14Sep/15

Morning Market Commentary & Weekly Charts

Risks related to international events remain quiet with most focus on China. Volatility in Chinese equity markets remains extreme. Economic news this week (other than the FOMC news on Thursday) is expected to be mixed. FOMC news on Thursday is by far the most important equity market-moving event this week. Polls say that chances of an increase in the Fed Fund rate are 25%. Knee jerk reaction to an increase likely will be negative. However, weakness will provide a buying opportunity.

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01Sep/15

Morning Market Commentary & Charts

For the month, the S&P 500 and Dow are lower by over -6%, both closing below their respective 20-month moving average for the first time since September 2011. August’s return is a significant divergence from the average return for the market, according to the S&P 500 Index. The technical status of the broad market has notably deteriorated, suggesting stocks may not be free of further downside risk, as of yet.

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31Aug/15

Morning Market Commentary & Weekly Charts

Economic news this week is expected to show accelerating US economic growth in Q3, a scenario that likely will raise concerns about timing of the first increase in the Fed Fund rate. International events also could influence equity markets this week Hot spots include China, Russia, Venezuela and selected Middle East countries.

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24Aug/15

Morning Market Commentary & Weekly Charts

Global equity markets entered into a meltdown phase on Friday, and are undergoing a usual “Sell in May & Go away”-type summer correction, or as we had correctly predicted for 2015 “Sell before May & Go away”. International events could influence equity markets again this week.  In Europe and the US, economic news is expected to show a mixed-to-stable economic growth momentum in Q3, a scenario that likely will continue to occupy investors about timing of the first increase in the Fed Fund rate. Seasonal influences for North American and European equity markets
are negative between now and the second week in October. Historically, the
month of September is the weakest month of the year for equity markets.
Short and intermediate technical indicators are trending down and most are oversold.
However, signs of a bottom have yet to appear.
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21Aug/15

Strategy Update & Charts

We are expecting for equities in Developed Markets to remain in a declining
pattern until October. Bullish opportunities between now and October will be
limited to a few select seasonal opportunities, visible by significant rotation in
favorable defensive sectors such as Utilities, moving higher while economic
sensitive sectors (e.g. Consumer Discretionary) are moving lower. Technical
parameters for world equity markets have turned negative. Short and
intermediate technical indicators for major equity markets and most sectors are
trending down, but already are approaching oversold levels. Once again, they
failed to move to multi-year highs after testing recent highs. Meanwhile, their
short-term momentum indicators continue to trend down.

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20Aug/15

CGI Strategy Update: US Oil

We’ve been writing since June that oil prices would continue to slide. In our last
update on July 13th, we lowered our near-term target for WTI crude to $46 per
barrel. We believe that oil prices will plumb new lows over the next two months. In our judgment, investing (or worse, speculating) in the energy sector today at current levels too closely resembles catching a falling knife. Wait for a better opportunity…it’s coming.
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10Aug/15

Morning Market Commentary & Weekly Charts

Chinese inflation grew +1.6% y-o-y in July, up from +1.4% the previous month and
ahead of estimates of +1.5%. Talks between Greece and its international creditors are progressing and hopes are that a third bailout deal could be agreed by 20th August. The outlook for Ireland has been amended to positive from stable by the credit ratings agency Fitch. In the US, data from the Labor Department showed employers added 215,000 jobs in July, missing the consensus forecast of 225,000. Lastly, the global economies are getting relief from Oil prices declining to new lows.
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04Aug/15

Morning Market Commentary

For the month of August, we are expecting for a historical repeat for bond prices around the world to have their best month of the year. So far, for the past week, investors have been evaluating the deteriorating macro news, and re-allocated new money into the bond markets, just as we were predicting. Strength in the bond market, utilities and real estate over the past week signaled that investors are coming around to our views that the Federal Reserve is likely to postpone its first increase in the Fed Fund rate beyond September, which in return, will be a positive influence for equity markets.

