TPW Investment Management

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Insights

As The Tri Polar World Turns - October 2019

OVERVIEW

The pace of action seems to be picking up as we enter Q4. Financial markets chopped a lot of wood in September as they did in August. Given the seasonally weak period and the stable nature of asset prices, one has to respect the Teflon like nature of current asset markets.

A Lower for Longer Global Growth Path remains our central theme. Our Big Four signposts remain constructive.

We expect to see positive catalysts during the quarter, perhaps on trade, perhaps on the global economic front and expect those catalysts to have positive implications for asset prices. We have added to the Cyclical nature of our portfolio solutions.

ECONOMICS

Developed economies are enjoying record low unemployment which has led to record highs in global consumer confidence, suggesting continued robust household spending over the next several quarters. No recession call here. 

The Global Manufacturing PMI appears to have bottomed & is turning up. We view the weak US ISM as a “catch down” to the rest of the world which is bottoming. 

POLITICS

A confluence of events suggests progress may be forthcoming on both US - China trade and Brexit. All the main actors: Pres Trump & Xi, PM Johnson, and the EU, can use a win. Risk assets would be big winners as well.

POLICY

Low inflation provides the cover for a continued global easing cycle while fiscal policy swings into action. Our Global Risk Nexus (GRN) work suggests progress on both the Economic & Policy front.

MARKETS

 

A long list of market positives offset concerns that Q4 19 will repeat last year’s horrid Q4. Central Banks’ easing rather than tightening, a better tone around trade and sharply lower rates all run counter to last year’s set up. 

The shift in global PMI regimes suggests reasonable asset upside, particularly among the non US & Value and Cyclical segments of global equity markets while also supporting credit over Govts & favoring commodities.

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James Gardiner
As The Tri Polar World Turns - September 2019

Overview: Markets chopped a lot of wood in August: EM’s Argentina collapse, tit for tat tariff hikes, RMB cracking 7, US yield curve inversion to name a few. Growth/Momentum factors ruled the roost for hedge funds and trend followers alike.

This sets up perfectly for a Fall risk asset rally with offsides positioning, horrible sentiment, improving seasonality coupled with full throated global easing, an uptick in Global PMIs, better technicals and cheap stocks relative to overbought and expensive bonds.

The catalyst could be a US - China trade deal in 2019, a prospect that seemed outlandish two weeks ago but very real today as both sides make nice. Another could be a Brexit deal, perhaps the only thing considered more unlikely than a trade deal. Focus on non US equity exposure, Cyclical sector & Value factor selection.

Economics: China’s L shaped recovery  demonstrates resolve in the US trade conflict, suggests China will neither sink nor save the global economy and shines a spotlight on Europe in general and Germany in particular as free riders on global demand.

Politics: Are we about to finally see Trump the deal maker? The weaker the US economy, the worse the polling numbers & the greater the need for a deal. Europe’s new leadership is a breadth of fresh air & how about that Italian own goal?

Policy: Roughly 80% of the world’s Central Banks are in easing mode; fiscal policy is the topic du jour in Europe and being implemented in Asia. 

 

Markets: Fall Risk Asset Rally ahead - the factor crash in the first two weeks in September could rival the quant crash of 2008-9. Note its all one trade: long Growth/Momo, long duration UST, long USD - reversals are likely across assets and around the globe.

Stay frosty my friends.

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James Gardiner
As The Tri Polar World Turns - August 2019

In this month’s As The Tri Polar World Turns, CIO Jay Pelosky analyzes the recent financial market volatility and asks whether one should hold to the Lower for Longer Global Growth path. He notes the tussle between Fixed Income’s school yard bullies and highlights how amidst all the trade drama earnings in both the US and Europe have come in better than expected. Bottom line: we don't see the duration rally as signaling recession and continue to expect a global growth bottom and higher equity prices in the months ahead.

