have documented many times, most recently in The Rational Bubble Is Turning Irrational, the current vulnerability is the exponential relationship between rising bond yields and the risk premiums on equities and other risk-assets (Chart I-5 and Chart I-6). Meaning that $500 trillion of risk-assets are vulnerable to any substantial further rise in bond yields. Chart I-5A 1.5 Percent Decline In The Bond Yield Had A Smaller Impact On The Earnings Yield When The Bond Yield Started At 4 Percent... Chart I-6...Than When The Bond Yield Started ##br##At 3 Percent The second type of shock – political shocks – should be predictable as they mostly arise from well-defined events such as elections and referenda, which an army of political experts analyses ad nauseam. Yet the greatest political minds could not see Brexit or President Trump coming. Indeed, even ‘Team Brexit’ didn’t see Brexit coming, because it had no plan on how to implement Brexit once the vote was won. The third type of shocks – natural shocks – are clearly unpredictable as individual events. Nobody knows when the next major pandemic, earthquake, volcano eruption, tsunami, solar flare, or asteroid strike is going happen. Yet, to repeat, while the precise nature and timing of shocks is not predictable, the statistical distribution of shocks is highly predictable. The Statistical Distribution Of Shocks Is Highly Predictable The good news is that shocks follow well-defined statistical ‘power laws’ which allow us to accurately forecast how many shocks to expect in any long timeframe. The 7 shocks experienced through the past 21 years equates to a shock every three years on average, or 3.33 shocks in any 10-year period. The expected wait to the next shock is three years. The next few paragraphs delve into some necessary mathematics, but don’t worry, you don’t need to understand the maths to appreciate the key takeaways. If the past 21 years is representative, we propose that the number of shocks in any 10-year period follows a so-called Poisson distribution with parameter 3.33. From this distribution, it follows that the probability of going through a 5-year period without a shock is just 19 percent, and the probability of going through a 10-year period without a shock is a negligible 4 percent (Chart of the Week). The result is that if you are a long-term investor, then encountering a shock is a near-certainty and should be built into your investment strategy. How can we test our assumption that the number of shocks follows a Poisson distribution? The maths tells us that if the number of shocks follows a Poisson distribution with parameter 3.33, then the ‘waiting time’ between shocks follows a so-called Exponential distribution also with parameter 3.33. On this basis, 63 percent of the waits between shocks should be up to three years, 23 percent should be four to six years, and 14 percent should be over six years. Now we can compare this expected distribution with the actual distribution of waits between the 7 shocks encountered so far in this century. We find that the theory lines up closely with the practice, validating our assumption of a Poisson distribution (Chart I-7 and Chart I-8). Chart I-7The Theoretical Waiting Time Between Shocks… Chart II-8…Is Close To The Actual Waiting Time Between Shocks To repeat the key takeaways, on a long-term timeframe, encountering at least one shock is a near-certainty, and the expected wait to the next shock is three years. A Shock Is A Near-Certainty, And It Will End Up Deflationary Nevertheless, there remains a pressing question: Will the next shock(s) be deflationary or reflationary? It turns out that all shocks end up with both deflationary and reflationary components: either a deflationary impulse followed by a reflationary backlash or, as we highlighted in The Road To Inflation Ends At Deflation, a reflationary impulse followed by a deflationary backlash. But the crucial point is that the deflationary component will swamp the reflationary component. In the seven shocks of this century so far, six have been deflationary impulses with a weaker reflationary backlash; and one – the reflation trade of 2017-18 – was a reflationary impulse with a stronger deflationary backlash. It is our high conviction view that in the next shock(s), the deflationary component will continue to hold the upper hand (Chart I-9). Chart I-9Each Shock Has A Deflationary And Reflationary Component... But The Deflationary Component Tends To Dominate The simple reason is that as financial asset prices, real estate prices, and debt servicing costs get addicted to ever lower bond yields, the economy and financial markets cannot tolerate bond yields reaching previous tightening highs and, just like all addicts, need a new extreme loosening to feel any stimulus. This means that when the next shock comes – as it surely will – it will require lower lows and lower highs in the bond yield cycle. Let’s sum up. On a timeframe of a few years, a shock is a near-certainty even if we do not know its precise nature – economic/financial, political, or natural – or its precise timing. Furthermore, the shock will be net deflationary. Hence, investors must build such a deflationary shock or shocks into their long-term investment strategy. Specifically: The 10-year T-bond yield will eventually reach zero, and the 30-year T-bond yield will ultimately reach 0.5 percent. For patient investors, this constitutes a mouth-watering 100 percent return on the long-duration T-bond. The 10-year T-bond yield will eventually reach zero. The structural bull market in equities will continue until T-bond yields reach their ultimate low. Patient equity investors should tilt towards ‘growth’ sectors that will surge on the ultimate low in T-bond yields. Candidates For Countertrend Reversals This week we have noticed an unusual decoupling among the tech-heavy markets of Taiwan, Netherlands, and China (Chart I-10). Chart I-10An Unusual Decoupling Between Tech-Heavy Netherlands And China Among these three markets, the strong short-term outperformance of both Taiwan and Netherlands are due to supply bottlenecks in the semiconductor sector that have boosted Taiwan Semiconductor Manufacturing and ASML, but we expect these bottlenecks ultimately to resolve.  On this basis and combined with extremely fragile 130-day fractal structures, Taiwan versus China and Netherlands versus China are vulnerable to reversals (Chart I-11 and Chart I-12). Chart I-11Underweight Taiwan Versus China Chart I-12Underweight Netherlands Versus China Our first recommended trade is to underweight Netherlands versus China, setting a profit target and symmetrical stop-loss at 5 percent. Another outperformance that looks fragile on its 130-day fractal structure is Sweden versus Finland, driven by industrials and financials versus energy and materials (Chart I-13). Chart I-13Underweight Sweden Versus Finland Our second recommended trade is to underweight Sweden versus Finland, setting a profit target and symmetrical stop-loss at 4.7 percent.   Dhaval Joshi Chief Strategist dhaval@bcaresearch.com Fractal Trading System Fractal Trades 6-Month Recommendations Structural Recommendations Closed Fractal Trades Asset Performance Equity Market Performance   Indicators To Watch - Bond Yields Chart II-1Indicators To Watch - Bond Yields - ##br##Euro Area Chart II-2Indicators To Watch - Bond Yields - ##br##Europe Ex Euro Area Chart II-3Indicators To Watch - Bond Yields - ##br##Asia Chart II-4Indicators To Watch - Bond Yields - ##br##Other Developed   Indicators To Watch - Interest Rate Expectations Chart II-5Indicators To Watch - Interest Rate Expectations Chart II-6Indicators To Watch - Interest Rate Expectations Chart II-7Indicators To Watch - Interest Rate Expectations Chart II-8Indicators To Watch - Interest Rate Expectations    

Highlights Biden will host a global summit for Earth Day on April 22-23, giving public attention to his climate change policy push. Investors should count on Biden’s green infrastructure package becoming the bulk of his climate push, given uncertainty over the 2022 midterm elections. However, over the long run, American public opinion is shifting in favor of renewables and the US will seek to maintain its technological edge via participating in the green tech race. Go long our “Biden Fiscal Advantage Basket” versus the Nasdaq 100.  Feature The Biden administration’s $2.3 trillion American Jobs Plan is often referred to as a “green infrastructure” package and in this report we take a look at what makes it green – and what are the investment implications. Biden will virtually host a global climate summit on April 22-23, Earth Day, which the Chinese President Xi Jinping is expected to attend, thus providing momentum to the green investment theme. The stock market anticipated Biden’s electoral victory last year and renewable energy stocks rallied exorbitantly, with ultra-easy monetary and fiscal policy as a fundamental support. The market’s reaction to Biden’s official outline of his plan last month suggests that investors are energized about Biden’s infrastructure package but already suffering from some green fatigue (Chart 1). However, this bill’s passage will initiate the US’s official entrance into the global green energy race and from that point of view renewable plays should recover. Once the American Jobs Plan passes, likely sometime this fall, Biden’s climate agenda will be virtually finished, from an investment perspective. Investors have little visibility beyond 2022 as the president’s party rarely hangs onto the House of Representatives in his first midterm election. However, over the long run, American public opinion is shifting in favor of renewable energy. And Biden also has regulatory tools to push the Democratic Party’s climate agenda from 2022-24 regardless. Chart 1Biden's AJP Already Priced Chart 2Biden’s First Budget: Boom In Non-Defense Discretionary Spending Biden’s first presidential budget, released on April 13, also highlights the US’s attempt to boost climate policy (the Environmental Protection Agency’s funding would go up by 21%). More broadly it highlights the US’s ongoing sea change in fiscal policy. Discretionary spending turned around under President Trump’s populism and will continue under Biden’s populism. The difference lies in social spending versus defense. Biden proposes a 15.2% increase in non-defense discretionary spending, with education, commerce, health, and environment while the departments of defense and justice see much smaller increases (Chart 2). But we doubt that even defense spending will be curtailed given the US’s global strategic challenges. The president’s budget proposals are drops in the bucket compared to the trillions in his economic stimulus packages. Biden’s American Family Plan will be outlined in detail later this month