WHAT’S GOING ON IN THE MARKETS?
Investors try to figure out growth peak
Nothing — from rising rates to blowout earnings — has knocked the stock market out of its tight range over the past two months. Theories abound, but it’s all a bit of a mystery.
So we asked some of the sharpest money managers to explain just what the heck is going on and what they are doing about it?
Michael Shaoul, CEO of Marketfield Asset Management, said inflation is lifting input costs so his focus is on companies linked to commodities.
Jenny Jones, portfolio manager at Schroder Investment Management, said the market’s trying to suss out when growth will peak, and that’s causing the gyrations.
For Ed Keon, chief investment strategist at QMA, the chance of a recession by spring 2021 is more than 50-50 — until then, stay invested in equities while you can.
Rich Guerrini, CEO of PNC Investments, said the Fed’s got people’s attention but tightening shouldn’t be a concern, it’s natural at this stage, so get used to the swings.
Of course, their explanations have far more nuance than can be expressed in a short sound bite, so here’s more of their reasoning.
Shaoul says his firm, which manages $500 million, has moved steadily into commodity-related equities and countries that export them such as Chile and Brazil.
“The market has just been given a new problem — the market’s been told, input costs are an issue, whether it’s commodity costs or labour costs, or transportation. It is a confusing time.”
He’s generally moved away from technology and remains short consumer staples.
“The earlier you are in the price chain the better, because your stuff is in demand and you have pricing power. So all those commodity-related sectors that really did so badly in the middle of this bull market are quite advantaged again. Energy, materials, countries that have a lot of commodity exports as a key part of their economy. All of that stuff is in a better place.”
Although Marketfield invests mostly in stocks, the shop’s view is that the shortend of the yield curve “is your friend.”
Mid-cycle? Late-cycle? The market can’t seem to figure it out, according to Jones, and that’s causing the ups and downs. Here’s how to assess it:
“The market is saying, I don’t know, but I know that I’d rather go back to secular high-growth businesses,” she said in a phone interview. “Specifically, biotech and pharma.
Technology in certain areas that are related to the internet, cloud expansion, and software companies that are related to that. And that’s typical of when there is concern in the market about possible cyclicality. There is some kind of concern in the market that the other companies — industrials, chemicals, even banks — that they can sustain that growth rate into 2019.”