TPW Investment Management

Weekly Musings

Friday Musings

The Letter E

Happy Friday,

Live from Bermuda and no shortage of topics to muse over: earnings, economic data from Spain to Thailand & points in between; abdications, coup accusations and more than enough political theatre to go around.

Hard earned experience (ie mistakes) inform me that earnings and economic data tell the tale and on both fronts the news is pretty good. Earnings across the board be it in the US, Europe or Japan seem to be coming in better than expected; those fearing an “earnings recession” have some thinking to do.

Why? Well first because Q1 EPS is coming in +3% y/y in both the US and EU vs forecasts for negative y/y #s. Second because the economic data is turning in favor of a growth bottom outside the US and the “lower for longer global growth path” we have been discussing. Whether it is new export orders in China, Q1 GDP in Europe or Manufacturing PMIs in much of Asia ex-Japan the growth bottom is coming into the picture.

That leaves policy makers a little askew as the Fed & Chairman Powell reveal with its inflation outlook. A short time ago the Chairman was quoted as calling low inflation “one of the major challenges of our time”; yesterday it was: “some transitory factors may be at work” in keeping inflation below target. It almost makes one yearn for the good old obfuscation of Chairman Greenspan.

Meanwhile like the tide the flows come in and go out: Vanguard’s tech ETF had its largest weekly inflow EVER last week… good thing UBER is coming to feed the ducks. Europe equity funds have seen outflows in 56 of the last 58 weeks (check out @tpwim for some good charts).

Over in commodity land the miners have been smoked while bullish bets on WTI outweigh shorts 14:1… to square the circle flows into long term US bond ETFs were expected to have a set a new record in April.

We stick to the letter E: Earnings and Economics, await further confirmation of Europe’s growth bottom (watch the BUND) and suggest that if you must sell in May that one consider profit taking in the US and buying abroad. Growth bottom plays like base metals, miners, have given back much of their recent gains - happy hunting.

We are excited to note our upcoming webinar in conjunction with the good folks at GlobalX. Please block off 2pm on Wednesday May 15th and sign up.

Where to find 2nd Half Opportunities

After a strong four month run to start the year, are US equities ready to keep roaring, or is it time to consider opportunities overseas? Join us for a conversation between TPW Investment Management's CIO and Co-Founder, Jay Pelosky, and Global X ETF's CIO, Jon Maier, and Head of Research, Jay Jacobs, as they discuss their outlook for the remainder of 2019. 

The trio will discuss a range of topics including: 

  • The impact of the Fed on US and international markets

  • Where to find potential opportunities in the US and overseas

  • How to evaluate China and the emerging markets

  • The implications of potentially lower for longer global growth

Have a great weekend!

Jay and Jamie

James Gardiner