but it only has a 50/50 chance of passing by the 2022 midterm election. This leaves us with the American Jobs Plan as the real macro policy factor to watch. And in the case of green energy, in particular, the Democrats may not have another opportunity to pass major legislation for many years. The US’s Strategic Basis For Green Energy The American Jobs Plan is billed as a $2.3 trillion green infrastructure package but in reality the package should be broken into traditional infrastructure ($784 billion for roads and bridges), social welfare ($647 billion  for elderly care, education, etc), green initiatives ($370 billion for electrical grid and retrofits, etc), tech initiatives ($280 billion for broadband, semiconductors, research and development), and small business support, in order of dollar value (Chart 3). The implication is that climate policy is important but not the top priority. Still, $370 billion is the biggest green package the US has ever launched. It consists of $150 billion for “hard” green infrastructure, such as new electricity grid and $220 billion for “soft” green infrastructure, such as tax credits for buying EVs (Chart 4). Chart 3Biden’s AJP: Green Initiatives Total $370 Billion Chart 4Biden’s AJP: Green Initiatives Mostly Rebates/Incentive The US has moved slowly on green energy policy – relative to Europe or China – because it does not face the same strategic necessity. China faces domestic social unrest if it does not reduce pollution, it faces American strategic containment if it does not reduce its dependency on the Middle East (35% of total oil consumption), and it faces the middle-income trap if it does not increase innovation and productivity. Europe is similarly dependent on a geopolitical enemy for its energy supply – Russia provides 35% of its oil consumption and 38% of its natural gas – and it must also increase productivity. Europe and China are net energy importers who have a great strategic interest in making energy supply a matter of manufacturing prowess rather than divine natural resource endowment (Chart 5). The US is late to the green energy game in part because it does not share the same degree of strategic necessity. Like the EU, the US took care of its most pressing pollution problems decades ago. But unlike the EU, the US is a net energy exporter thanks to the fracking revolution. However, the US is not truly energy independent – an Iranian closure of the Strait of Hormuz would cause global oil prices to spike and trigger a recession. And the US also has a powerful strategic interest in maintaining its global leadership and its edge in technology, innovation, and productivity (Chart 6). The US cannot afford to miss out on the green tech race even if starting from a more secure natural resource base. Chart 5US Green Focus Less Motivated By Energy Security Than China, EU US public opinion is also following European opinion regarding climate change and environmental protection. True, voters are more urgently concerned about the economy, jobs, and health care over the environment – as we showed in our Special Report on health care earlier this year. But the administration has decided not to rehash the health care battles of the Obama administration – having seen Republicans fail to repeal Obamacare – and instead to open up a new policy domain with climate change. Even if the environment is low priority for most voters, they do not oppose green projects in principle – in fact, they favor renewable energy over fossil fuels when it comes to the US’s energy future (Chart 7). And voters strongly favor infrastructure, which means they are more susceptible to green energy projects when presented as part of a broader infrastructure buildout – as opposed to a transformative “Green New Deal” designed to revolutionize every aspect of US life. Chart 6US Green Focus Motivated By Global Innovation/Tech Race Chart 7US Public Supports Renewable Energy The US shift to green energy is well underway, with renewables ready to surpass coal in the national energy mix (Chart 8). The natural gas boom of the past decade has worked wonders in reducing coal dependency and hence overall carbon emissions (Chart 9). Chart 8Shift To Renewables Well Underway Chart 9US Carbon Emissions To Fall Further Bottom Line: The US does not have the same energy security problems as China and the EU, which is one reason the US trails these competitors in green energy production and policy. But the US has a powerful interest in maintaining its technological edge and productivity growth. So policymakers will continue to push the green agenda even as the public follows Europe in becoming more favorable toward it over the long run. US Climate Policy Will Advance In Fits And Starts The fact that the US lacks the same strategic urgency as Europe and China suggests that the green energy push in the US will progress in fits and starts rather than in a straight line. Popular opinion cited above is supportive enough to allow a political party to push a green agenda if it has control of both the White House and Congress. The Biden administration has moderate-to-strong political capital based on our Political Capital Index (Appendix). But this could change with the next election, which would introduce a ruffle in the current narrative in which Biden saves planet earth. One factor that helps Biden is that his presidency is entirely about economic stimulus and recovery, which enables him to minimize the regulatory and punitive side of his party’s energy agenda. While the American Jobs Plan includes corporate tax hikes, his climate policy in itself is all about spending rather than taxation. There is no carbon pricing scheme anywhere to be seen. And Biden’s Transportation Secretary, Pete Buttigieg (“Mayor Pete,” a center-left politician from Indiana), immediately reversed his recent suggestion that the government levy a gasoline tax or vehicle mileage tax. Biden cannot get any revolutionary green measures passed through the Senate, given that moderate Democrats like Senators Joe Manchin of West Virginia and John Tester of Montana hail from coal-heavy states. The Democrats must also pay heed to the swing states for future elections. Biden only narrowly won his home state of Pennsylvania, after pledging to phase out oil and natural gas in the last presidential debate. True, Biden’s American Jobs Plan will remove subsidies for the oil and gas sector – but these subsidies are not very large. Notably, subsidies for renewables already overwhelm those for traditional infrastructure, even under the Trump administration (Chart 10). Chart 10Subsidy Reform Will Promote Renewables Chart 11Green Policy At Risk In 2022 Midterm These points underscore the fact that US climate policy is uncertain over the medium term, when the pandemic fades and the Democrats attempt more ambitious climate proposals. The Republican Party supports the traditional energy sector and is skeptical about climate change. The GOP could easily make a net gain of five seats in the 2022 midterm elections and take back control of the House of Representatives. They would not be able to repeal Biden’s laws or regulations, given his veto and likely Democratic majority in the Senate, but they would be able to pare back green funding. Republicans are not uniform on the issue of climate but more than half of Trump supporters in 2020 considered climate change unimportant. Young party members, moderates, and women were more split on the issue, with 60% of moderate Republicans viewing climate change as somewhat or very important (Chart 11). The takeaway is that Republicans would obstruct but not repeal future climate policy. Climate policy would be limited to Biden’s regulations until at least 2024. Hence investors can expect US climate policy to plow forward in the short run but to encounter resistance in the medium run. This is also likely to be the case as various other crises will emerge and soak up government attention and resources (most likely geopolitical conflicts). Chart 12Green Policy More Likely Over Long Term Over the long run climate policy will have more reliable support. Younger Republicans support federal environmental policy more than their elders, are increasingly favorable toward government regulation to that end, and prefer renewables to fossil fuels (Chart 12). The millennials and younger generations will make up more than half of the electorate by around 2028. Even then the government’s focus on climate will wax and wane given the other pressing matters of the day. Investment Takeaways A tsunami of money has been created, a lot of it is finding its way into the stock market, and a lot of it is finding its way into green and sustainable energy companies – companies that now have a privileged position in terms of both government support and conspicuous consumption. Combine this with a tidal wave of institutional funds pouring into anything and everything labeled ESG (environmental, social, and governance) – and the stigma attached to climate skepticism and denialism – and investors should fully expect irrational exuberance and stock bubbles. Consider the US’s premier EV maker, Tesla. The vertical run-up in Tesla stock has occurred alongside the run-up in US money supply. Tesla’s price trend conforms with the profile of a range of stock market bubbles of the past (Chart 13), as shown by our US Equity Strategy. Chart 13ALow Rates And Vast Money Growth... Chart 13B...Will Fuel Green Bubble That being said, renewables stocks surged throughout 2020 on the back of stimulus and Biden’s likely election – and have since fallen back. They have underperformed cyclical and defensive sectors alike this year to date (Chart 14). As highlighted above, the Democrats’ climate ambitions could yet be pared back in the Senate. However, given the argument in this report, there is sufficient political capital for the climate provisions of the American Jobs Plan to pass. Renewable plays should recover, at least on a tactical, “buy the rumor, sell the news” basis. To play Biden’s American Jobs Plan, our US Equity Strategist Anastasios Avgeriou constructed a “Biden Fiscal Advantage Basket” comprising eight ETFs and one stock, all equal weighted (Chart 15, top panel). Instead of buying specific stocks, Anastasios opted for ETFs so as to diversify away company-specific risk. Chart 14Renewables Corrected But Will Recover Chart 15Introducing The Biden Fiscal Advantage Basket The goal was to filter for ETFs that hold mostly US companies and that offered the highest possible liquidity. From a portfolio construction perspective, he aimed to match the different spending segments of Biden’s White House proposal with an ETF. The ticker symbols included in the basket are: PAVE, PHO, QCLN, TAN, WOOD, SOXX, HAIL, GRID and SU. We choose SU as there is no pure play Canadian oil