This commentary was posted recently by fund managers, research firms and market bulletin writers and was edited by Barron’s.
Weekly update
Aden forecasts
February 11th : Gold breaks out on the upside!! [The spot gold price rose 1.26% Friday to $1,860.60 an ounce.] A meteoric rise has begun and it is fueled by fears that Russia will soon invade Ukraine. High inflation is also a stimulus… Gold ends the week with its best rise in three months, and is very strong above $1,830.
Gold stocks follow the strength of gold with the
NYSE Arca Gold BUGS
the index jumped and approached its 65-week moving average. It is very strong above 260. Silver is not as robust as gold and miners, but it is still firm above $22.50, and it would be in a breakout above of $25. Hold your positions.
—Pam and Mary Anne Aden
Inflation: causes and remedies
Talking points
BMO Capital Markets
February 11th : Inflation is a process, not an event. As stunning as January’s US CPI was – and it was a staggering 7.5% for the headline and 6.0% for the core – it’s just a small part of a process that’s been going on ever since. over a year now. There isn’t a single factor that brought us here, but rather a series of unfortunate events. Ultra-easy monetary policies, ultra-stimulative fiscal policies, a global shift towards buying goods instead of services, workers unable or unwilling to work, supply chain issues and profound changes in the world oil market have all worked together to get us to where we are today. To get back down the mountain of inflation, we may need to see a reversal or relief from each of these factors. It looks like a long process.
At the Inflation Forecasting Olympics, the Transitory team missed the first gate, fell on the first jump, slipped on the first turn…you get the gist. Now, I’m way too big of a person to say “I told you so” on the inflation front. But loyal readers of this space will know that we’ve been in the camp of Larry Summers for a year, warning that inflation was going to be much hotter and last much longer than the consensus predicted. Even we were somewhat surprised by the strength of inflation trends in the US and raised our CPI estimate several times over the past year. We now expect the headline CPI to average over 6% this year before falling to just under 3% in 2023, both a long way from the 1.7% average of the decade before the pandemic.
—Douglas Porter
Disruptors, beware of disruptions
Global investment strategy
CBA Research
February 11th : Tech stock enthusiasts tend to forget that disruptors themselves can be disrupted. History is littered with tech companies that failed to keep pace with a changing world: RCA,
Kodak
,
Polaroid, Atari, Commodore, Novell, Digital, Sinclair, Wang, Iomega, Corel, Netscape, AltaVista, AOL, Myspace, Compaq, Sun, Lucent, 3Com,
nokia
,
Palm and RIM were all major players in their respective industries, eventually falling into oblivion. All but one of the top 10 tech names
S&P 500 IT
index in 2000 underperformed the market to a large extent over the next 10 years.
Today, the incentive for the emergence of startups has never been stronger. Venture capital funds are full of cash. Technology profit margins are near record highs, making challenging incumbents an increasingly attractive goal. About a third of the outperformance of US tech stocks since 1996 can be explained by rising relative profit margins, with faster sales growth and relative expansion in the P/E multiple explaining 45% and 23% of the rest, respectively.
—Peter Berezin and his team
Loan growth in China is accelerating
ING Snap
ING
February 10: January typically sees a sharp increase in loan growth in China compared to December, as Chinese banks tend to book loans early in the year. But this year’s jump is significant, even on an annual basis. This indicates that underlying economic activity is stronger than last year.
Yuan
loan growth rose 11.5% year-on-year in January to 3.98 trillion yuan, meaning outstanding loans stood at 196.65 trillion yuan at the end of January. end of January. Most of the loan growth came from longer-term business loans. These business loans signal growth in business investment. This is in line with our expectation that investments in semiconductors, telecommunications, healthcare, data privacy and hardware infrastructure projects started in January. Accelerating loan growth points to positive investment momentum in the first and second quarters. We should see an increase in services and manufacturing activity [in China] in the field of IT and building materials processing within a few months.
—Iris Pang
Bullish outlook for commodities
The weekly speculator
Marketfield Asset Management
February 10: For commodities, the upward trajectory has the potential to continue. Investor inflows are far from excessive and, unlike previous peaks such as 2008 and 2011, there has not been a massive expansion of new exploration and development helping to boost supply well beyond. above consumption. It would appear that the Omicron scare has been a great buying opportunity for energy in particular, and we suspect that the long period of industrial and precious metals consolidation will resolve to the upside. We note that iron ore has shown an impressive recovery from its 2021 crash, and lumber, the 2021 boom and bust story, is once again seeing a very rapid price increase. This is important, as it suggests that even if some key prices pull back in 2022, this could prove to be a temporary respite unless underlying demand is clearly impaired (this was obviously not the case with timber). work).
—Michael Shaul, Timothy Brackett
Pain point for mid caps
United States Investment Policy Notes
CFRA
February 10: The deterioration in small-cap stocks has been documented for months, and now that weakness has spread to their mid-cap cousins, according to Lowry Research, a CFRA firm. Mid and small caps lagged large caps from a price perspective, as seen in the relative performance charts of the S&P 400 Mid-Cap Index and the S&P 600 Small-Cap Index, which recently set new 52 week lows. compared to the
S&P500.
Lowry’s segmented percentage of operating-only (OCO) stocks 20% or more below 52 weeks, which represents the weakest stocks in each capitalization group, currently indicates that small caps have weakened significantly since July, followed by mid caps dating from the end of November. Typically, the deterioration in health starts with small caps and spreads to mid caps and finally to large caps. When the latter falls, the market can generally no longer resist the sellers. For the moment, great caution remains in order.
—Sam Stovall
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