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27Jul/15

Morning Market Commentary & Weekly Charts

As we had highlighted in several publications since March 2015, Global GDP Growth is set to slow across a growing number of the world’s largest economies, including the US and China. China’s worries have spread to oil, which is adding to last week’s -5% drop. Global economic growth slowed during June, led by a significant contraction in emerging market output. The global economy is struggling with secular stagnation. Too much fiscal and monetary intervention by governments an their central banks and now with even more of these policies, things will get increasingly worse, not better. For now, we are expecting for Europe to temporarily slow over the next 2 months again, before gaining macro momentum in late September until the end of the year.

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24Jul/15

Morning Market Commentary

US inflation continues to run below the Fed’s 2% target, which policymakers view as a “temporary result of the strong US$ pressuring commodity prices”.  However, maybe the FED should rethink their definition of “temporary” for the US$ strength, and the inherent tremendously negative impacts on the US economy, the negative impacts on competitiveness of US companies, and negative impact on imports, exports, negative impacts on US inflation, or better, the lack thereof. We just cannot see the rational for the FED to raise interest rates, when macroeconomic momentum, and the negative impacts of a strong US$ are already at unsustainable levels, nevertheless with risks of a rate hike going to exacerbate and make things much worse.

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22Jul/15

Morning Market Commentary

US inflation continues to fade, well below the Fed’s 2% target, which policymakers view as a “temporary result of the strong US$ pressuring commodity prices”. However, when looking at the recent US$ charts, maybe the FED should rethink their definition of “temporary” for the US$ strength, and impacts on the US economy and inflation, or better, the lack thereof.

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22Jul/15

Daimler 2Q15E Preview

Daimler shares’ long-term positive trend is intact. Daimler shares are in a short- term correction. The short-term technicals are still negative with RSI and MACD both negative. Daimler shares have downside risk towards the 50-day moving average of around EUR 75 a share. We are advising to accumulate Daimler shares at current levels. Our medium- term price target for Daimler shares is EUR 110.

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20Jul/15

Morning Market Commentary & Weekly Charts

We are seeing increased technical evidence that world equity markets and most sectors remain in a corrective phase since mid-May. Short and intermediate technical indicators for most equity markets and sectors are oversold but continue to trend down. The latest survey of investors’ sentiment conducted by sentix has revealed that investors’ feel relief after the turn in the Greek debt drama. From an already high level, sentix Sentiment rises once more by over 10 percentage points and signals a party mood. In contrast, commodities command investors’ respect. Here, fears that the whole sector is in a free fall dominate. Meanwhile, the US$ benefits.
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16Jul/15

China Strategy Update: Patience is a Chinese Virtue

The infallibility of the communist party and by extension its leadership is a core tenet of the mantra that the Chinese people have intoned as truth for decades. So the meltdown of China’s stock market over the past three weeks must have been viewed with consternation by Chinese investors as well as the average Chinese citizen watching from the sidelines since the populace was encouraged by Beijing to invest in the country’s own brand of capitalism. Failure to stop a sell-off would lead to a broadbased loss of confidence that could undermine the leadership’s reform efforts, the economy and potentially lead to social unrest—the biggest fear of the leadership. Consequently, the rest of the world’s angst over Beijing’s direct market intervention rather than allowing free market forces to clear markets is relegated to a far distant secondary concern by the country’s leaders.
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13Jul/15

Morning Market Commentary & Weekly Charts

The EU and Greece have secured debt restructuring and medium-term financing. We are not expecting for “Greece’s no vote” to have a substantial impact for equities,  either for bonds or foreign exchange.  For both equities and bonds, early signs of a peak in summer volatility have appeared. Now is the time to prepare for seasonal buying opportunities. However, we are seeing increased technical evidence that world equity markets and most sectors remain in a corrective phase since mid-May. Short and intermediate technical indicators for most equity markets and sectors are oversold but continue to trend down.

