22 June 2022 COVID | Equities | Global

Charts of the Week: Growling Bears

By Matthew Tibble
2 min read

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Summary

Italy is in (a lot of) debt.
GOOG and META come tumbling down.
Bearish sentiment prevails in the US.
We are panicking post-Covid.

Italy Is in (a Lot of) Debt

BTP yields are trading near heights last seen in 2014, even after recent rallies. With public debt/GDP above 150%, the interest burden is making headlines again (Chart 1). But we do not think Italy’s debt is an issue – for now, at least. The situation could change come the elections.

GOOG and META Come Tumbling Down

The communications index of the S&P 500 had a great run until last year, outperforming the market by 57%, thanks to Alphabet (GOOG) and Meta (META) (Chart 2a). However, it has been the second-worst performer in 2022, due both to collapsing highfliers and poor performance by old-line telecom, cable and media companies (Chart 2b).

We think the communications sector currently looks cheap. The highfliers now trade at reasonable P/E ratios and have solid business models.

Bearish Sentiment Prevails in the US

We are in a bear market, and it is a bear that will probably keep growling. As risk markets sell off worldwide, investors have become more certain on their bearish US equity bias. According to the survey-based short-term investor optimism (AAII) survey, bullish sentiment reduced to 19.4%, while bearish sentiment increased 11.4pp to 58.3% (Chart 3).

Our Post-Covid Panic

We may not be in full-on panic mode, as in 2008 or early 2022, but investor uncertainty is still in the 92^nd percentile (Chart 4). That could be an opportunity, though: a recent paper shows how the VIX and other popular sentiment measures can predict short-term returns.

Matthew Tibble is Commissioning Editor at Macro Hive. He has worked as an editorial consultant and freelance editor for companies such as RiskThinking.AI, JDI Research, and FutureScape248.

(The commentary contained in the above article does not constitute an offer or a solicitation, or a recommendation to implement or liquidate an investment or to carry out any other transaction. It should not be used as a basis for any investment decision or other decision. Any investment decision should be based on appropriate professional advice specific to your needs.)

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Charts of the Week: Growling Bears

Summary

Italy Is in (a Lot of) Debt

GOOG and META Come Tumbling Down

Bearish Sentiment Prevails in the US

Our Post-Covid Panic

Matthew Tibble is Commissioning Editor at Macro Hive. He has worked as an editorial consultant and freelance editor for companies such as RiskThinking.AI, JDI Research, and FutureScape248.

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Charts of the Week: Growling Bears

Summary

Italy Is in (a Lot of) Debt

GOOG and META Come Tumbling Down

Bearish Sentiment Prevails in the US

Our Post-Covid Panic

Matthew Tibble is Commissioning Editor at Macro Hive. He has worked as an editorial consultant and freelance editor for companies such as RiskThinking.AI, JDI Research, and FutureScape248.

Enter your email to read this Macro Hive Exclusive

Your comments

Cancel reply

Like these insights? Join our free newsletter for regular updates and trade ideas.

Like these insights? Join our free newsletter for regular updates and trade ideas.

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