sands ETF trading in USD. Granted there is some replication of stocks included in these ETFs. In certain ETFs there is also a sizable international stock exposure, including EM and Chinese stocks. One final caveat is that these ETFs have a high concentration of technology stocks. Our sense is that this basket should outperform the S&P500 on a cyclical and structural basis albeit not tactically (Chart 15, middle panel). However, given the high-tech exposure, our preferred way to express this trade is via a long/short pair trade versus the QQQ high-tech ETF, which tracks the largest 100 companies on the Nasdaq stock exchange (Chart 15, bottom panel). Table 1 shows a number of related ETFs that did not make the cut but that readers may find intriguing and that deserve further research. Later this month we will publish a joint special report with our US Equity Strategy service, updating our views on Biden’s proposals and elaborating on this equity basket. Table 1Infrastructure and Renewables Related ETFs More broadly, US equities are still enjoying a positive cyclical backdrop, whereas the passage of the American Jobs Plan later this year has a 50% chance of marking peak stimulus (the American Families Plan may not pass). Tactically, however, we are more cautious. There are also several pronounced foreign policy stress tests facing the Biden administration imminently, including serious Russia/Ukraine, Israel/Iran, and China/Taiwan saber-rattling that we fully expect to engender volatility and safe-haven flows. At least one FOMC member, Saint Louis Fed President Jim Bullard, is now openly thinking about thinking about the Fed’s tapering asset purchases – that is, once the US vaccination rate reaches 75%. Our US Investment Strategy recently showed that this rate of vaccination could be reached as early as September.     Matt Gertken Vice President Geopolitical Strategy mattg@bcaresearch.com Jesse Anak Kuri Associate Editor jesse.Kuri@bcaresearch.com Anastasios Avgeriou US Equity Strategist anastasios@bcaresearch.com   Appendix Table A1Political Risk Matrix Table A2Political Capital Index Table A3APolitical Capital: White House And Congress Table A3BPolitical Capital: Household And Business Sentiment Table A3CPolitical Capital: The Economy And Markets Table A4Biden’s Cabinet Position Appointments

Highlights Duration: Treasury yields look fairly valued on several different valuation metrics and the yield curve discounts a much quicker pace of rate hikes than is currently signaled by the Fed’s “dot plot”. However, the economic data continue to beat expectations by a wide margin. This suggests that bond yields could overshoot their fair value in the near term. Maintain below-benchmark portfolio duration. Employment: The US employment boom is just getting started. Total employment is still 8.4 million below pre-pandemic levels, but 37% of missing jobs are from the Leisure & Hospitality sector where demand is about to surge. Fed: The US economy will reach the Fed’s definition of “maximum employment” in 2022. This will cause the Fed to lift rates before the end of 2022, an event that will be preceded by an announcement of asset purchase tapering either late this year or early next year. Feature Chart 1Price Pressures Building The past two weeks brought us a couple of interesting developments directly related to the Treasury market. First, long-dated Treasury yields declined somewhat, presumably because many investors concluded that the yield curve is already priced for the full extent of future Fed rate hikes. Second, we received further evidence – from March’s +916k employment report, the 12% year-over-year increase in producer prices and continued elevated readings from PMI Prices Paid indexes – that economic activity is recovering more quickly than even the most optimistic forecasters anticipated (Chart 1). These two opposing forces highlight a tension in the current outlook for US Treasury yields. Yields now look fairly valued on several different valuation metrics, a fact that justifies keeping bond portfolio duration close to benchmark. However, cyclical economic indicators are surging, a fact that suggests yields will keep rising in the near-term, causing them to overshoot fair value for a time. This week’s report looks at this tension between valuation indicators and cyclical economic indicators through the lens of our Checklist To Increase Portfolio Duration. While we think there are convincing arguments in favor of both “At Benchmark” and “Below Benchmark” portfolio duration stances on a 6-12 month investment horizon, we are deciding to stick with our recommended “Below Benchmark” stance for now, until the economic data are more in line with market expectations. Checking In With Our Checklist Back in February, following the big jump in bond yields, we unveiled a Checklist of several criteria that would cause us to increase our recommended portfolio duration stance from “Below Benchmark” to “At Benchmark”.1 As is shown in Table 1, the Checklist contains seven items that can be grouped into two categories: Valuation Indicators that compare the level of Treasury yields to some estimate of fair value Cyclical Indicators that look at whether trends in the economic data are consistent with rising or falling bond yields Table 1Checklist For Increasing Duration Valuation Indicators Chart 2Valuation Indicators As mentioned above, valuation indicators show that Treasury yields are roughly consistent with fair value, suggesting that a neutral duration stance is appropriate. First, consider the 5-year/5-year forward Treasury yield relative to survey estimates of the long-run neutral fed funds rate (Chart 2). Last week, survey estimates from the New York Fed’s Survey of Market Participants and Survey of Primary Dealers were updated to March, and while there was some upward movement in the estimated long-run neutral rate ranges, the median estimates in both surveys were unchanged from January. The result is that the 5-year/5-year forward Treasury yield remains near the top-end of its survey-derived fair value band (Chart 2, top 2 panels). Second, the same two surveys also ask respondents to forecast what the average fed funds rate will be over the next 10 years. We can derive an estimate of the 10-year term premium by subtracting those forecasts from the 10-year spot Treasury yield (Chart 2, bottom 2 panels). In this case, respondents did raise their average fed funds rate forecasts and our term premium estimates were revised down as a result. While both term premium estimates are now below their 2018 peaks, they remain elevated compared to recent historical averages. Third, we turn to the front-end of the yield curve to look at what sort of Fed rate hike path is priced into the market (Chart 3). We see that the market is currently priced for Fed liftoff in December 2022 and for a total of four 25 basis point rate hikes by the end of 2023. Only a handful of FOMC participants forecasted a similar path at the March Fed meeting. Chart 3Market Priced For December 2022 Liftoff We discussed the wide divergence between market expectations and the Fed’s “dot plot” in a recent report.2 Essentially, the divergence boils down to the Fed focusing more on actual economic outcomes while the market takes its cues from economic forecasts. We think there’s good reason for optimism about the economy, and therefore expect that the Fed will revise its interest rate forecasts higher in the coming months as the “hard” economic data improve. However, we should point out that respondents to the New York Fed’s Survey of Primary Dealers and Survey of Market Participants also have much more benign interest rate forecasts than the market, and respondents to those surveys do not share the Fed’s bias toward actual economic outcomes. Table 2 shows that the average respondent to the Survey of Market Participants only sees a 35% chance that the Fed will lift rates before the end of 2022 and the Survey of Primary Dealers displays a similar result. Table 2Odds Of A Fed Rate Hike By End Of Year The wide gap between rate hike expectations embedded in the yield curve and forecasts from both the FOMC and the New York Fed’s surveys suggests that Treasury yields are at least fairly valued, and perhaps too high. However, the most important question is whether the market’s rate hike expectations look lofty compared to our own forecast. As is explained in the below section (titled “The Employment Boom Is Just Getting Started”), we think that the jobs market will be strong enough for the Fed to lift rates before the end of 2022 and that the market’s anticipated rate hike path looks reasonable. However, even this view is only consistent with a neutral stance toward portfolio duration. Chart 4Higher Inflation Is Priced In For our final valuation indicator we focus specifically on the outlook for inflation compared to what is already priced into the forward CPI swap curve (Chart 4). The forward CPI swap curve is priced for headline CPI inflation to rise to 2.7% by May 2022 before falling back down only slightly. In reality, year-over-year headline CPI will probably spike to even higher levels during the next two months but will then recede more quickly. We think it’s reasonable to expect headline CPI inflation to be between 2.4% and 2.5% in 2022, a range consistent with the Fed’s 2% PCE target, but the forward CPI swap curve reveals that this outcome is already priced. All in all, the message from the valuation indicators in our Checklist is that a robust economic recovery is already reflected in market prices. Thus, even with our optimistic economic outlook, Treasury yields look fairly valued, consistent with an “At Benchmark” portfolio duration stance.  