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06Jul/15

Morning Market Commentary & Weekly Charts

Valuations for European equities are even more very favorable since the usual sell-off in May began, both on an absolute and on a relative basis.  We are expecting for the ECB to make a decision whether to continue providing emergency liquidity assistance (ELA) to Greece at a meeting today.  Consequent to the continued geo-political uncertainty in Europe regarding Greece and implications on the rest of the Eurozone, and the US, we do continue to expect for the US Federal Reserve not to raise the Fed Funds rate in 2015.
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30Jun/15

Energy Strategy Update: United States

Traders have been focused on domestic inventory oil storage levels that have been drawn down over the past few weeks.  Continued drawdowns support higher prices. In their view, the inventory drawdown of the past few weeks reflects the early stage lag effect of production pressure as a consequence of declining drilling activity dating to last fall. Nonetheless, up to now, advancing technology is enabling U.S. oil production to remain at a record pace despite the declining well count. Traders are likely to be taken by surprise when inventory levels begin to rise within the next few weeks and push prices lower. In our judgment, any sell off in WTI crude due to a rise in inventory storage levels will prove temporary as the surge in imports subsides just as quickly. Oil-related stocks can be expected to decline in sympathy. As investor sentiment washes out, we would use such a pullback as a buying opportunity to establish positions in global oil producers (especially oversold domestic drillers) in anticipation of an earnings recovery (and subsequent increased merger & acquisition activity) on higher oil prices.

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29Jun/15

June 2015 Global Automotive Demand Atlas

In May, global light vehicle sales declined 1.4% yoy to 7.33m, after a 1.6% increase in April, resulting in a 1.1% increase to 36.79m YTD. LMC Automotive (LMCA) calculate that in May the SAAR (seasonally adjusted annualized rate) was 87.0m, units/year, down from 88.4m in April and well below January’s 89.4m, and 88.0m YTD.
The global LV sales that have been stable so far during 2015 are considerably weaker than a surprisingly strong December SAAR of 92.1m/year, confirming the suspicion that the latter was due to year-end marketing pushes in key markets.
For FY15E, we expect a global LV market of 89.0m, implying an increase by 1.7% or 1.5m. This is a downgrade from the previous forecast of 89.2m and an implied increase by 1.9% or 1.7m. The growth rate is thus expected to more than halve in 2015E, from 3.7% in FY14 and 4.0% in FY13.

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28Jun/15

2015 Q3 Global Investment Strategy & Equities Outlook

10-Year US and European Bond yields will turn lower one more time. The US$ will decline further. Oil & Commodities will move higher. Global Equities will correct,
but then recover sharply towards end of Q3 into Q4. EAFE to continue to outperform US equities.

Stocks have the seasonal tendency to outperform bonds from mid-November until the end of March, a trend that we see to continue in 2015. As in prior reports, we do think that the current stagnation-type economic environment, impacting two-thirds of the global economy, namely the US and Europe, and Japan, is going to provoke most long-term investors to conduct a major switch from “negative-return based” bond investments into high-yield equities with stable and defensive cash flow generative outlook.

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22Jun/15

Morning Market Commentary & Weekly Charts

European 10-Year government bonds are entering their period of seasonal strength from mid-May until end of August. After the short-term current correction in US, European and Japanese 10-Y
treasuries, which we expect to last for another few days, we are expecting for further yield compression between French, Italian, Portuguese, Spanish 10-Y Government bonds and the German bunds to materialize over the coming 2 – 3 months, and are advising for investors to increase their weightings into Spanish, Italian, Portuguese, Irish 10-Year bonds into the current correction.

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18Jun/15

Morning Market Commentary

The Eurogroup meeting here in Luxembourg today has been touted as the “last chance” for Greece to agree a deal in time of the end of June. Athens must repay EUR 1.6BN due to the IMF by 30th June but has admitted that it has insufficient funds to do and that compromising to unlock frozen aid would be a necessity. We would not be surprised that there would be a positive outcome for the Greek Saga today in Luxemburg, which then consequently would cause both European equities and the Euro to snap back considerably.

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16Jun/15

US Strategy Update: The Economy Finally Begins To Put Upward Pressure On Interest Rates

Workers typically don’t quit their job without an expectation of getting a better higher paying one and the number of quits has continued to trend higher over the past year with the largest rises concentrated in higher paying sectors such as durable goods manufacturing, finance & insurance and health care. The trend in quits and the surge in job openings bode well for a rise in real income.
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15Jun/15

Morning Market Commentary & Weekly Charts

Economic focus this week in the US is on the FOMC meeting results to be released on Wednesday. Earnings and sales by S&P 500 companies during the next two quarters remain a concern. Intermediate and technical indicators for most equity markets and sectors remain overbought and trending down. Short-term technical indicators (mainly momentum indicators) for most equity markets and sectors are trending up.

