Written by subodh kumar on February 7, 2018 in Market Commentary Precis

Note Précis February 7,2018: Rotation of Rotation: Unlike the fear and restructuring of 2007 to early 2009, more recent markets until February 2018 have been about complacency with liberal quantitative ease. Amid volatile trade, internal and global politics worldwide, miscalculations could take place. Even if for currently obscure reasons, likely to be next is rising vigilance in the capital markets. These changed dynamics for markets and central banks would be a rotation of rotation. Within the current business cycle in the sequencing of consumer spending versus production versus capital investment versus resource demand, the first phase has been elongated and potentially in excess. The elongation drivers likely lie in all of massive quantitative ease, major technological changes in retailing and the rise of emerging country consumers. Subsequent business phases are likely but be more volatile. Long term corporate project capital budgeting is unlikely to be on hurdle rates based only on presently minimal administered rates. As global growth continues, the future amplitude of interest rates is unknown. Rates are likely to rise with public deficits concerning.  In the capital markets response to volatility, the availability of funds (leveraged or direct) is likely to be scarcer. Whether on fundamental or technical aspects, risk premiums are likely to rotate up. No change strategies have already been found vulnerable, whether on liquidity in volatility ETFs or on rotation to Europe and Japan based on lower P/E ratios versus the U.S.. There is all the more reason currently to have a quality, diversification and business sector tilt over one on low quality that has long benefitted from massive ease. It overrides even geographical rotation.  

 

Kind Regards,

 

 

Subodh

 

 

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