Cyclical Indicators While valuation indicators perform well over longer time horizons, they are notoriously bad at pinpointing market turning points. It’s for this reason that we augment our Checklist with cyclical economic indicators, specifically high-frequency cyclical economic indicators that correlate tightly with bond yields. First, we look at the ratio between the CRB Raw Industrials commodity price index and gold (Chart 5). The CRB index is a good proxy for global economic growth and gold is inversely correlated with the stance of Federal Reserve policy – gold falls when policy is perceived to be getting more restrictive and rises when policy is perceived to be easing. This ratio has shown little evidence of rolling over and further gains are likely as the economy emerges from the pandemic. We also look at other high-frequency global growth indicators like the relative performance between cyclical and defensive equities and the performance of Emerging Market currencies (Chart 5, panels 2 & 3). The trend of cyclical equity sector outperformance continues while EM currencies have shown some tentative signs of weakness. The US dollar is one particularly important indicator for bond yields. As US yields rise relative to yields in the rest of the world it makes the US bond market a more attractive destination for foreign investors. When US yields are attractive enough, these foreign inflows can stop them from rising. One good indication that US yields are sufficiently high to attract a large amount of foreign interest is when investor sentiment toward the dollar turns bullish. For now, the survey of dollar sentiment we track shows that investors are still bearish on the US dollar (Chart 5, bottom panel). Bearish dollar sentiment supports further increases in bond yields. Chart 5Cyclical Indicators Chart 6Data Surprises Still Positive Finally, we track the US Economic Surprise Index as an excellent summary indicator of the US data flow relative to market expectations. The index also correlates tightly with changes in bond yields (Chart 6). Though the index has fallen significantly from the absurd highs seen late last year, it is still elevated compared to typical historical levels. In general, bond yields tend to rise when the economic data are beating expectations, as indicated by a positive Surprise Index. All in all, we see that the cyclical indicators in our Checklist are sending a very different signal than the valuation indicators. This suggests a high probability that yields could overshoot fair value in the near term. Bottom Line: Treasury yields look fairly valued on several different valuation metrics and the yield curve discounts a much quicker pace of rate hikes than is currently signaled by the Fed’s “dot plot”. However, the economic data continue to beat expectations by a wide margin. This suggests that bond yields could overshoot their fair value in the near term. Maintain below-benchmark portfolio duration. The Employment Boom Is Just Getting Started Chart 7Defining "Maximum Employment" The Fed has conditioned the first rate hike of the cycle on both (i) 12-month PCE inflation being at or above 2% and (ii) the labor market being at “maximum employment”. As we’ve previously written, we see strong odds that the inflation trigger will be met in time for a 2022 rate hike.3 This week, we assess the likelihood that “maximum employment” will be reached in time for the Fed to lift rates next year. Fed communications have made it clear that the FOMC’s definition of “maximum employment” is equivalent to an environment where the unemployment rate is between 3.5% and 4.5% - the range of FOMC participants’ NAIRU estimates – and the labor force participation rate has made a more-or-less complete recovery to pre-pandemic levels (Chart 7). Following March’s blockbuster employment report, we update our calculations of the average monthly nonfarm payroll growth that must occur to hit “maximum employment” by different future dates (Tables 3A-3C). Table 3AAverage Monthly Nonfarm Payroll Growth Required For The Unemployment Rate To Reach 4.5% By The Given Date Table 3BAverage Monthly Nonfarm Payroll Growth Required For The Unemployment Rate To Reach 4% By The Given Date Table 3CAverage Monthly Nonfarm Payroll Growth Required For The Unemployment Rate To Reach 3.5% By The Given Date For example, to reach the Fed’s definition of “maximum employment” by December 2022, nonfarm payroll growth must average between +410k and +487k per month between now and then. To reach “maximum employment” by the end of this year, payroll growth must average between +701k and +833k over the remaining nine months of 2021. It’s probably unrealistic to expect a return to “maximum employment” by the end of this year, but we do expect at least a couple more monthly payroll reports that are even stronger than last month’s +916k. Our optimism stems from the industry breakdown of the current jobs shortfall. Table 4 shows the change in overall nonfarm payrolls between February 2020 and March 2021. In total, we see that the US economy is missing 8.4 million jobs compared to pre-pandemic. We also see that 3.1 million (or 37%) of those jobs come from the Leisure & Hospitality sector. That sector is predominantly made up of restaurants and bars, two services where demand is about to ramp up significantly as COVID vaccination spreads across the US. A few months in a row of 1 million or more jobs added is highly likely in the near future. Table 4Employment By Industry Bottom Line: We see the boom in employment as just getting started and we expect that the US economy will reach the Fed’s definition of “maximum employment” in 2022. This will cause the Fed to lift rates before the end of 2022, an event that will be preceded by an announcement of asset purchase tapering either late this year or early next year.   Ryan Swift US Bond Strategist rswift@bcaresearch.com Footnotes 1 https://www.bcaresearch.com/webcasts/detail/387 2 Please see US Bond Strategy Weekly Report, “The Fed Looks Backward While Markets Look Forward”, dated March 23, 2021, available at usbs.bcaresearch.com 3 Please see US Bond Strategy Weekly Report, “Limit Rate Risk, Load Up On Credit”, dated March 16, 2021, available at usbs.bcaresearch.com Fixed Income Sector Performance Recommended Portfolio Specification

Highlights Private-sector savings exploded during the pandemic, swelling the already large global savings glut. Reluctant to sit on excess cash, households shifted some of their funds into the stock market. With corporate buybacks outpacing new share issuance, stock prices had nowhere to go but up. Falling bond yields further supercharged equity valuations. Despite the run-up in stocks, the global equity risk premium – measured as the forward equity earnings yield minus the real bond yield – still stands at about 6%, similar to where it was in late-2009. Using a simple example, we show why investors should hold more stock than the standard 60/40 rule suggests when bond yields are still this low. While bond yields will rise further over the coming years, it is likely to be a slow process. Investors should remain bullish on stocks over a 12-month horizon, favouring non-US equities over their US peers. Did A Surfeit Of Savings Lead To A Shortage Of Assets? Real interest rates have fallen dramatically since the early 1980s (Chart 1). Economic theory posits that lower real rates discourage savings while encouraging spending. Yet, as Chart 2 shows, with the exception of the late-1990s and the mid-2000s – two periods when spending was buoyed first by the dotcom bubble and then by the housing bubble – the US private sector has run a large financial surplus; that is to say, it has consistently spent less than it earned. Private-sector financial balances in most other economies have followed a similar trend. Chart 1Real Bond Yields Have Been Trending Lower Since The 1980s Chart 2The Private Sector Has Been Mostly Running Surpluses Ben Bernanke famously cited chronic private-sector financial surpluses as evidence of a “global savings glut.” The concept of a savings glut is closely related to the concept of demand-side secular stagnation, an idea popularized by Larry Summers prior to his heel-turn towards stimulus skeptic. When the private sector is unable to find enough worthy investment projects to make use of all available savings, the economy will struggle to attain full employment, even in the presence of very low interest rates. The concept of a savings glut is also related to another, less well known, concept: a safe asset shortage. If the private sector earns more than it spends, it must, by definition, accumulate assets. In principle, governments can satiate the demand for safe assets by issuing more bonds. In practice, governments have often been reluctant to run persistently large budget deficits for fear that this could undermine their credibility. Faced with a shortage of safe assets, the private sector has stepped in to fill the void, often with disastrous consequences. Most notably, in the lead-up to the Global Financial Crisis, banks sliced and diced portfolios of risky mortgages with the goal of creating safe assets that could be sold into the market. Most financial crashes occur when investors conclude that the assets they once thought were safe are not so safe after all. This was precisely what happened to mortgage-backed securities during the 2008 mortgage meltdown. The exact same pattern repeated itself two years later when investors finally came around to the seemingly obvious conclusion that Greek government bonds were not as safe as say, German bunds. The Safe Asset Shortage In A Post-Pandemic World This brings us to the present day. After falling from 7% of GDP in 2009 to 3% of GDP in the lead-up to the pandemic, the global private-sector financial balance surged to 11% of GDP in 2020. The IMF expects the global private-sector balance to average 9% of GDP in 2021 before trending lower over the coming years. Arithmetically, the private-sector financial balance must equal the sum of the fiscal deficit and the current account balance.1 By running large budget deficits during the pandemic, governments endowed the private sector with income they otherwise would not have had. This income consisted of transfers (stimulus checks, expanded unemployment benefits, business subsidies, etc.) as well as income generated from direct government spending on goods and services. As of the end of March, we estimate that US households had accumulated about $2.2 trillion (10.5% of GDP) in savings over and above what they would have had in the absence of the pandemic. About 40% of those “excess savings” stemmed from fiscal policy with the remainder reflecting decreased consumption (Chart 3). Chart 3Lower Spending And Higher Income Have Led To Mounting Savings Chart 4Government Largesse Boosted Savings And Fattened Bank Deposits As the private sector’s financial balance increased, so did its asset holdings. Unlike in normal fiscal expansions where governments fund budget deficits by selling debt to the public, this time around, governments largely sold the debt to central banks. The money that governments received from central banks in return was then pumped into the economy, leading to a surge in bank deposits (Chart 4).   