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15Jun/15

FCA and GM – A Marriage Made in Heaven or Hell?

Another year, another merger rumour surrounding FCA! Only this time it is more than a rumour We believe that FCA’s CEO Marchionne looks for a tie-up with the epicentre in NAFTA.  Mr. Marchionne has repeatedly said that there was a need for more consolidation in the auto industry to spread the costs of developing new models, efficient engines and clean-emissions technologies. We do not believe that mega mergers are the answer.
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10Jun/15

CGI USA Strategy Update

May’s strong auto sales have raised expectations for this Thursday’s May retail
sales report.  Regardless as to what number prints for retail sales, we believe that the near
daily pattern of divergent (and often conflicting) economic data will remain the
status quo and contribute to a rise in daily volatility.
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10Jun/15

CGI Morning Note

We continue to see weakening global macro data, and consequently we believe that the past 7 days sell off in US and European 10-year Treasuries is overdone, and that current market prices constitute a clear “buy” signal. We are advising for investors to step up investments into 10-year US and European bonds, which sold off excessively in the past week, on nothing but a bit of improving, but still mixed, and not sustainable macro data from Europe and the US in the past three days.
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10Jun/15

CGI Morning Note

We believe that the past 5 days sell off in US and European 10-year Treasuries is overdone, and that current market prices constitute a clear “buy” signal. We are advising for investors to step up investments into 10-year US and European bonds, which sold off excessively in the past week, on nothing but a bit of improving, but still mixed, and not sustainable macro data from Europe and the US in the past three days.
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10Jun/15

CGI Morning Note & Weekly Charts

“The Federal Reserve should defer raising interest rates until there are greater signs of wage or price inflation than are currently evident”, the International Monetary Fund said today. The IMF now took the GDP growth outlook for the US down to 2.5%. This is still way above our 2015 forecast for the US of 2.2% GDP growth, which we are likely going to revise down in the coming months, if growth does not kick in massively in the current quarter, which we do not see in most of the aggregate data, which
we use in our assumptions.

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28May/15

IMF Says China’s Currency No Longer Undervalued

We noted in a previous report that the steeper the ascent, the deeper the correction. The Shanghai composite index has hit CGI’s target of 4,900 and is vulnerable to around 4,400 or even 4,100 should selling volume sustain itself after yesterday’s decline on record volume. Those with a short-term trading orientation may consider trimming positions or taking profits. However, we believe that the ‘A’ shares can still push higher after a period of consolidation. We reiterate that we believe the greater risk for long-term investors is one of not participating and missing out on China’s continued bull run.

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28May/15

Global Automotive Demand Atlas, May 2015 edition

For FY15E, we expect a global LV market of 89.2m, implying an increase by 1.9% or 1.7m. The growth rate is thus expected to almost halve in 2015E, from 3.7% in FY14 and 4.0% in FY13.

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22May/15

See The Chinese Forest Through The Trees

Although domestic loan demand has been trending below expectations, further reductions in the RRR in conjunction with new monetary and fiscal policy initiatives could lead to resurgent economic activity. We believe that China has at least two more years to pursue aggressive stimulative monetary policy given the current state of the global economy and generally accommodative monetary policy enacted by most central banks. In our view, it will be at least that long before accommodative global monetary policy transitions to a tightening cycle. Meanwhile, the world is awash in rising central bank driven liquidity.

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15May/15

BMW (EUR 102) – BUY

Solid 1Q15 auto results reflect ‘normalisation’ in China to single-digit growth rates and profit margins. In 2015E-17E, we expect EPS to grow at a CAGR of 8.1% and reach EUR 11.15 in FY17E. Our new YE15 target price of EUR 125 implies a 22% upside potential for BMW shares.

