Sectors
What is the outlook for the European housing market amid rising mortgage rates and the energy crisis? Does housing represent a systemic risk? Can households weather the storm? And what are the opportunities, if any?
Go long the Kensho Space index over a cyclical horizon on the back of growing public and private investment, rising national security interests, declining sector costs, and heightened geopolitical risk.
The messages from the deteriorating fundamental backdrop (tight monetary policy, slowing global growth) and improved credit valuation (elevated 12-month breakeven spreads) are giving conflicting signals on corporate bond strategy. We are putting more weight on the fundamentals and are staying with an overall underweight stance on global investment grade corporates, with a slight bias towards Europe given more attractive spread valuations. At the same time, we see selective opportunities in sectors where risk-adjusted spreads are wide as signaled by our individual country sector valuation models, like US Energy and euro area Financials.
In this report we scrutinize the state of US consumer finances, which are a key driver of the Payment Processing Industry. We expect demand for services to pull back in the early 2023 on the back of still high inflation and tighter monetary policy. The payment processing companies thrive but live on borrowed time. We are overweight for now but monitor this position closely.
Stocks will only get temporary relief from gridlock. Inflation will abate but then remain sticky. US and global policy uncertainty and geopolitical risk will remain historically high.
A client concerned about the slump in asset prices, the stubbornness of inflation, and rising bond yields asks what went wrong, and what happens next? This report is the full transcript of our conversation.
This week we present our Portfolio Allocation Summary for November 2022.
On their third quarter earnings calls, the largest banks indicated that their household and business customers remain in surprisingly robust shape. We interpret their observations as supporting our constructive near-term take on the economy and financial markets.
Banks face many challenges from a slower economy and tighter financial conditions, which offset benefits from rising rates and higher net interest income. It is likely that things will get worse, a sentiment supported by many banking executives. However, negative expectations have already been priced in. We will maintain our overweight for now but will fade this position after a bounce in the next bear market rally. The long-term outlook is negative. We prefer Regional Banks to Diversified Banks.
Is the BoE’s emergency intervention in its bond market a British idiosyncrasy that global investors can ignore? No, the UK’s near death experience sends three salutary warnings, with implications for all investors.