Our April Monthly Investor Guide is out!
The Monthly Investor Guide is a comprehensive research piece covering the outlook for 11 asset classes in our universe based on Macro, Sentiment, and Valuation.
The Monthly Investor Guide will give you a ton of information on the key developments in markets and how they impact the attractiveness of Equities, Real Estate, High Yield, Treasuries, Commodities, Gold, Bitcoin, and more. In addition, the Monthly Investor Guide seeks to enrich your investment framework. We are pretty sure you will get new and valuable insights.
Here are some of the takeaways from the Monthly Investor Guide:
MACRO:
Pressure on the banking sector will linger as long as the trend of fleeing bank deposits has not been broken.
Evidence has been building that the US labor market is finally succumbing to the biggest and fastest Federal Reserve tightening cycle since the early 1980s.
The sweet spot for declining (headline) inflation has arrived. Yet central banks have become increasingly backward-looking because of their poor track record in recent years. Despite this, we think the end of the Fed tightening cycle is near.
So far, the China ‘reopening’ looks amazingly different from the one we witnessed in Europe and the US, with PMIs falling again after a brief pickup and inflation at very subdued levels.
Our ISM Manufacturing Index (46.3) scenarios call for a long US Treasuries, short US Equities strategy in each scenario.
The increase in Federal Reserve liquidity, together with markets pricing in a series of Fed rate cuts this year, keeps markets afloat. But assuming the banking crisis will not worsen from here, liquidity will reverse.
SENTIMENT:
Based on EUR returns, gold is the only asset class that truly shines. Its 3-month and 12-momentum are positive.
Our Fear & Frenzy sentiment Index moved away from ‘Frenzy’ but remains in Neutral territory.
The risks that the liquidity mini-crisis migrates into a credit crisis are increasing. However, the market is well aware of this risk, as is revealed in the latest Bank of America Global Fund Manager Survey.
Equity market breadth looks unimpressive. Big tech stocks are driving the rally, with the rest of the markets barely moving.
April is the strongest month for equities, but also a strong month for other risky asset classes like Commodities and High Yield Bonds.
VALUATION:
All equity-related risk premia have come down as stock prices rose.
The equity risk premium on bank stocks is significantly higher than the overall market but by no means extraordinary compared to the last ten years.
With a P/E ratio of nearly 18, Developed Market Equities are not cheap at all.
The gap between the actual 10-year US Treasury Yield and the Fair Value estimate has closed for the first time in two years.
Three asset classes suggest implied recession odds of at least 50% – Equities, Commodities, and Treasuries.
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