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11May/15

Morning Market Commentary & Weekly Charts

Total global debt is up 40% since 2007 to US$ 199 TRN according to a study by Mc Kinsey. As a percentage of GDP, debt is now higher in most nations than it was before the crisis of 2008/2009. On average globally, it is 286% now vs. 269% in 2007. Despite the economic rebound since 2009, the debt of households, corporations and especially governments continues to rise. Governments in advanced economies have borrowed heavily to fund bailouts in the crisis and offset demand in the recession. The danger is far larger and more imminent than commonly admitted, as evidenced in the chart below.

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06May/15

Morning Market Commentary

Seasonally, inflationary pressures are the strongest in Q1, attributed to the seasonal rise in commodity prices. Investors should keep in mind though, that there is increasing macro evidence, as today’s disappointing ADP data, whereas the US created 169,000 private- sector jobs in April, after a downwardly revised 175,000 jobs were created in March. Companies with 500 or more employees had the slowest growth, the firm said. The economist consensus is for the US to report 233,000 nonfarm jobs created in April on Friday.

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05May/15

Morning Market Commentary

The average unfavorable period return over the past 20 years was –0.25%; the average changes slightly to –2.04% when unfavorable periods following below average favorable periods are isolated. Declines between May and October are definitely not a certainty, but it often is prudent to be conservative in equity allocations by reducing beta and correlation versus the market during this period of random performance.

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04May/15

Morning Market Commentary & Weekly Charts

If the current slow GDP trend continues, and all signs we see point to this, then the level of earnings for the S&P 500 could be the lowest seen in two years. Q1. We are convinced by the initial data that this year’s Q2 will not be nearly as strong; we maintain our 2015 forecast for +2.2% GDP growth. It is time to make a few portfolio adjustments.

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29Apr/15

Morning Markets Commentary & Charts

US equities, even at current extremely high valuations, still have DDM support. The present dividend yield of the S&P 500 sits around 1.95%, almost double what it was at the start of the century. For the first time since the 1950’s, the dividend yield of the S&P 500 benchmark is higher than the 10-year Treasury yield (1.92%), increasing the appeal of the equity market. Whatever the use of enormous corporate cash balances, there remain many reasons to be enticed by the equity market over the long-term. Defensive sectors like utilities (+25%) and healthcare (+24%) are leading the US sector higher last year, and we believe that the low growth environment keeping the FED monetary policies on hold will bode well again for these sectors in 2015.

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24Apr/15

Morning Markets Commentary & Charts

Historically, when stock prices went up, bond prices went down and when stock prices went down, bond prices went up. This market phenomenon did not hold true in the past 7 years, since most global central banks have been turning up the floodgates. Thanks to most Central banks monetary policies around the world, financial markets are booming in virtually all corners of the world. Most global equity markets are trading at all-time record highs. Global real estate is booming at the same time, with record valuations in many countries, including both residential and commercial properties. Art collecting too is in vogue among the world’s wealthiest citizens.

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22Apr/15

Morning Markets Commentary & Charts

US stocks ended mixed yesterday with the Dow Jones Industrial Average and the Nasdaq Composite closing on opposite sides of the flat line. Q1 US company earnings so far are beating expectations, which is positive (albeit from a much reduced level as 3 months ago), but they are coming up light on revenue, which is bothersome. Not all of the shortfalls are attributable to the translational impact of the stronger US$, which makes even more for a sup-par grade for this earnings season.

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20Apr/15

Morning Market Commentary & Weekly Charts

We are still not assuming that the Fed will raise the FED Fund rate this year, so, consequently we see US equity markets may trade down within the “normal historic period of seasonal weakness” from May to September, which has been between -8% and -10%, before then a later FED move on raising rates may circumstantiate a more pronounced correction for equities in the US, and globally, to the tune of a -10% to -15% correction.

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13Apr/15

Morning Market Commentary & Weekly Charts

International events could have an impact on equity markets this week. The Greek government is close to running out of international currency to pay its debts. Negotiations continue. Discussions about framework of the Iran nuclear agreement continue. Venezuela is close to government breakdown. Terrorist hot spots seem to surface on a regular basis. Economic news this week is expected to show a slight recovery in the US economy in March from the weather related slowdown in February. Focus is on March Housing Starts to be released on Thursday.