The Nature Of Stock Market “Flows” What happened to the money after it reached people’s bank accounts? A popular narrative is that some of it flowed into the stock market. While this description is technically true, it is somewhat misleading in that it conveys the false impression that there was a net inflow of money into stocks. The reality is more nuanced. When I buy some stock, I gain some shares but lose some cash. Conversely, whoever sold me the stock gains some cash and loses some shares. In aggregate, there is no change in either the number of shares or the amount of cash that investors hold. What does change is the value of the shares in relation to the cash that investors hold. My purchase must lift the share price by enough to persuade someone else to part with their shares. If the seller does not want to hold the additional cash, he or she may try to place an order to purchase a different stock that appears more attractively priced. This game of hot potato will only end when the value of the stock market rises by enough that all investors are happy with how much stock they own in relation to how much cash they hold. Rethinking The 60/40 Split The standard investment mantra is that investors should hold 60% of their portfolios in stock and the rest in cash, bonds, and other financial assets. The discussion above casts doubt on this simple rule of thumb. Suppose that Melanie holds $600 in stock and $400 in cash, and that cash earns a real interest rate of 2%. Let us also assume that Melanie requires a 4% equity risk premium. Hence, the equity earnings yield must be 6% (i.e., her $600 in stock must correspond to $36 in earnings).2 Now let us suppose that the central bank cuts the policy rate, so that the real interest rate falls to zero. In order to maintain a 4% equity risk premium, the earnings yield must decline to 4%, which implies that the value of the stock must rise to $900 ($36/0.04=$900). Thus, we have gone from a position where Melanie holds 60% of her portfolio in stock to one where she holds about 69% ($900/$1300) in stock. In other words, even though the equity risk premium did not change at all, the desired ratio of stock-to-cash rose from $600/$400=1.5 to $900/$400=2.25. Let us continue the thought experiment and imagine a scenario where the government sends Melanie and everyone else a stimulus check of $100. Now she has $500 in cash and $900 in stock. If she wants to maintain a stock-to-cash ratio of 2.25, she would need to use some of her cash to buy stock. However, since everyone else is also looking to purchase stock with their stimulus checks, before Melanie has a chance to enter a buy order, she finds that the stock in her portfolio has appreciated to $1125. Since $1125/$500 is equal to 2.25, Melanie cancels her buy order, content with the knowledge that she holds as much stock as she wants. Notice that in this simple example, neither interest rate cuts nor stimulus checks did anything to boost corporate profits. All that happened is that stock prices rose, causing the equity earnings yield to first fall from 6% to 4% after the central bank cut rates, and then fall again from 4% to 3.2% ($36/$1125) after the stimulus checks were sent out. If all of this sounds a bit familiar, it should. The sequence of events described above is precisely what has happened over the past 12 months. And not just to stock prices. As interest rates fell and cash balances swelled, other risky assets such as cryptocurrencies went to the proverbial moon. Is The Party Over? Given that fiscal stimulus has peaked and interest rates cannot be cut any further in the major economies, are stocks set to fall? Not necessarily! The amount of stock that investors choose to hold in relation to their cash balances is a function of animal spirits. While US consumer confidence rebounded in March to the highest level in a year, it still remains well below pre-pandemic levels (Chart 5). The percentage of households in The Conference Board’s survey who expect stock prices to rise over the next 12 months is still around its long-term average (Chart 6). Chart 5Stocks Could Rise Further As Confidence Recovers Chart 6The Percentage Of Households Who Expect Stock Prices To Rise Over The Next 12 Months Is Still Around Its Long-Term Average Fortunately, the US is on target to provide a vaccine shot to everyone who wants one by the end of April.3 As the economy continues to reopen, confidence will rise further. Rising confidence, in turn, may prompt investors to increase their equity holdings. Our US equity strategists expect share buybacks to exceed share issuance over the next 12 months. Thus, the value of equity portfolios will only be able to rise if share prices go up. Outside the US and the UK and a few other smaller economies, the vaccination campaign has gotten off to a rocky start. However, the pace of inoculations is set to accelerate rapidly in the second quarter, which should pave the way to faster global growth. Global equities usually outperform bonds when growth is on the upswing (Chart 7). Chart 7Stocks Usually Outperform Bonds When Economic Growth Is Strong While equity allocations have risen, they are below the level reached in 2000 (Chart 8). Back then, the global equity earnings yield was on par with the real bond yield. Today, the earnings yield is about six percentage points above the bond yield, a similar gap to what prevailed in late-2009 (Chart 9). Chart 8Stock Allocations Have Rebounded, But Remain Below Their 2000 Peak Chart 9The Equity Risk Premium Is At Levels Similar To Late-2009 Granted, today’s high equity risk premium largely reflects the exceptionally low level of bond yields. If bond yields were to move up, the equity risk premium would shrink. While we do think that bond yields will rise by more than expected in the long run, the path to higher yields is likely to be a slow one. Rate expectations 2-to-3 years out tend to move closely in line with the 10-year yield (Chart 10). Already, there is a large gap between market expectations and the Fed dots. Whereas the market expects the Fed to start lifting rates late next year, the median Fed “dot” continues to signal no rate hike at least until 2024 (Chart 11). It is unlikely that market expectations will shift towards an even more aggressive path of rate tightening unless the Fed’s dovish rhetoric turns hawkish. As we discussed in our recently published Second Quarter Strategy Outlook, we do not expect this to happen anytime soon. Thus, with monetary policy still very loose, stocks can continue to grind higher. Chart 10Bond Yields Are Unlikely To Rise Much Unless The Market Lifts Its Estimate Of Where The Fed Funds Rate Will Be 2-To-3 Years Out   Chart 11A Wide Gap Has Opened Up Between Market Expectations And The Fed Dots Regionally, we favour stock markets outside the US. Not only will overseas markets benefit from a rotation in growth from the US to the rest of the world in the second half of this year, but US corporate tax rates are almost certain to rise. We will be exploring the tax issue over the coming weeks.   Peter Berezin Chief Global Strategist pberezin@bcaresearch.com Footnotes 1 Just as the private-sector financial balance is the difference between what the private sector earns and spends, the fiscal balance is the difference between what the government earns and spends. If the fiscal balance is negative, the government runs a deficit. If the fiscal balance is positive, the government runs a surplus. Thus, added together, the private-sector financial balance and the fiscal balance simply equals the difference between what the country as a whole earns and spends which, by definition, is equal to the current account balance. One can also see this point by rewriting the equation Y=C+I+G+X-M as (Y-T)-(C+I)=(G-T)+(X-M) where T is tax revenue, Y-T is private-sector earnings, C+I is what the private sector spends on consumption and capital goods, G-T is the fiscal deficit, and X-M is the current account balance, broadly defined to include not only the trade balance but also net income from abroad. 2 The relative attractiveness of stocks can also be inferred by subtracting the real bond yield from the earnings yield on stocks in order to get an implied equity risk premium (ERP). It is necessary to subtract the real bond yield, rather than the nominal bond yield, from the earnings yield because the earnings yield provides an estimate of the real total expected return to shareholders. For further discussion on this, please see Appendix A of the Global Investment Strategy Special Report, “TINA To The Rescue?” dated August 23, 2019. 3 Mia Sato, “The US is about to reach a surprise milestone: too many vaccines, not enough takers,” MIT Technology Review, March 22, 2021. Global Investment Strategy View Matrix Special Trade Recommendations Current MacroQuant Model Scores

Highlights Continued upgrades to global economic growth – most recently by the IMF this week –will support higher natgas prices.  In our estimation, gas for delivery at Henry Hub, LA, in the coming withdrawal season (November – March) is undervalued at current levels at ~ $2.90/MMBtu. Inventory demand will remain strong during the current April-October injection season, following the blast of colder-than-normal weather in 1Q21 that pulled inventories lower in the US, Europe and Northeast Asia. The odds the US will succeed in halting completion of the final leg of the Russian Nord Stream 2 natural gas pipeline into Germany are higher than the consensus expectation.  Our odds the pipeline will not be completed this year stand at 50%, which translates into higher upside risk for natural gas prices.  We are getting long 1Q22 calls on CME/NYMEX Henry Hub-delivered natgas futures struck at $3.50/MMBtu vs. short 1Q22 $3.75/MMBtu calls at tonight's close.  The probability of Nord Stream 2 cancellation is underpriced, which means European TTF and Asian JKM prices will have to move higher to attract LNG cargoes next winter from the US, if the pipeline is cancelled (Chart of the Week). Feature As major forecasting agencies continue to upgrade global growth prospects, expectations for industrial-commodity demand – energy, bulks, and base metals – also are moving higher. This week, the IMF raised its growth expectations for this year and next to 6% and 4.4%, respectively, nearly a full percentage-point increase versus its January forecast update for 2021.1 This upgrade follows a similar move by the OECD last month.2 In the US, the EIA is expecting industrial demand for natural gas to rise 1.35 Bcf/d this year to 23.9 Bcf/d; versus 2019 levels, industrial demand will be 0.84 Bcf/d higher in 2021. For 2022, industrial demand is expected to be 24.2 Bcf/d. US industrial demand likely will recover faster than the EU's, given the expectation of a stronger recovery on the back of massive fiscal and monetary stimulus. Overall natgas demand in the US likely will move lower this year, given higher natgas prices expected this year and next will incentivize electricity generators to switch to coal at the margin, according to the EIA. Total demand is expected to be 82.9 Bcf/d in the US this year vs. 83.3 Bcf/d last year, owing to lower generator demand. Pipeline-quality gas output in the US – known as dry gas, since its liquids have been removed for other uses – is expected to average 91.4 Bcf/d this year, essentially unchanged. Lower consumption by the generators and flat production will allow US gas inventories