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Time to Play a Cyclical Recovery in European Equity (Amundi, 17 pages read) Amundi is bullish European cyclicals due to the following themes: the COVID situation in Europe is under control relative to the rest of world, high-frequency data is signalling a more substantial rebound, TLTRO is benefitting real economy, earlier fiscal austerity has eased, reduced political risk premium and attractive valuations. [Bullish EU Cyclicals]
Could There Be a Bubble During a Crisis? (LGIM, 3 min read) Although US equities continue to climb, markets are still not in bubble territory, believes Emiel van den Hilgenberg. The tech sector remains prone to a bubble given it attracts young investors who are digital natives. However, he remains bullish on tech himself but sees some early signs of ‘bubbly behaviour.’
Five Reasons EM Are More Resilient Than in the Past (Advisor Perspectives, 10 min read) GMO is bullish EM equities. China’s large weight in the MSCI EM index and ample fiscal room (China has only spent 5% of its GDP on fiscal stimulus relative to 11.5% in the GFC) limits downside risk. The sector composition of the index is now also more favourable. [Bullish MSCI EM Index]
Understanding the Pandemic Stock Market (Project Syndicate, 5 min read) Dynamics of narrative and crowd psychology explain the 40% rally in the S&P 500 from the March lows, believes Robert Shiller. Narratives of a speedy recovery in 2018 and S&P 500 rallying five-fold from the 2009 nadir strengthened investors’ thinking that it was safe to buy stocks again. [Bearish S&P 500]
Private Equity Can Rebuild the Economy and Its Reputation (OMFIF, 4 min read) Lending to SMEs in the UK stagnated during the last decade due to stringent risk standards post 2008. Since SMEs in the UK employ 61% of the total workforce and account for 52% of total business turnover, reviving SMEs will be crucial for a post-lockdown recovery. PE speciality in restructuring and business recovery can play a vital role. So, public policy should help guide private equity investments in some targeted sectors. [Bullish PE]