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09Apr/15

Morning Market Commentary

Stocks around the world ended with marginal gains on Wednesday as investors digested the minutes from the latest FOMC meeting and awaited earnings from Alcoa after the closing bell. The S&P 500 Index continues to hover around its 20 and 50-day moving averages as investors refrain from any significant directional bets given the reporting season ahead. In the midst of this near-term hesitation in the US, global equity markets are excelling, outpacing the returns of American benchmarks.

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30Mar/15

Morning Market Commentary & Weekly Charts

Seasonal influences turn strongly positive (possibly due to anticipation of good news released by CEOs at annual meetings when they release “difficult” first quarter results e.g. stock splits, share
buy backs, dividend increases).  We are advising investors to accumulate seasonally attractive economically sensitive North American and internationals equities, with the exception of Japan
(due to March 31st being end of fiscal year, and a consequent -8% – 10% historical sell-off affecting Japanese equities from April – July) on weakness this week for a seasonal trade lasting until at least May.
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25Mar/15

2015 Q2 Global Investment Strategy

Equities globally still offer the best risk-adjusted returns compared to most other asset classes. Overall, for the broader equity markets to go higher, we need to see a rotation into the more cyclical sectors and into the financials. We prefer sectors like Energy, Industrials, Materials, Financials, Utilities and particularly public infrastructure themes for Europe, the US and Japan, where valuation measures look less demanding, with increasing cash flows, and high yields and growing dividends like particularly in Automotive, Energy Industrials and Basic Materials.  Chinese, Indian, Brazilian and Russian equities have entered their period of seasonal strength, and hence why recommend to stay overweight the Shanghai Composite, and increase weightings into Indian, Brazilian and Russian equities for Q2 2015.  European equities remain cheapest on an absolute basis and and the relative valuation discount to bonds has improved over the past months, particularly since the ECB started QE. The much weaker Euro in combination with with much lower commodity prices for champion European industrial manufacturing and luxury manufacturers companies will help exports and increase earnings in 2015 beyond consensus estimates. European equities with much higher dividend yields than anywhere still offer much better risk-adjusted total returns. We see increasing M&A activities to be a big theme in Europe and help drive equity prices higher. However, Q2 in Europe, like in Japan and the US represents the period of seasonal weakness, and will offer better buying opportunities ahead.
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24Mar/15

Strategy Update: China

China forecasts and estimates are likely to become very sloppy as government guidance begins to lose its quality of certainty that many forecasters have relied upon.  The most important question has always been whether Premier Li Keqiang can implement the necessary reforms to ensure that the economy will grow in a long term sustainable manner. Foreign investors continue to flee from China. The media negatively impacts foreign investor sentiment by drawing negative conclusions as it highlights the slowest economic growth in more than two decades juxtaposed to the double digit growth of an earlier era; for them the glass is always half empty.

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16Mar/15

Morning Market Commentary & Weekly Charts

International events will influence financial markets including the election in Israel and evolution of events in Greece. Economic news globally this week is expected to show a mild improvement relative to comparable reports released at the same time in February. US economic focus this week is on the FOMC meeting and news conference on Wednesday. In the US, stocks drifted lower on Friday as investors jockey for position ahead of this week’s FOMC meeting. FOMC meetings where a quarterly press conference has followed are thought to be the most probable time for the Fed to announce its first rate increase; the next opportunity won’t be until June 17, therefore it is no wonder that investors have been reacting in the equity, currency, and treasury markets much more
significantly than past meetings.

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11Mar/15

Morning Market Commentary

The parabolic rise of the US$ is finally becoming a discussion topic amongst the global strategists, asset allocators and analysts, so that now we start seeing US government officials coming out of the woodworks and starting to comment on the exuberant strength of the US$ hurting US industries and the inherent lack of competitiveness.

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10Mar/15

Morning Market Commentary

US 30-year treasuries peaked at the end of January following test of trend line resistance; since the price of the 30-year treasury bond has traded lower by around 7%, now testing the middle line of the long-term rising trend channel. We are assuming the price trades to the lower limit of the rising range, a decline of around 13% (to $130) from present levels is still implied.