to return to their five-year average levels of 3.7 Tcf by the end of October, in the EIA's estimation (Chart 2). Chart of the WeekUS-Russia Geopolitical Risk Underpriced Chart 2US Natgas Inventories Return To Five-Year Average US Liquified Natural Gas (LNG) exports are likely to expand, as Asian and European demand grows (Chart 3). Prior to the boost in US LNG demand from colder weather, exports set monthly records of 9.4 Bcf/d and 9.8 Bcf/d in November and December of last year, respectively, with Asia accounting for the largest share of exports (Chart 4). This also marked the first time LNG exports exceeded US pipeline exports to Mexico and Canada. The EIA is forecasting US LNG exports will be 8.5 bcf/d and 9.2 Bcf/d this year and next, versus pipeline exports of 8.8 Bcf/d and 8.9 Bcf/d in 2021 and 2022, respectively. Chart 3US LNG Exports Continue Growing Chart 4US LNG Exports Set Records In November And December 2020 US LNG exports – and export potential given the size of the resource base at just over 500 Tcf – now are of a sufficient magnitude to be a formidable force in global markets, particularly in Europe. This puts it in direct conflict with Russia, which has targeted Europe as a key market for its pipeline natural gas exports. US-Russia Standoff Looming Over Nord Stream 2 Given the size and distribution of global oil and gas production and consumption, it comes as no surprise national interests can, at times, become as important to pricing these commodities as supply-demand fundamentals. This is particularly true in oil, and increasingly is becoming the case in natural gas. That the same dramatis personae – the US and Russia – should feature in geopolitical contests in oil and gas markets also should not come as a surprise. In an attempt to circumvent transporting its natural gas through Ukraine, Russia is building a 1,230 km underwater pipeline from Narva Bay in the Kingisepp district of the Leningrad region of Russia to Lubmin, near Greifswald, in Germany (Map 1). The Biden administration, like the Trump administration and US Congress, is officially attempting to halt the final leg of the pipeline from being built, although Biden has not yet put America’s full weight into stopping it. Biden claims it will be up to the Europeans to decide what to do. At the same time, any major Russian or Russian-backed military operation in Ukraine could trigger an American action to halt the pipeline in retaliation. Map 1Nord Stream 2 Route In our estimation, there is a 50% chance that the Nord Stream 2 natural gas pipeline will not be completed this year or go into operation as planned given substantial geopolitical risks. The $11 billion pipeline would connect Russia directly to Germany with a capacity of about 55 billion cubic meters, which, combined with the existing Nord Stream One pipeline, would equal 110 BCM in offshore capacity, or 55% of Russia's natural gas exports to Europe in 2019. The pipeline’s construction is 94% complete, with the Russian ship Akademik Cherskiy entering Danish waters in late March to begin laying pipes to finish the final 138-kilometer stretch, according to Reuters. The pipeline could be finished in early August at the pace of 1 kilometer per day.3 The Russian and German governments are speeding up the project to finish it before US-Russia tensions, or the German elections in September, interrupt the construction process again. It is not too late for the US to try to halt the pipeline through sanctions. But for the Americans to succeed, the Biden administration would have to make an aggressive effort. Notably the Biden administration took office with a desire to sharpen US policy toward Russia.4 While Biden seeks Russian engagement on arms reduction treaties and the Iranian nuclear negotiations, he mainly aims to counter Russia, expand sanctions, provide weapons to Ukraine, and promote democracy in Russia’s sphere of influence. The result will almost inevitably be a new US-Russia confrontation, which is already taking shape over Russia’s buildup of troops on the border with Ukraine, where US and Russian meddling could cause civil war to reignite (Map 2). Map 2Russia’s Military Tensions With The West Escalate In Wake Of Biden’s Election And Ukraine’s Renewed Bid To Join NATO Tensions in Ukraine are directly tied to US military cooperation with Ukraine and any possibility that Ukraine will join the NATO military alliance, a red line for Putin. Nord Stream 2 is Russia’s way of bypassing Ukraine but a new US-Russia conflict, especially a Russian attack on Ukraine, would halt the pipeline. The pipeline’s completion would improve Russo-German strategic relations, undercut US liquefied natural gas exports to Germany and the EU, and reduce the US’s and eastern Europe’s leverage over Russia (and Germany). Biden says his administration is planning to impose new sanctions on firms that oversee, construct, or insure the pipeline, and such sanctions are required under American law.5 Yet Biden also wants a strong alliance with Germany, which favors the pipeline and does not want to escalate the conflict with Russia. The American laws against Nord Stream have big loopholes and give the president discretion regarding the use of sanctions, which means Biden would have to make a deliberate decision to override Germany and impose maximum sanctions if he truly wanted to halt construction.6 This would most likely occur if Russia committed a major new act of aggression in Ukraine or against other European democracies. The German policy, under the current ruling coalition led by Chancellor Angela Merkel’s Christian Democratic Union, is to finish the pipeline despite Russia’s conflicts with the West and political repression at home. Russia provides more than a third of Germany’s natural gas imports and this pipeline would bypass eastern Europe’s pipeline network and thus secure Germany’s (and Austria’s and the EU’s) natural gas supply whenever Russia cuts off the flow to Ukraine (through which roughly 40% of Russian natural gas still must pass to reach Europe). Germany's Election And Natgas Politics Germany wants to use natural gas as a bridge while it phases out nuclear energy and coal. Natural gas has grown 2.2 percentage points as a share of Germany’s total energy mix since the Fukushima disaster of 2011, and renewable energy has grown 7.7ppt, while coal has fallen 7.3ppt and nuclear has fallen 2.5ppt (Chart 5). The German federal election on September 26 complicates matters because Merkel and the Christian Democrats are likely to underperform their opinion polls and could even fall from power. They do not want to suffer a major foreign policy humiliation at the hands of the Americans or a strategic crisis with Russia right before the election. They will insist that Biden leave the pipeline alone and will offer other forms of cooperation against Russia in compensation. Therefore, the current German government could push through the pipeline and complete the project even in the face of US objections. But this outcome is not guaranteed. The German Greens are likely to gain influence in the Bundestag after the elections and could even lead the German government for the first time – and they are opposed to a new fossil fuel pipeline that increases Russia’s influence. Chart 5Germany Sees Nord Stream 2 Gas As Bridge To Low-Carbon Economy Hence there is a fair chance that the pipeline does not become operational: either Americans halt it out of strategic interest, or the German Greens halt it out of environmental and strategic interest, or both. True, there is a roughly equal chance that Merkel’s policy status quo survives in Germany, which would result in an operational pipeline. The best case for Germany might be that the current government completes the pipeline physically but the next government has optionality on whether to make it operational. But 50/50 odds of cancellation is a much higher risk than the consensus holds. The Russian policy is to finish Nord Stream 2 while also making an aggressive military stance against the West’s and NATO’s influence in Ukraine. This would expand Russian commodity and energy exports and undercut Ukraine’s natgas transit income. It would also increase Russian leverage over Germany – and it would divide Germany from the eastern Europeans and Americans. A preemptive American intervention would elicit Russian retaliation. The Russians could respond in the strategic sphere or the economic sphere. Economically they could react by cutting off natural gas to Europe, but that would undermine their diplomatic goals, so they would more likely respond by increasing production of natural gas or crude oil to steal American market share. In any scenario Russian retaliation would likely cause global price volatility in one or more energy markets, in addition to whatever volatility is induced by the cancellation of Nord Stream 2 itself. US-Russia tensions are likely to escalate but only Ukraine and Nord Stream 2, or the separate Iranian negotiations, have a direct impact on global energy supply. If Germany goes forward with the pipeline, then Russia would need to be countered by other means. The Americans, not the Germans, would provide these “other means,” such as military support to ensure the integrity of Ukraine and other nations’ borders. The Russians may gain a victory for their energy export strategy but they will never compromise on Ukraine and they will still need to focus on the broader global shift to renewable energy, which threatens their economic model and hence ultimately their regime stability. So, the risk of a market-moving US-Russia conflict can be delayed but probably not prevented (Chart 6). Chart 6US-Russia Conflit Likely Bottom Line: The Nord Stream 2 pipeline is not guaranteed to be completed this year as planned. The US is more likely to force a halt to the Nord Stream 2 pipeline than the consensus holds, especially if Russia attacks Ukraine. If the US fails to do so, then the German election will become the next signpost for whether the pipeline will become operational. If the Americans halt the pipeline, then US-Russian conflict either already erupted or will occur sooner rather than later and will likely impact global oil or natural gas prices. Investment Implications Our subjective assessment of 50% odds the US will succeed in halting completion of the final leg of Nord Stream 2 are higher than the consensus expectation. This translates directly into higher upside risk for natural gas prices in the US and Europe later this year and next. Given our view, we are getting long 1Q22 calls on CME/NYMEX Henry Hub-delivered natgas futures struck at $3.50/MMBtu vs. short 1Q22 $3.75/MMBtu calls at tonight's close. The probability of Nord Stream 2 cancellation is underpriced, which means the odds of higher prices in the LNG market are