Investment Tweet – swisspartners – The art of finance

Investment Tweet

14.09.2017Math lessons

Out of the 7.5bn world population over 5bn are located in developing countries (emerging markets) and of this amount over 50% are located in China and India. According to McKinsey Global Institute, annual consumption in emerging markets will rise to a whopping $30 trillion by 2025 compared to $12 trillion in 2010. If wages increase by another USD per annum in developing markets that would effectively produce another USD10bn + of consumer spending power. This is the most powerful investment theme of our time but many are playing it wrong – we will give you a clue - this newly created disposable income is not going to be spent on locally produced washing powder! - Peter Ahluwalia

21.02.2017If you blinked you missed it!

European GDP growth outpaced that of the USA last year but we seem to be the only ones who noticed it or care. No this is not fake news. There is a significant chance that European GDP growth exceeds 2% this year (PMI`s are already suggesting this). This is not priced in by markets and could cause significant upwards volatility. - Peter Ahluwalia

06.02.2017Dear Donald...

We know that you are a big picture guy and others take care of the details but we think you might have made a serious mistake.

The name of the Mexican president is Pena Nieto not piñata.

Yours truly
Peter Ahluwalia

27.01.2017“He who knows when he can fight and when he cannot will be victorious” – Sun Tzu – the art of war

The possible war (trade) with Mexico should perhaps not be taken at face value. Just like the gladiators in the colosseum in ancient Rome kept the mob happy an “easy” target such as Mexico may placate voters, honour election promises and avoid a trade war with China that the US is unlikely to win. - Peter Ahluwalia

18.11.2016Is Donald Trump a Chihuahua?

Now I don't mean to be offensive here - I have the highest respect for Chihuahuas and the US democratic process. Rather I am referring to the analogy is his bark worse than his bite and does he have limited biting power? Looking at the analogy of Dr Jekyll and Mr Hyde I think we have seen Mr Hyde (bad cop if you like) first and now we are likely to see Dr Jekyll (good cop). Essential to the whole thing is figuring out whether he wants to be a one term or two term President - I am pretty sure it is the latter. This means that there will have to be some delivery on his campaign promises in terms of economic growth and prosperity (fiscal stimulus, deregulation and smaller government ). A small majority in the Senate and a somewhat split Republican Party could very well keep some of the more controversial promises at bay. What about the wall? Well it could be one foot high and made of marshmallows! He didn't go into specifics. - Peter Ahluwalia

04.11.2016Batman - the revenge

The US election is beginning to look like a Hollywood script with 3 players Batman, the Joker and Two face - I let you figure out which is which. Markets which have been bruised by the BREXIT result are having a sense of déjà vu and in the US have been declining since early September. They needn`t worry! We currently see a Clinton victory (remember many have voted early) with her being blocked in Congress and maybe also the Senate – a very market friendly outcome. Even if we are wrong (and we only have a 50% chance of getting it right) than Trump we believe would be reigned in quite hard by the Republican party. No matter what happens things are getting better both on a global economic basis and a corporate profitability level and this is what really matter. Any short term turbulence should thus present an opportunity. - Peter Ahluwalia

02.11.2016Trump trumped

Despite the risk aversion we are seeing in markets due to the upcoming FED decision and US elections investors panicking in the short term may be missing the bigger picture. After 5 consecutive quarters of negative earnings growth in the US and 5 years of negative earnings in Europe we seem likely to have positive earnings for both regions this quarter and beyond. This is a big deal along with strengthening manufacturing data (which seems to have been completely ignored) and is likely to be a driver of better market performance going forward. Pre US election jitters should be used as a buying opportunity of selected risk assets. - Peter Ahluwalia

22.09.2016It's beginning to look a lot like Christmas!