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09Mar/15

Morning Market Commentary & Weekly Charts

We are not fearful of a Fed rate hike, as that is typically good for stocks given that it means the economy is in good shape and stocks stay on the uptick for 2-3 years after. Plus, worldwide  government bond competition will lead more investors to US Treasuries to keep a lid on rates and thus continue to make stocks look attractive by comparison. Our views for 2015 (as for 2014) of the global investment world differ substantially from consensus, and applied by other investors on Friday. Yet when level heads prevail, however, it may take the market 3 – 4 months, as it has
in the past years, we think that more people will come around to our investment views and conclusions. As such, we believe that this is a buyable dip for US 10-Year government bonds with higher highs on the way for 2015. For now, US bonds are still more attractive to investors than US stocks.
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02Mar/15

Morning Market Commentary & Weekly Charts

We continue to advise investors to increase allocations towards Japanese equities and towards the $NIKK in particular, as we see the structural changes made by Abe’s government gaining traction and delivering tangible results, and Japanese investors increasing exposure into domestic equities.  Historically, the N-225 is in a period of seasonal strength from January until early April (in part due to fiscal year end {March 31st} window dressing related performance).
As we had been expecting, European benchmarks have been outperforming US benchmarks since the beginning of the year, mainly due to the much lower valuations attracting investors (P/E; P/CF; much higher dividend yields) but also benefiting from the accommodative monetary policies enacted by the ECB. We see increasingly technical evidence of the strength in European equity markets set to continue, following historic seasonal strength patterns that run through to the start of May, which is coinciding with the end of annual dividend pay-out period.
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25Feb/15

Morning Market Commentary & Charts

After the FOMC meeting notes, it seems that Ms. Yellen is now altering the FED’s focus away from employment, GDP and other determining interest rate policies’ factors to one of the economic indicators, which we had been highlighting as one of our main benchmarks for our forecasts on FED related policy changes, and our 2015 assumptions on “No FED rate hike until 2016!”, namely consumer price inflation indicator (CPI).

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23Feb/15

Morning Market Commentary & Weekly Charts

Equities globally rallied on today, boosted by news that Greece has reached a deal to secure a loan extension with its creditors. The German DAX 30 and the Dow Jones Industrial Average charted a new all-time closing high, following the S&P 500 Index and Russell 2000 Index, which charted all-time highs earlier in the week.

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19Feb/15

Morning Market Commentary

We maintain our baseline forecast for 2016 of “No FED rate hike in 2016”, as the global inflationary pressures are still declining, and we see increasing macro-economical evidence of the US economy slowing, and of our baseline forecast becoming more widely be accepted both by central bankers and by market participants.  Consequent to the market slowly adapting to our base line scenario, we do see a strong case for renewed allocations towards high yielding equities mostly outside of the US, particularly in the case of Japan and Europe, as those equities markets have entered their periods of seasonal strength until April for Japan, and mid-May in the case of Europe. In the US, dividend yields on S&P 500 stocks are competing with yields on 10-year Treasuries. Higher Treasury yields (i.e. lower Treasury prices) could prompt additional rotation into equities.

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18Feb/15

Morning Market Commentary

Seasonally, treasuries trade lower between now and the end of April as investors take on more risk in the equity market; the month of March is by far the weakest period of the year for the treasury bond, declining by an average of 1.6%. The 30- Year Treasury Bond has declined in March 87% of the time over the past 24 years, a significant frequency for any asset class. Bonds seasonally come back into favor during the summer months when investors tend to be more risk averse.

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09Feb/15

Morning Market Commentary & Weekly Charts

Treasury bond prices are vulnerable to further technically corrective declines, particularly given that we are in the midst of the period of seasonal weakness for the asset class; negative seasonal tendencies persist through April. However, over the past 30 years, each time the long-term treasury bond has met up with this rising level of resistance, stocks have generally performed well in the months and years that have followed. However, we continue to advise investors to trade bonds according to their long-term trend channel dynamics. We see nothing fundamentally having changed over the past 2 months for that trend to change.