  • Economics:  Nascent Growth Pickup at Risk to Trade Tiff

  • Politics:        Not a Great P/L for the President

  • Policy:          Are Global CBs Truly Ineffective?

  • Markets:       Hey, Remember Earnings?

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James Gardiner
Bloomberg TV: Fed Speak Keeps Markets Guessing

Jay Pelosky, chief investment officer and co-founder at TPW Investment Management, Michael Purves, chief executive officer at Tallbacken Capital Advisors, and Mark Connors, global head of portfolio and risk advisory at Credit Suisse, discuss the lack of market consensus on the size of a potential Federal Reserve rate cut. They speak with Bloomberg's Jonathan Ferro on "Bloomberg Markets: The Open."

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James Gardiner
As The Tri Polar World Turns - July 2019

In this month’s As The Tri Polar World Turns, CIO Jay Pelosky looks into the 2nd Half and notes the potential for a risk asset melt up. He highlights that investor positioning: super bearish stocks and super bullish duration = being super bearish growth and lays out why we expect that to be revealed as wrong thinking as the year progresses.

  •  Economics: Growth Bottom Ahead

  • Politics:        The Debt Ceiling Rears Its Head 

  • Policy:          Fed Pivot Complete

  • Markets:       Positioning for Growth

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James Gardiner
HanETF and TPWIM Webinar Replay: Trading the Trade Wars: Trump, Tariffs, and a Tri-Polar World: Investment Strategies

The upcoming G20 Osaka meeting on June 28-29 will see Presidents Trump and Xi attempt to resolve the ongoing trade war between the world’s two largest economies.

This webinar was on 27th June where we look at the interplay between tariff costs and stimulus benefits in regards to China's growth profile, identify which sectors are most at risk from a prolonged trade dispute, examine the implications for the ROW and assess the cross-asset impact on global portfolios. 

  • Trade Tariffs & Lower for Longer Growth World: How Can Global Investors Prepare?

  • The 3 Ts: Trump, Trade & Tech - Making Value Great Again?

  • TPWIM's 3 Step Risk Asset Process (RAP): Anticipate, Confirm, Re-Allocate

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James Gardiner
As The Tri Polar World Turns - June 2019

In this month’s As The Tri Polar World Turns, CIO Jay Pelosky updates TPWIM’s view on the trade war and its implications for a “lower for longer global growth path”. He also reintroduces the concept of the 3Ts and asks if the combo of Trump, Trade and Tech will Make Value Great Again - an interesting question we think you will want to ponder.

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James Gardiner
Real Vision TV Expert View: Lower for Longer Global Growth Path

This 30 min Real Vision interview allows TPWIM CIO Jay Pelosky the opportunity to lay out the: "Lower for Longer Global Growth Path”  theme underpinning TPWIM's current approach to the global cross asset markets. He begins with our Global Risk Nexus (GRN) Scoring System (as we do every portfolio meeting) and focuses on Potential Growth Rates ( PGR) and Neutral Rates of Interest (NRI) which underpin the thesis. He then covers the impact of the Fed’s pivot and China’s stimulus in supporting this thesis. Jay identifies how one should invest in a Lower for Longer world noting the focus on equity markets with room for multiple expansion, fixed income instruments that offer yield, currencies that benefit from a weak dollar and commodities that benefit from a growth bottom. He discusses the risks of a deeper trade war and lays out why Pres. Trump is unlikely to go the Full Monty (25% on all Chinese exports to the US)  on China tariffs. The video is a great example of TPWIM’s capabilities around original investment idea generation, independent cross asset thinking & institutional level analysis. We hope you find it of use.

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James Gardiner
Bloomberg TV: Testing the FED's Patience

Jay Pelosky joined Michael Kushma, global fixed income chief investment officer at Morgan Stanley Investment Management and Gabriela Santos, global market strategist at JPMorgan Asset Management on this morning’s "Bloomberg Markets: The Open." with Jonathan Ferro. They examine what it would take for the Federal Reserve to make a move on interest rates.

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James Gardiner