Trades and Markets Risks|
We see several factors helping reflation trades to mid-2018: (1) Global QE is winding down, allowing the U.S. 10Y yield to stabilize or move higher, (2) Currency war is over, allowing U.S. inflation to edge higher, (3) U.S. labor markets to tighten further, and the Fed will not rock the boat near-term, (4) As GDP clouds lift we prefer cyclicals rather than growth or defensive, (5) Saudi Arabia is likely to reassert its 'central bank of oil' role and extend output cuts, having no other options, (6) Presidential difficulties may be a catalyst for Republican agreement on tax reform.
Beyond mid-2018 we see several overall market risks: (1) Our market direction model (R2 0.75 monthly for 65 years) indicates this is the final run before a cyclical bear (-20%) market, (2) The U.S. 10Y yield may quickly plunge by 100bps and curve invert in 2018 if U.S. GDP growth disappoints or the Fed fumbles asset unwind, (3) Corporate spreads are the weak link for stock valuation in 2018, (4) We have doubts about the recovery in U.S. wages as well as GDP growth abroad in 2018, (5) Commodities are at a critical level, signaling a decisive reflation or deflation break, (6) With policy having adverse effects, resulting "reflate or bust" risk overshadows low volatility.
Head of Institutional Equity Strategy
Managing Director, Stifel
- Head of Institutional Equity Strategy for the group 2011 Present
- Sell-side Machinery and Engineering (E&C) analyst 1992-2010
- Buy-side senior equity analyst / portfolio manager 1987-1992
- Stifel & Legg Mason (predecessor firm), Baltimore MD 1998 Present
- SG Warburg & Swiss Bank Corporation, New York City 1992-1998
- Buy-side investment firms 1987-1992
- 5x Institutional Investor magazine All Star Analyst (E&C, Machinery)
- 6x Wall Street Journal Best on the Street award (E&C, Machinery)
- 6x StarMine Top Level Analyst award (Industrials)
- CFA charter holder since 1991
- BA (1984) & M.B.A. (1987) Emory University, Atlanta GA