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06Feb/15

Morning Market Commentary

Despite the bearish oil report, and the significant headwind imposed by the stronger US$, the price of $WTIC closed firmly higher, breaking resistance charted around the 50-day moving average. Momentum indicators are starting to curl high after briefly rolling over in the month of February. A break above the February high around $54 would confirm a higher short-term low charted in recent days, providing a strong first step towards a series of higher-highs and higher-lows.

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04Feb/15

Morning Market Commentary

Early technical signs have surfaced that 10-Y US Treasuries are rolling over from overbought levels.  However, as we noted repeatedly over the past 10 months, due to falling global
inflation, we see any temporary small correction of 10-Y Treasuries as another reentry point for investors, as we anticipate for the yield for the 10-Y Treasuries to fall at least towards 1.3% in the coming 2 quarters.

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02Feb/15

Morning Market Commentary & Weekly Charts

Stocks are trading at extremely high valuations against a backdrop of slowing economic growth and rising global financial and geopolitical instability.  Market cap to GDP ratio is currently at twice its historical average. The Shiller Cyclically Adjusted P/E Ratio (CAPE) is at 1.7x its historical average.  The forward P/E ratio of the S&P 500  is currently 16x versus an historical average of 14x .

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26Jan/15

Morning Market Commentary & Weekly Charts

We believe that the US$ impact is not at all factored in by sell side analysts, and will make for a nasty surprise in the coming quarters in 2015. The price of the long-term bond continues to bump against trend line resistance that has spanned the last 30-years. Should this trend line hold, the long-term treasury bond may succumb to selling pressures following the Fed announcement. International market ETFs including Emerging Markets and European equity market led world equity markets on the upside last week, and we are expecting for that trend to continue over the coming months.
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22Jan/15

Morning Market Commentary & Charts

Asian and European financial markets, (currencies, equities and government bonds) were little changed as investors braced for the possibility of new quantitative easing measures from the European Central Bank (ECB). There’s a strong chance that tomorrow’s ECB announcement will boost Eurozone stocks, however not necessarily weaken the Euro further, as the parabolic rise of the $USD relative to most world currencies since June 2014 has been overdone in time and magnitude. The ECB move, in combination with the European-wide Juncker Plan, which will
bring an additional stimulus to particularly infrastructure projects in Europe, should be convincing investors to make further equities and bond investments into the Eurozone.

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19Jan/15

Morning Market Commentary & Weekly Charts

North American equity markets entered into a short-term corrective phase on December 29th.  The corrective phase is expected to continue until end of the fourth quarter earnings report period (i.e. late January/early February). Thereafter, North American equity markets are expected to resume an intermediate uptrend as they normally do during a US Presidential Pre-election
year. We are expecting for equity markets around the world to be exceptionally volatile this week due to a series of economic/political news events.

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15Jan/15

Morning Market Commentary

In a shock move this morning, the Swiss central bank scrapped its minimum exchange rate of 1.20 Swiss francs a Euro, which was introduced four years ago
to protect Switzerland from the Eurozone debt crisis. The Eurozone’s trade surplus widened in November as exports rose, indicating that a weakening Euro is starting to provide a boost to the economy. The European Union’s statistics agency today announced the Eurozone recorded a surplus in its trade in goods with the rest of the world of EUR20 bn ($23.6 bn), up from EUR16.5 bn in the same month of 2013.

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12Jan/15

Morning Market Commentary & Weekly Charts

US Equities are extremely expensive compared to its global peers, and have been overweighed & overheld for a very long time by foreign investors. The fact that foreign ownership of US stocks is at an all-time high, totaling 16% in 2014, the highest in 69 years since such records have been kept, is of additional concern. For 2015, we are advising US investors to increase their foreign holdings, and reduce US equities exposure.

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05Jan/15

Morning Market Commentary & Weekly Charts: 2014 Final Words

The yield on the benchmark 10-year Treasury bond ended the year at 2.17%, exactly at our 2014 target price, and down substantially from where it started the year at 3.03%. Despite the fact that the Fed ended its quantitative easing program in October 2014, we do see the long end of the Treasury curve likely to move lower in 2015 on the back of weak global growth, and the fact that “the Fed is boxed in” consequently, and eventually will become more accommodative one more time.

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