TPW Investment Management

Weekly Musings

Friday Musings

Summer Heat Wave: Melt Up or Melt Down?

Happy Friday,

Will Summer’s 1st heat wave lead to a risk asset melt up or melt down? Odds favor melt up. Jay was on Bloomberg Asia Daybreak discussing (Clip) and here's why:

Expect Pres. Trump to be bombastic on the campaign trail but conventional on the global stage (Mexico, Iran, G-20) as he focuses on that age old political goal: reelection.

Trade War in focus: Google Trends indicator at 100 > can’t go any higher. Expect a “can kick” at Osaka as a “Full Monty” tariff imposition will hammer US tech sector and raise odds of recession. “Can kick” = continued uncertainty.

Silver Lining is that uncertainty leads to weak cap ex >> increases growth dependence on the consumer & focus on wealth effect >> global easing cycle >> Fed insurance cut >> ACWI +10% next 6 months according to history.

The combination of a Osaka “can kick”, global easing cycle/Fed insurance cut, and a likely global growth bottom is very positive for risk assets. Add on top that the BofA manager survey is showing “Max bearish” implies melt up risk.

Our Lower for Longer Global Growth Path thesis suggests a focus on non US equity markets that offer the Big 3 return drivers: EPS growth, multiple expansion and FX appreciation. ACWX trades at 13x forward vs 17x for SPY.

Amidst the Osaka conversations we expect continued pressure on the tech sector. Splinternet is real & is bearish US tech/growth while tech typically underperforms in Fed easing cycles.

Note that Global Value stocks are starting to show some leadership. Longstanding US equity/ tech global equity leadership could be about to shift to non US/value markets.

Watch out in bond land: Wall St slash & burn on growth, rate levels for YE = perfect setup for Citi GESI bottom & reversal leading to long duration bond sell off.

The upcoming Fed rate cuts while the rest of the world growth is bottoming sets up for USD weakness. Dollar weakness & growth bottom is bullish for commodities; we like miners & oil service.

Yesterday’s joint TPWIM, HANetf & EMQQ Webinar covered all this ground - click here for replay. Given our Tech view EMQQ is interesting.

Note TPWIM goes live on the SMArtX platform Monday. SMArtX’s cutting edge tech together with TPWIM's low cost, risk aware Global Macro solutions…what a great combo!

Any Fencing Nation folks out there? Will be Columbus bound for Summer Nationals - look me up.

Finally, no Musings next Friday - Happy 4th - back on the 12th!

Stay hydrated my friends! 

Jay and Jamie

TPWIM events 

May

5/15                                     Joint webinar w GlobalX (Replay)

5/20                                     RealVision interview on TPWIM’s Lower for Longer Global Growth Theme (Recording)

5/23                                     Joint Conf Call with Signum Global on EU Parliamentary Elections - Political & Risk Asset Implications (Recording of Call)

5/24                                     Jay was on Bloomberg TV: The Open talking FED (Short Clip)

5/26                                     Jay was on Bloomberg TV: Daybreak Asia talking European Parliament Breakdown (Short Clip)

 

June

6/19                                     Joint Conf Call with Signum Global on US Political Situation and Outlook (Recording of Call)

6/24                                     Jay was on Bloomberg TV: The Open G-20 (Short Clip)

6/27                                     Joint Conference Webinar with HAN ETF - Europe’s Only White Label ETF Provider “Trade & Tariffs in a Tri-Polar World” (Recording)

6/27                                     Jay was on Bloomberg TV: Daybreak Asia talking 2nd Half Outlook (Clip)

James Gardiner