As expected rates were left on hold by the FOMC however it now seems clear that unless we see some substantially weaker data there will be a rate rise in December and markets have been prepared for it. If we carry on at this pace it will take 10 years for interest rates to reach normal levels. In fact the growth projections for the US economy were lowered to below 2% and the future interest rate forecasts were lowered as well. Every central banker knows that it is easier to fight inflation rather than deflation (just look at Japan). Lower for longer is the mantra that will likely continue for the foreseeable future. With the advent of fiscal stimulus which we expect and easy monetary policy inflation will return perhaps in 3-5 years and will be allowed to overshoot. - Peter Ahluwalia

08.09.2016Brothers in arms

Despite the slight difference of opinion over taxes Apple and the EU have more in common than one might think. Expectations for new features and sales of the upcoming iPhone 7 are low as are expectations of anything happening at the EU leaders summit in the middle of this month. Chance of a significant upside surprise for both is high. - Peter Ahluwalia

01.09.2016You ain`t seen nothing yet!

“Bull-markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria.” – Sir John Templeton

Given the painfully slow progress we have made since the great recession- it has taken 17 years for the Nasdaq, Dow Jones Industrial and S&P 500 to reach simultaneous record highs (the last time was 31st December 1999) and European equities are 40% below their all-time highs my guess is that we haven`t even reached the optimism stage yet.
Recent fund flow data show the 29th consecutive week of outflows from European equities and the 19th week out of 21 weeks that money has flown into bond markets.

My gut instinct tells me that we are probably at the optimistic stage for bond markets (Japan is considering buying foreign bonds which could push us closer to euphoria) and that given subdued optimism for equity markets we are probably in the greatest secular bull market of my career.
If I am right this means that we are not even at the halfway stage of this up cycle and the trend (there will be some dips along the way) will be firmly upwards over the next decade. - Peter Ahluwalia

Graph: Euphoric fund flows to assets tied to 'zero-rate' expectations
Source: BofAML Global Investment Strategy, EPFR Global

30.08.2016Salmon fishing in the FOMC

A fishing guide dropped a man and a woman off to fish two different bits of a river. When he returned for hours later he found the man was already two miles downstream whilst the woman had hardly moved at all! You maybe struggling to make the financial connection?
Women are more thorough and cautious then men.
A rate hike in the US is unlikely in our opinion until the FED funds futures contract prices in a 75% - 100% probability of a rate hike ie. they do not want to surprise the market. At this point in time a 40% probability for September is priced in so unless this changes drastically we expect no hike. Interestingly June 2017 has close to a 100% probability. - Peter Ahluwalia

24.08.2016Absolutely not!

They say that absolute power corrupts absolutely.
When looking at investment markets it important to be wary of absolutes and extremes.
Two months after BREXIT Armageddon didn`t happen for either the UK or Europe and the for horseman of the apocolpyse did not arrive. Conversely the UK did not overnight turn into the land of milk and honey.
The sharp fall in GBP has increased shopping tourism (don`t expect tax revenue to increase as most will be doing their VAT refunds). Companies which export mainly in the FTSE100 index have benefitted – just look at stocks like Rio Tinto and Burberry. On the flip side of the coin some major projects planned by companies have been put on hold, the UK Government debt level is rising and cost of imported goods has risen.
Basically we are pretty much where we were before BREXIT (it hasn`t actually really happened yet) except with a cheaper currency which has helped take the sting out of the BREXIT tail.
European data just released (purchasing managers index) showed signs of expansion with limited BREXIT effect. - Peter Ahluwalia

23.08.2016Bedtime stories

I was putting my seven year old daughter to bed and out of the darkness came two questions:

1. What is a soul - I am not going to get into this one here!

2. How come there are poor people- before I could answer this morphed into why do children in some of these poor countries die? I tried to explain that the world is not a fair place and in these countries medicines we take for granted are not available whilst assuring her that where we live these kind of things don't happen. I then tried to explain that some of these children don't even have toys and perhaps it would be a nice idea for her to give some of her old ones away. Her reaction was to keep all of the toys she had since she was a baby and not give anything up.
Looking at the state of global politics ( I won't name countries) but we seem to be moving towards a me type of philosophy. Perhaps if we were all less inward looking maybe just maybe the world might be a better place. - Peter Ahluwalia

22.08.2016Does anyone except us feel the love?