underpriced (Chart 7). The immediate implication of our view is European TTF prices will have to move higher to attract LNG cargoes next winter from the US, if the Nord Stream 2 pipeline's final leg is cancelled. This also would tighten the Asian markets, causing the JKM to move higher as well (Chart 8). Any indication of colder-than-normal weather in the US, Europe or Asian markets would mean a sharper move higher. Chart 7Natgas Tails Are Too Narrow For Next Winter Chart 8Nord Stream 2 Cancellation Would Boost JKM Prices   Robert P. Ryan Chief Commodity & Energy Strategist rryan@bcaresearch.com Matt Gertken Vice President Geopolitical Strategy mattg@bcaresearch.com Commodities Round-Up Energy: Bullish The US and Iran began indirect talks earlier this week in Vienna aimed at restoring the Joint Comprehensive Plan of Action (JCPOA), otherwise known as the "Iran nuclear deal." All of the other parties of the deal – Britain, China, France, Germany and Russia – are in favor of restoring the deal. BCA Research believes this is most likely to occur prior to the inauguration of a new president who is expected to be a hardliner willing to escalate Iran’s demands. US President Biden can unilaterally ease sanctions and bring the US into compliance with the deal, and Iran could then reciprocate. If a deal is not reached by August it could take years to resolve US-Iran tensions. China could offer to cooperate on sanctions and help to broker negotiations following the signing of its 25-year trade deal with Iran last week. Russia likely would demand the US not pressure its allies to cancel the Nord Stream 2 deal, in return for its assistance in brokering a deal. Base Metals: Bullish Iron ore prices continue to be supported by record steel prices in China, trading at more than $173/MT earlier this week. Even though steel production reportedly is falling in the top steel-producer in China, Tangshan, as a result of anti-pollution measures, for iron ore remains stout. As we have previously noted, we use steel prices as a leading indicator for copper prices. We remain long Dec21 copper and will be looking for a sell-off to get long Sep21 copper vs. short Sep21 copper if the market trades below $4/lb on the CME/COMEX futures market (Chart 9). Precious Metals: Bullish Gold held support ~ $1,680/oz at the end of March, following an earlier test in the month. We remain long the yellow metal, despite coming close to being stopped out last week (Chart 10). The earlier sell-off appeared to be caused by a need to raise liquidity to us. We continue to expect the Fed to hold firm to its stated intent to wait for actual inflation to become manifest before raising rates, and, therefore, continue to expect real rates to weaken. This will be supportive of gold and commodities generally (Chart 10). Ags/Softs: Neutral Corn continues to be well supported above $5.50/bu, following last week's USDA report showing farmers intend to increase acreage planted to just over 91mm acres, which is less than 1% above last year's level. Chart 9 Chart 10       Footnotes 1     Please see the Fund's April 2021 forecast Managing Divergent Recoveries. 2     We noted last week these higher growth expectations generally are bullish for industrial commodities – energy, metals, and bulks.  Please see Fundamentals Support Oil, Bulks, And Metals, which we published 1 April 2021.  It is available at ces.bcaresearch.com. 3    For the rate of construction see Margarita Assenova, “Clouds Darkening Over Nord Stream Two Pipeline,” Eurasia Daily Monitor 18: 17 (February 1, 2021), Jamestown Foundation, jamestown.org. For the current status, see Robin Emmott, “At NATO, Blinken warns Germany over Nord Stream 2 pipeline,” Reuters, March 23, 2021, reuters.com. 4    The Democratic Party blames Russia for what it sees as a campaign to undermine the democratic West and recreate the Soviet sphere of influence. See for example the 2008 invasion of Georgia, the failure of the Obama administration’s 2009-11 diplomatic “reset,” the Edward Snowden affair, the seizure of Crimea and civil war in Ukraine, the survival of Syria’s dictator, and Russian interference in US elections in 2016 and 2020. 5    The Countering Russian Influence in Europe and Eurasia Act of 2017, and the Protecting Europe’s Energy Security Act of 2019/2020, contain provisions requiring sanctions on firms that have contributed in any way a minimum of $1 million to the project, or provide pipe-laying services or insurance. There are exceptions for services provided by the governments of the EU member states, Norway, Switzerland, or the UK. The president has discretion over the implementation of sanctions as usual. 6    The German state of Mecklenburg-Vorpommern is creating a shell foundation to enable the completion of the pipeline. It can shield companies from American sanctions aimed at private companies, not sovereigns.    Investment Views and Themes Recommendations Strategic Recommendations Tactical Trades Commodity Prices and Plays Reference Table Summary of Closed Trades

Highlights Our 80% odds that Biden will pass the $2.3 trillion American Jobs Plan stem from public opinion as well as Democratic control of Congress. Voters favor both higher taxes on corporations and higher infrastructure spending, as well as Biden’s proposal to pay for the latter by means of the former. A bipartisan consensus favors infrastructure spending, including “soft” infrastructure. Republicans who campaigned on the need for infrastructure over the past five years will not gain voter support by opposing it now. The Senate parliamentarian’s recent ruling on budget reconciliation procedures enables the Democrats to pass a second reconciliation bill, as expected. This puts Biden’s American Families Plan, to be detailed this month, officially into play for FY2022. Our initial premise remains a 50/50 chance that the $1.9 trillion bill passes before the 2022 midterms. Infrastructure plays benefit from a rising budget deficit but will also face a global headwind as China’s stimulus and growth momentum wane. Feature The market cheered the Biden administration’s $2.3 trillion American Jobs Plan despite the confirmation that corporate tax rates will go up as expected (Chart 1). The details of the plan are shown in Table 1, which makes it clear that $760 billion can easily be subtracted from the plan during negotiations as not having to do with infrastructure. However, investors should wager that most of the new spending, including the social welfare components, will pass, since Democrats will use the budget reconciliation process. Chart 1Market Response To Biden, Infrastructure, Tax Hikes Table 1Biden's 'American Jobs Plan' The bigger question is tax hikes. Senator Joe Manchin of West Virginia reiterated that a 25% corporate tax rate is as high as he is willing to go. Since Democrats cannot spare a single vote in the Senate (not to mention six or seven votes, which Manchin claims to have on his side), the corporate tax rates may be compromised. Still, investors should prepare for the worst, i.e. the 28% rate that Biden presented or only slightly less. While Manchin is the critical marginal voter – his vote will turn the balance of power in the Senate – nevertheless there will be enormous pressure on him not to “betray” his party and vote against the signature legislative proposal of the Biden presidency. Insofar as Manchin succeeds, he presents a “less bad” outcome for equity sectors that stand to suffer the most from a higher headline corporate tax rate, such as utilities, health care, and information technology (Chart 2). Chart 2Corporate Tax Rates Will Rise To 25%-28%, A Big Increase For Real Estate, Health Care, Tech, Utilities, And Consumer Staples It will take time to draft and negotiate the spending and tax provisions and then get them passed in both the House and Senate. The Democrats also face tight margins in the House, where they can only lose four votes (the balance in the House is 218-211 after the death of Florida Representative Alcee Hastings). The earliest possible passage – based on historical precedent – is in May. The average length of time would put passage in November. In the worst case the negotiations could drag on till Christmas but we highly doubt the Democrats will take that long (Diagram 1). We attach an 80% subjective probability to the view that the American Jobs Plan will pass by end of year. Diagram 1Time Line For Congress To Pass American Jobs Plan By End Of 2021 Where we are less certain is in the second part of Biden’s economic plan, the $1.9 trillion American Families Plan, which contains social welfare spending, an expansion of the child tax credit and other tax cuts for the lower and middle classes, and the tax hikes on upper-middle class and wealthy individuals and households. This program will be outlined this month. It will be a challenge to pass it prior to the 2022 midterm elections, depending on how fast infrastructure flies through Congress. Our subjective 50% odds received initial support on April 5 when the Senate parliamentarian, Elizabeth MacDonough, ruled that the Democrats can indeed pass more than one budget reconciliation bill per fiscal year, contrary to previous practice. This bill is just as likely to be the Democratic campaign platform for 2022 as to be passed in early 2022 under the current Congress. Senate Parliamentarian Enables Democrats To Bypass Filibuster We must pause here to note that the parliamentarian’s ruling is highly consequential as it erodes the checks and balances on passing legislation in the Senate. The new ruling holds that under Section 304 of the Congressional Budget Act of 1974 the annual budget resolution can be revised. If it can be revised, then a new budget reconciliation bill can be crafted according to the new budget resolution. And reconciliation enables the ruling party to push through bills on a simple majority (51 votes) in the Senate. It will be hard for the Senate, as a body, to limit the ramifications of this decision in future. If the Democrats can pass two reconciliation bills in FY2021, then who is to say that some later Congress cannot pass three? Regardless, it is hard for a party to pass more than three major pieces of legislation in a single year, so the window is just wide enough to enable major breakthroughs in legislation (and, whenever the opposing party regains the House and Senate, big reversals of legislation). We have argued that Democrats would eventually, if not immediately, remove the Senate filibuster (the rule that requires 60-votes to end debate on regular legislation). At the moment there are still not enough votes to remove the filibuster entirely, although moderate Democrats are looking at technical ways of diminishing its influence, such as via the “talking filibuster” that would increase the difficulty of