Note March 21, 2018 – World In An Oyster: In this third week of March 21,2018 alone, there have been developments that are likely to determine outcomes over the next 12-18 months. These developments include leadership and trade politics worldwide; leadership and policy evolution at central banks and within equity markets, the differing sector compositions of the United States, Europe, Japan, Emerging markets and Australia/Canada. Financials do remain crucial to all as do risk premiums both in equities and fixed income. The leadership of both the Federal Reserve and the People’s Bank of China is now in new hands with continuity emphasized. Post the FOMC statement of March 21, 2018 increasing Fed Funds to 1¾%, we reiterate that more aggressive and higher Fed Funds rates of 3.50% (from 1.75% currently) are likely into Q1/2019 amid reduction in quantitative ease. Yields of 10 year Treasury Notes are likely to reach 4.50%, compared to the present 2.88%. Unlike the broad brush momentum tilts of earlier in this cycle, currently stronger global growth has not reduced the importance of restructuring delivery nor that of quality of selection. It is likely to override the momentum belief that investment rotation into lower P/E ratios for example in Europe and Japan would benefit from closing the gap with the S&P 500, which we see as elevated in valuation. Volatility is likely to be globally elevated alongside leverage and liquidity risk.
StrategeInvest’s independent consultancy operates as Subodh Kumar & Associates. The views represented are those of the analyst at the date noted. They do not represent investment advice for which the reader should consult their investment and/or tax advisers. Any hyperlinks are for information only and not represented as accurate. E.o.e. For disclosures, see www.subodhkumar.com .