TPW Investment Management

Weekly Musings

Friday Musings

Sell (US) in May & Go Abroad

Happy Friday,

Spring has sprung: birds chirp, flowers pop, trees bud & investors consider selling in May & going away.

This year it might be better to sell some US equity and go abroad. Its cheap (@tpwim), less crowded, your dollar buys more (way more) & you can visit places you haven't seen in years!

3 keys for risk asset direction:

  1. China - US trade deal > more & more likely;

  2. China growth bottom > data very supportive

  3. European growth bottom > patchy data. EU PMI shifting from falling sharply to stabilizing to improving.

We want to see the bond markets confirm better econ data, thus Morgan Stanley noting that China 10 year bond yields have risen the most this month since Jan 2017 (roughly 30 bps) which is good news. As is Bunds back above zero.

MS further notes that China bond yields and European stocks tend to move together… has anyone been watching EU banks… bull case building people.

60% of S&P reports in the next two weeks. This will be a leadership test for Tech (22% of index), last week’s Healthcare collapse is worrisome (#2 at 13% of index), Financials (#3 at 13%) have had a post Earnings pop, Industrials (#6 at 10%) are off to a good start…

Shifting to FX, the trade action has been so sleepy its left sell side speechless. However, this JPM chart (global FX vol - USD moves); strongly suggests times this catatonic lead to big USD moves. We expect $ down which reinforces that upside argument for the non US markets.

2019-04-19_JPM_FX.png

Finally, the action south of the border has been cha cha like: buy Brazil, sell Mexico, sell Brazil (down 8% past 1 month) buy Mexico (up 9%)...IMF DC soiree seems to have thrown some cold water on enthusiasm for Brazilian pension reform plans…

Cut to a TPWIM commercial: Start next week off right with Jay on Bloomberg TV Monday at 9 am with Jon Ferro.

Happy Spring/Easter/Passover!

Jay & Jamie

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James Gardiner