the process and thus reduce its use in the Senate.1 But this new ruling on budget reconciliation process substantively bypasses the filibuster. While the reconciliation process will still come with various technical limitations (the “Byrd rule,” and relevance to the budget), they are pliable. Clearly the ruling party calls the shots – especially if it is a party in synch with the political establishment in Washington. The Public Favors Tax Hikes For Infrastructure Where do we get our 80% subjective probability that Biden’s American Jobs Plan will pass Congress? Why so confident? First, Democrats have control of Congress, albeit narrowly. Second, public opinion not only favors infrastructure but also favors tax hikes on corporations – especially if they are to pay for infrastructure. The solution has been to rebrand renewable energy, broadband Internet, subsidized housing, and a range of other government programs as “infrastructure,” and meanwhile to rebrand social welfare as “human infrastructure.” Consider the following: The public favors higher taxes on corporations: 69% of Americans believe corporations pay too little in taxes, while only 6% believe they pay too much (Chart 3). While this is a general view, and does not reflect regional variations, it calls into question Joe Manchin’s opposition to a corporate tax rate of 28%. Manchin has his eye on the economic recovery, small business owners, as well as the particular industries and political orientation of his state. But the point is that opposition to corporate tax hikes is politically weak and therefore we continue to expect the result to be closer to Biden’s 28% than to Manchin’s 25%. The public favors higher taxes on high-income earners: As for Biden’s second slate of tax hikes, on individuals and households under the yet-to-be detailed American Families Act, 62% of Americans believe that upper-income earners pay too little in taxes and again only 9% believe they pay too much (Chart 4). Since Biden’s proposals amount to only a partial repeal of President Trump’s Tax Cut and Jobs Act, which was itself unpopular in opinion polling, investors should also have a presumption in favor of individual tax hikes. However, as noted above, the American Families Plan only has a 50% chance of passing prior to the midterms due to the time crunch. Chart 3Public Favors Tax Hikes On Corporations Chart 4Public Favors Tax Hikes On The Rich Government is not seen as incompetent on infrastructure: Net public approval of the government’s performance on infrastructure is positive, just barely, unlike immigration, health care, or the environment. This means Biden can tap into a greater level of trust in government on this policy, while still calling on a general belief that infrastructure needs to be improved (Chart 5). Chart 5Public Gives Government Decent Grades On Infrastructure Chart 6No Partisan Gap On whether Infrastructure Should Be Prioritized Infrastructure is bipartisan: The gap in the views of Republicans and Democrats is narrow when it comes to infrastructure, unlike other policy issues that are extremely polarized. The gap is narrow whether infrastructure should be prioritized (Chart 6), whether government should play a larger role (Chart 7), and whether the federal government does a good job in this area (Chart 8). Democrats are more supportive of these propositions and they are currently in charge. But even Republicans tend to agree, as indicated by President Trump’s own emphasis on infrastructure, which the grassroots of his party supported despite establishment Republican hesitations due to concerns about the deficit. These charts also suggest that voters, especially Democratic voters, will not be bothered by the presence of non-traditional or “soft” infrastructure in Biden’s package as long as it can be successfully pitched as helping the economy, jobs, and American supply chains. Chart 7Government Role In Infrastructure Not Too Partisan Chart 8Government Performance On Infrastructure Not Too Partisan The public approves of Biden’s corporate-tax-hikes-for-infrastructure tradeoff: About 54% approve outright, in line with Biden’s overall approval rating, including 52% of independents and a non-negligible 32% of Republicans. A further 27% support infrastructure spending without raising taxes, including 42% of Republicans (Chart 9). This poll does not stand alone but corroborates a range of polling over the past decade on both taxes and infrastructure. It strongly implies that the median voter will support Biden’s plan. (And again it suggests that while Senator Manchin may turn the balance in the Senate he is not standing on solid rock in calling for Biden to pare back his corporate tax hikes.) Chart 9Voters Back Tax Hikes For Infrastructure No need to rely on polling – look at how people vote: Ballot measures on the local level for transportation funding usually win high levels of voter approval, meaning that people vote to increase their own taxes if they think traditional infrastructure will be improved. The average approval for such measures stood at 74% in 2016 and rose to 94% in the 2020 election cycle (Chart 10). And voters clearly understood that this combination is what they would get in voting for Biden, given that he did not shy away from his tax proposals in the presidential debates (although he insisted no tax hikes on those who earn less than $400,000 per year). Chart 10Voters Accept Higher Taxes For Infrastructure The Democrats have the votes for an infrastructure package, they have the votes for at least some degree of corporate tax hikes, and they have popular opinion behind the principle of tax hikes in exchange for infrastructure upgrades. Furthermore the rise of geopolitical struggle abroad and populism at home have given Biden and the traditional Democrats extraordinary impetus to pass this bill. If they fail, they will have wasted precious congressional time, they will be less likely to pass the American Families Plan, and they will be more likely to lose control of the House or even the Senate in 2022, as their failure would energize both the democratic socialists on their left and the Trump Republicans on their right. It is unlikely that Senator Manchin alone is willing or able to cause such a train wreck for his party given the popularity of the proposals.2 The implication is that corporate tax hikes will be compromised only somewhat. It is also possible that non-infrastructure components of the bill, such as housing or some social spending, could be pared back, although these are not the controversial parts of the bill and we would not bet on the overall size of spending to be reduced by much. A bill with Biden’s spending measures and only half of the tax hikes would increase the budget deficit by $1.4 trillion, as we showed last week. A bill with all spending and all tax hikes would increase the deficit by $400 billion. Bottom Line: Biden has an 80% chance of passing the American Jobs Act, although some non-infrastructure provisions could be pared back and the corporate tax hike may not reach all the way to 28%. Most likely the final bill will be substantially similar to Biden’s proposal on spending, while the tax hikes will be compromised, reflecting the populist and proactive fiscal turn in US politics. Investment Takeaways A basket of the 50 companies in the S&P 500 with the highest median effective tax rates outperformed the S&P500 upon Trump’s election and subsequent tax cuts (Chart 11). Since Biden’s election they have also outperformed on the expectation of post-pandemic reopening and economic stimulus. However, the high-tax companies and high-tax sectors have underperformed on an equal-weighted basis since the Democratic Party won control of the Senate and tax hikes became inevitable. Tax hikes are largely but not fully priced from this point of view. Historically a rising budget deficit does not have a clear or positive correlation with the S&P 500, cyclical sectors, value stocks, or small caps. Fiscal thrust normally surges during recessions and bear markets. Nevertheless infrastructure plays – by which we include building products, construction materials and services, environmental services, metals and mining, machinery, and steel – tend to perform better when the deficit blows out. That trend looks to be intact today (Chart 12). Chart 11High-Tax Companies Rallied Despite Biden's Tax Hikes (But Not On Equal-Weighted Basis) Chart 12US Budget Blow-Out Positive For Infrastructure Plays The budget deficit is generally a stronger predictor of the performance of these sub-sectors than global manufacturing surveys and leading economic indicators, although the improvement in global sentiment and growth is clearly a positive backdrop (Chart 13). Europe and countries other than China will soon improve their vaccinations, reopen, and start catching up to the US economic rebound. China’s fiscal-and-credit impulse is closely correlated with US infrastructure plays and this has not changed since the trade war began (Chart 14). Importantly, China is tapping on the policy brakes and its economy is set to decelerate in the second half of the year, which has important implications for our BCA Infrastructure Basket and long trades. This indicator suggests that the relative performance of infrastructure plays will face a gradually rising headwind from abroad even as the US economy continues to provide a tailwind. Chart 13Global Sentiment Positive But Not A Big Driver Of US Infrastructure Plays Chart 14Infrastructure Plays Face Headwind From China's Waning Stimulus Infrastructure plays shown here – which consist of goods and services that fall under greater demand when infrastructure is built – should not be confused with infrastructure companies themselves, which tend to be classified under the much more defensive utilities and telecommunication sectors (Chart 15). This ratio is looking very toppy, in keeping with the general rollover in cyclical equity sector performance relative to defensives.   Matt Gertken Vice President Geopolitical Strategy mattg@bcaresearch.com Jesse Anak Kuri Associate Editor jesse.Kuri@bcaresearch.com Chart 15Infrastructure Plays Versus Utilities And Telecoms   Appendix Table A1Political Risk Matrix Table A2Political Capital Index Table A3APolitical Capital: White House And Congress Table A3BPolitical Capital: Household And Business Sentiment Table A3CPolitical Capital: The Economy And Markets Table A4Biden’s Cabinet Position Appointments   Footnotes 1     Molly E. Reynolds, “What is the Senate filibuster, and what would it take to eliminate it?” Brookings Institution, September 9, 2020, brookings.edu. 2     On the contrary, while the bill will pass via party-line voting, it is still conceivable that one or two moderate Senate Republicans could be brought to endorse Biden’s American Jobs Plan.