European stocks see USD2.8bn in net outflows for the week to August 17th marking the 28th straight week of redemptions and the longest losing streak ever.

Money is going to emerging market stocks where allocations are neat 2 year high but the majority is still going to bonds.

Guess nobody wants to buy low and sell high! - Peter Ahluwalia

18.08.2016Did anything change?

Having just renewed my UK passport at Her Majesty`s Passport Office the cover clearly says at the top European Union.

Will Mr. Juncker (or friends) be waiting at passport control with a red pen to cross this out. Will the UK recall all passports and have to replace them. Why are the issuing passports with European Union on them – because the UK is still a fully-fledged member and is likely to be so for quite a while.

We had the vote and now we have the mess. It will take longer than many think to clear up! - Peter Ahluwalia

28.07.2016Wird Dublin London beerben?

Nach dem Entscheid des britischen Stimmvolkes zum Austritt aus der EU (Brexit) geht die Angst in London um.
Die Finanzmetropole fürchtet um Tausende von Arbeitsplätzen und dies nicht unbegründet. Dabei dient die Schweiz als negatives Beispiel, was auf London zukommen könnte. Der Binnenmarkt der Europäischen Union erlaubt es Aussenstehenden wie der Schweiz nicht, aktive Finanzdienstleistungen anzubieten. Nun gibt es zahlreiche Exponenten, die bei einer Finanzdienstleistung immer von einem Aktivismus ausgehen und passive Dienstleistung per se gar nicht existieren. Zumindest sind Dienstleistungen im möglichen Graubereich gefährlich und können zu drakonischen Strafen führen.
Schweizer Banken lösen dieses Problem, indem sie Onshore (vor Ort) ihre Finanzdienstleistungen anbieten; sei dies in London, Luxembourg oder Frankfurt. Hauptsache aus einer Metropole innerhalb der Europäischen Union. Den Finanzdienstleistern, die bisher aus London operieren, droht also als Aussenstehender den gleichen Spielregeln wie die Schweizer Finanzinstitute zu unterstehen. Und ihre Lösung könnte Dublin heissen. Nicht um sonst ist Dublin der europäische Hauptsitz von amerikanischen Firmen wie Google, Facebook, Dell, Microsoft, Intel, Apple, Pfizer oder Johnson & Johnson. Sie profitieren von drei Vorteilen, die keine andere europäische Metropole bieten kann:

1.) Englische Landessprache
2.) Mitglied der Europäischen Union und damit uneingeschränkten Zugang zum europäischen Binnenmarkt
3.) Tiefste Unternehmenssteuer aller OECD-Länder (12.5%)

Dublin könnte für die Finanzdienstleister aus London folglich eine mögliche Alternative sein, um weiter uneingeschränkt ihre Finanzdienstleistungen anbieten zu können. - Ralph Weidenmann

27.07.2016Cut interest rates to increase

USD 17.5trillion in govt debt now carries a negative yield. Likely to increase as Bank of England is forced to cut interest rates. Swiss 30 year bond yield has now gone negative. - Peter Ahluwahlia

19.07.2016Big JP Morgan

Deutsche Bank and Credit Suisse likely to be from Eurostoxx 50. DB is now only 1/10th the size of JP Morgan. - Peter Ahluwahlia


European equities on sale due to BREXIT and global growth worries. Valuations now at nonsensical levels even for European companies that do very little European business. The baby has really been thrown out with the bathwater. - Peter Ahluwahlia

06.07.2016Central Banks

We have a political crisis aggravated by a lack of leadership crisis. All the work is once again down to central banks. - Peter Ahluwahlia

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