The Green New Deal & Clean Energy

Nick Ferres Vantage Point Articles

A key potential implication of the mini Blue Wave that has the Democrats controlling the House, Senate and the White House is that the Administration will put-forward friendly clean energy industry legislation. Of course, this was rapidly priced (extrapolated) by the investors. The S&P Clean Energy Index is +66% since the November election +179% over the past year. There are …

The Non-Predictions for 2021

Nick Ferres Vantage Point Articles

As is customary in December, analysts start to publish their economic and market forecasts for the following year. Of course, the challenge is that it is impossible for human beings to see the future. Given the unprecedented events this year and the nature of the COVID episode most forecasts made at the end of 2019 for this year would likely …

The Least Compelling “Value” Sector

Nick Ferres Vantage Point Articles

If the global expansion is sustainable, synchronous and supported by policy in 2021 “value” sectors of the world equity markets have a decent probability of out-performing “growth, momentum or low volatility” factors in a tactical sense next year. The historical experience from past cycles suggests that the expansion ought to continue as the cyclical tailwinds following a recession are powerful. …

The EM Barbell and the Case for Asian Technology

Nick Ferres Vantage Point Articles

Our sense is that long EM equities (and short the US dollar) has become a widely held consensus belief. On the positive side, following a decade of underperformance, the secular outlook for emerging (Asian) equites appears very appealing. In relative price, valuation and positioning terms EM/Asia is back to 2003 just after the SARS pandemic and not far above Asian …

The Case For Asian Banks

Nick Ferres Vantage Point Articles

Earlier this week we observed that the prevailing bias and positioning suggests that long equity is now a relatively crowded trade or consensus belief. However, that is more of a tactical observation. In contrast, the medium term outlook is still constructive given the early stage of the cycle. Stated differently, forward looking equity prices are likely to rise with the …

The Asymmetry in Treasuries

Nick Ferres Vantage Point Articles

While the probability of a Democrat clean sweep or blue wave has increased to more than 70%, according to FiveThirtyEight, the Treasury market and betting odds remain more sceptical. Price action in the Treasury market also likely reflects uncertainty regarding additional fiscal stimulus. Although an agreement seems unlikely ahead of the election, the probability of large additional fiscal stimulus would …

FOFO

Nick Ferres Vantage Point Articles

From our perch, “risk on/risk off” used to be one of the most irritating acronyms in macro investing as it often ignored important underlying trends or anomalies at the country, sector or single stock level. Over the past few weeks, “fiscal on/fiscal off” or the prospect of whether additional fiscal easing will be delivered appears to be driving short term …

There’s a (Bond) Bear in There

Nick Ferres Vantage Point Articles

While some analysts including Andrew Sheets at Morgan Stanley have argued that this cycle has been surprisingly normal in terms of how the global growth data have evolved and how many risk assets have responded, from our perch the key difference has been the absence of a rise in long end Treasury yields. As we noted back in August, the …

Politics & the Correction

Nick Ferres Vantage Point Articles

Yesterday’s Presidential debate was more like a WWE Smackdown event than a political discord. The big picture point for markets is that the odds of a Biden victory increased as measured by the betting market. However, the equity market had already largely discounted a decent probability of a Biden victory. That said, a “contested election” (the absence of a clear …

Heroic Ambitions

Nick Ferres Vantage Point Articles

The way price has responded (so far) to the September FOMC suggests that while the statement and forward guidance from the Committee was fairly dovish, it was already well telegraphed (and priced) after Jackson Hole. As we noted a few weeks ago, there are no new catalysts to propel risk assets higher, only extrapolation of existing beliefs. There was also …