My head hurts: trade disaster last week, trade bounce this week, trade purgatory ahead?
Trade stuff is so opaque but three things stick out to me:
1. Pres. Trump owns this issue as far as the market is concerned as his trade tweets are definitely market moving.
2. The US economy is nowhere near as robust as the US side seems to think with Q2 Atlanta Fed Forecast at 1.1% - check out the 2 yr UST for confirmation.
3. The leading equity market sector in the leading market: US tech, up 22% ytd, is most exposed to the Full Monty (25% on full $500B) with smartphones/laptops = to 69% of the Top 10 items not yet covered by tariffs.
These three points suggest to me that the US is highly unlikely to implement the Full Monty as subsequent stock market weakness and likely US economic weakness will be squarely laid at Pres. Trump’s West Wing door. Given that he wants to open that door in 2021 and beyond this does not seem like a winning electoral strategy.
Absent the Full Monty/complete breakdown of talks, a good bit of the downside seems to be priced in, particularly outside the US. Next steps are a US delegation trip to China and the G-20 meeting between the two presidents. If Osaka fails to bring a deal but talks continue then trade purgatory awaits. 2nd H positive offsets include: upward global earnings revisions, growth stabilization in China, growth bottoming in Europe and likely EM Central Bank rate cuts.
As a quick aside (speaking of tech), what about the Lyft/Uber IPOs - perhaps the “bubble” is in the private markets? The permanent capital folks have been putting more and more into private vehicles (no nasty mark to markets, lower vol, and higher Sharpe ratios). Interesting then that the world's largest Fund, Norway's investment vehicle, is going the other way, increasing public equity to close to 70% of AUM.
We continue to focus on investment opportunities that fall out of our Lower for Longer Global Growth Path thesis (as highlighted in recent webinar with GlobalX) including equity markets with room for multiple expansion: Europe & Japan and income segments with yield (EM USD debt, US HY, Pref Sec, MLPs etc). On the commodity side metals and miners have been hit hard with Dr. Copper off 6% and copper miners off 15% over the past month.
Speaking of Europe we are excited to note our upcoming joint conference call with the good folks at Signum Global Advisors, a leading transatlantic political advisory firm next Thursday, May 23rd at 10:30 EST, 3:30 UK time, (information below). Hope to hear you on the call!
We have a busy few weeks ahead - CHECK OUT our upcoming calls, webinars, and appearances below.
TGIF - How bout them Bruins & enjoy the seasonal weather (finally) here in NYC!
Jay and Jamie
Upcoming TPWIM events
5/15 Joint webinar w GlobalX (Replay to come next week)
5/20 RealVision interview on TPWIM’s Lower for Longer Global Growth Theme
5/23 (10:30am EST) Joint Conf Call with Signum Global on EU Parliamentary Elections - Political & Risk Asset Implications (See Below)
5/24 (9:00am EST) Jay will be on Bloomberg TV The Open
6/3 & 6/4 Inside ETF Smart Beta Conference
6/4 (11:40am EST) Jay speaking on the panel “Active 2020: Strategies to Generate Alpha”
Late June (TBD) Joint Conference Webinar with HAN ETF - Europe’s Only White Label ETF Provider
Trade & Tariffs in a Tri-Polar World: Investment Strategies
The EU Parliamentary Elections: Political Risks & Investment Opportunities
Anna Rosenberg, Head of Europe and UK, Signum Global & Jay Pelosky, Co-Founder & CIO of TPW investment Management
Topics to be discussed:
Real versus perceived risks of populists in the next European Parliament
Populists’ ability to disrupt decision-making and European integration
Impact of European Parliament elections on the UK and Brexit
Europe’s Place in a Lower for Longer Global Growth World
Implications for European Cross Asset investing with Political Risk Ebbing and Growth Bottoming
Thursday, 23rd May
10.30am EST / 3.30pm UK
US: +1 646 876 9923
UK: +44 203 695 0088
Meeting ID: 882 929 901
There will be an opportunity to ask questions. Should you want to listen to the replay, please contact email@example.com.
Anna Rosenberg is Partner, Head of Europe and UK and member of Signum’s Global Management Committee. Over the past ten years, Anna has advised executives of multinational companies in managing their global market portfolios. She helps senior executives better plan for and respond to forces outside of their control, such as political and economic risk, to ensure their businesses can navigate through difficult times and continue to perform. Before joining Signum, Anna worked as Director of Global Management Insights at Frontier Strategy Group and also headed the firms' Sub-Saharan Africa research practice. Previously, Anna worked as Head of Research for IC Publications, where she was in charge of putting together major investment conferences with a focus on emerging markets. Her work on business strategy has been featured in Harvard Business Review, the Wall Street Journal, the BBC and CNBC, among others. Anna is also a Visiting Scholar at the London Institute of Banking and Finance and a BBC Expert Woman. Anna holds an MA with Distinction from the SOAS, University of London. She speaks fluently German, Spanish, and Portuguese, reads French and Italian and basic Arabic.
Jay Pelosky, Co-Founder & CIO TPW Investment Management
Jay is the Chief Investment Officer and Co-Founder along with James Gardiner of TPW Investment Management, a New York City based investment solutions firm focused on offering a suite of competitively priced, ETF-based, Global risk-based portfolios. Jay is responsible for management of all TPWIM’s global asset allocation & portfolio strategy, leads the research activities of the investment team, and produces frequent written market and research commentaries. In addition he is a frequent speaker at industry conference and a reoccurring guest on television (Bloomberg, RealVision, etc).
He has over 30 years of buy and sell side investment experience in close to 50 countries around the globe. For the past 15 years he has invested his personal capital in an ETF based, global multi asset investment process. In 2011 he launched Pelosky Global Strategies (PGS), an investment advisory boutique advising Institutions, Hedge Funds and RIAs on portfolio strategy and asset allocation. Prior to PGS he was a Morgan Stanley Strategist & MD. At Morgan Stanley Asset Management, he launched single country and regional funds and served as PM. As a Morgan Stanley sell side strategist, he created the Firm’s Global Asset Allocation, Global Equity & Global Emerging Markets Strategy products and was a top ranked II Strategist in multiple categories.