🇺🇸 Equities | My understanding of investors' sentiment following multiple discussions:
1/ Reality is that investors are not looking at Macro or Earnings right now. They were trapped last year and most of them don’t want to miss again any upside move.
1/ Reality is that investors are not looking at Macro or Earnings right now. They were trapped last year and most of them don’t want to miss again any upside move.
2/ They remember that SPX increased by ~30% in 2019 despite Global GDP was revised downward by ~0.6ppt and SPX earnings growth was cut by >8%.
3/ The upside mainly came from a dramatic switch in liquidity expectations and the same phenomenom is happening right now with #PBOC relaunching the party worldwide.
4/ Nobody wants to take the risk to fight liquidity given that the trend is unlikely to stop before year-end (U.S. elections, China National Congress, renewed Brexit fears,…).
5/ Looking at the speech of Quarles yesterday, it even seems that a new bounce could come from the U.S.:
bloomberg.com/news/articles/…
bloomberg.com/news/articles/…
6/ Investors also see the U.S./China trade relationship as another tailwind for stocks in the short term. I agree that even if China misses all its sub-targets for 2020, they will increase purchases in Energy, AG and services showing goodwill before the first compliance review.
7/ The latter could result in a positive gesture from the U.S. before the elections (tariffs cut?).
8/ Now the only question is when will CBs lower liquidity expectations?❗
The paradox is that a counter-shock coming from China could lift growth & inflation expectations for 2021 but also push investors to return to earth by ending the liquidity party.
businessinsider.com/stock-market-i…
The paradox is that a counter-shock coming from China could lift growth & inflation expectations for 2021 but also push investors to return to earth by ending the liquidity party.
businessinsider.com/stock-market-i…
