Dating funda 21st century dating etiquette

Cash is expected to produce a negative real return for yet another year. In particular, no one knows for sure whether inflation is dead or merely sleeping.

Similarly, central banks could get tetchier about whether they are repeating the errors of the 2000s.

Additionally, a pickup in inflation expectations or disappointing earnings from growth companies could cause investors to refocus on earnings funda¬mentals, a shift that would favor value over growth. Note: Valuation spread is a z-score between the median P/E ratio of top quartile stocks and bottom quartile stocks as ranked by the size factor.

EXHIBIT 2: SIZE FACTOR VALUATION SPREAD (GLOBAL) Source: J. Despite losses in August, merger arbitrage continued to collect the premium implied by announced merger deals.

We see little reason to shift out of a portfolio skewed towards risk assets.

Given everything seems expensive, we still prefer equities over credit over government bonds.

Quality, on the other hand, appears rich (36th percentile).

Value spreads are average, and any progress toward a congressional infrastructure package would likely boost cyclical value stocks.

(High-tax company stocks have underperformed low-tax company stocks in 2017, a reversal of 4Q 2016, suggesting that politics likely played at least some role in these market dynamics). The Federal Reserve (Fed) signaled that it would hike rates once more this year, and the Trump administration unveiled a tax overhaul.

Markets priced in a 78% probability of a rate increase toward the end of September, up from 31%; yields and the U. dollar reversed course; and cyclical sectors and stocks began to once again outperform. Note: Equity and event-driven factors represented as 100% long notional exposure, macro factors as aggregation of 5% volatility subcomponents.

Policy as well as economic and fundamental data impacted pricing last quarter, and many of the factors that we favor were challenged, though there were pockets of strength (EXHIBIT 1).

For much of 2017, the reflation/Trump trade from 4Q 2016 unwound, with yields and inflation expectations falling, the U. dollar declining and cyclical sectors and stocks underperforming.

Forget “don’t fight the Fed”; it is the Bo J we will be keeping an eye on.

Tags: , ,