Results for search of category: Global Equities

The China Question

Our recommended weight for Chinese equities has just hit its all-time low since the beginning of this century. They have been in extreme underweight territory for their longest period ever. We think this is more than a temporary misunderstanding. It could represent the breakdown of the pro-China consensus that has dominated US investment thinking for over a decade. There may be parallels with what happened when the US became disillusioned with Russia 10 years ago. US investors who want international equity diversification will be forced to have another look at Europe.  [Read More... ]

Saviours of the World

The global Healthcare sector has begun to rally hard after hitting an all-time low in terms of its recommended weight relative to benchmark. It had previously been ignored because it doesn’t fit well into the current debate about growth vs value. We think it is time for another look, chiefly because the risk of price controls on US prescription drugs is much lower than previously feared. There is no time for Congress to consider this legislation before the run-up to the mid-term elections, and politicians may find that public opinion has changed after the success of anti-Covid vaccines.  [Read More... ]

So, You Want to Buy the Dip

Nothing in the last two weeks has changed our view that a correction in global equities is coming. If you are one of those investors who has waited all year to buy the dip, we have three rules about how to do it. One, decide your tactics in advance and don’t pay too much attention to the narrative behind the correction. Two, don’t add complexity to a market timing trade by using it to rebalance your equity portfolio. Three, if you want to front run a correction, make sure you have enough defensive exposure at a sector level. Our top pick here is European Telecom.  [Read More... ]

To See Ourselves as Others Do

Eurozone equities may be cheap when compared to the US, but that’s not really important. Over the last10 years, US investors have never been able to generate a superior risk-adjusted return by diversifying into the Eurozone index, no matter what tactical allocation strategy they follow. The picture is marginally better if we look individual sectors over a shorter time-frame, but Japan and Asia ex Japan, do much better on this test.   [Read More... ]

The Pandemic Isn’t Over Yet

The bond sell-off this week reflects a very bullish consensus about the pace of recovery from the pandemic, which we believe is not supported by the data. Daily infection rates have stopped falling in the EU and the governments of Germany, France and Italy may be forced to increase restrictions on mobility and economic activity. This would send a shockwave through bond markets – certainly in Europe and probably the US.  [Read More... ]

Two Big Ideas for 2021

In 2021, we expect our models to recommend an extended underweight in US Equities and an overweight in Small Caps, particularly Europe, The US underweight is controversial and has often been wrong, but investors need to know that we have been significantly overweight for most of the last 10 years. The underweight worked well in the recoveries of 2003-04 and 2009, and we participated on both occasions. The same is true of our overweight on Small Caps, which is our preferred way of playing the economic recovery and equity rotation at the same time.  [Read More... ]

Buying Dips & Selling Bounces

Given the likelihood of a second wave of the pandemic at some stage during the rest of this year, we have gone back through 25 years of data in over 40 countries, to see if there are any lessons about what to do in the immediate aftermath of a very bad sell-off. We find that buying the dip is not always a successful strategy and certainly not as successful as selling the bounce. By far the best strategy is avoiding the really bad weeks completely, which is easier said than done. The uplift from doing this is so significant that it dwarfs any other strategy. Even partial success is worth the effort - and the risk of missing out.  [Read More... ]

Asia: First In, First Out

The recent volatility shock is as big as the one in the middle of the GFC and it isn’t over yet. It has also happened three times faster, in three weeks rather than nine. Fear is inevitable, but the are some interesting opportunities, especially in Asia. Countries like Taiwan and South Korea have managed the corona virus better than the US or Europe, while China is already recovering. If you wait for the bounce in the West, you may miss it in the East.  [Read More... ]


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