In this Stockhead series, investment manager James Whelan, managing director of Barclay Pearce Capital Asset Management, offers his insights on the key investment themes and trends in domestic and global markets. From macro musings to the metaverse and everything in between, Whelan offers his distilled thoughts on the hot topic of the day, week, month or year, from the point of view of a professional money manager.

 

Morning all,

There’s an expression in markets that clients often need to “see skull”, referring to the need for people to see the face of their adviser.

Truth be told, what a lot of people like to see is a few grey hairs around the sides of the head, indicating you’ve been through a few tours of duty in the warzone that is financial markets.

There’s some mild salt and pepper that crept onto my head during 2008 when we were pulling 16-hour days booking out 10% of the GFC at UBS (while 15% of my colleagues were being made redundant).

Then the left and right sides of my head turned a distinctive shade of white during March and April of 2020 as I was actively managing money during the Covid calamity.

Last week, possibly one of the most volatile weeks of my career, I was calm as a cucumber. We detailed it on our Friday podcast. Along with my big mouth getting itself over its head to be able to play rugby in two months. Shades of last year’s challenge to compete in the National Championships for Jump Rope that won me two gold medals.

 

Calm, collected, invested

The setup we have now for clients is very much in tune with this style of not panicking. Calm, collected, invested.

For example. Here is the S&P 500 daily candle chart courtesy of TradingView. The left arrow is where the market finished on Friday 2nd August.

 

Pic via TradingView

 

 

Then the weekend headlines started on how much of a selloff we would see on Monday. Volatility spiked to levels only seen on the grey hair events listed further above.

The yen unwind caused “forced de-risking” (a lovely Goldman Sachs term I just heard) and everything was about to go down in a ball of fire.

Then have a look at the red arrow on the right of the above. That’s where the US market closed on Friday.

Basically no change.

Except for this… this changed a lot.

Pic supplied.

The usual transfer of wealth from retail to institutions. I won’t stand for it. It’s why I’ve spent as long as I have building the offering to retail to stay largely immune to this sort of thing.

The stat I’ve mentioned a few times that markets usually have a correction as the Fed starts cutting is usually only brought to fruition because the Fed starts cutting when growth is weak. Out of necessity, growth slows, Fed cuts, markets respond to growth and then the cuts. Everything keeps spinning.

Any conversation you’ve heard on growth slowing in the US is, in my view, just that for now.

 

Meanwhile, Citi…

… produced some charts showing:

• that the US unemployment rate is rising because layoffs are rising and another;

• that people are remaining unemployed for longer;

• that more consumers are reporting jobs as hard to get and;

• that businesses have cut back on hiring.

I can’t show these charts because it’s for Citi subscribers eyes only. They’re fairly grim, trust me.

 

Goldman’s Flood of optimism

Then you look at the market and earnings just gone. Here’s part of a transcript from Goldman Sachs’ “The Markets” podcast with John Flood, head of Americas Equities Sales Trading in Global Banking and Markets regarding US reporting as we have seen it thus far.

“Earnings. Coming into this quarter, there was fear that this nine per cent year over year growth hurdle for S&P 500 earnings was very high. It’s the highest we had seen in years.

“We’re 85 per cent of the way through earnings right now, and they’re coming in at 11 per cent. So this very high hurdle is still being cleared. That’s why I remain optimistic.”

 

The beat goes on

And so, we continue our dance. I’ll leave you with this re markets as I’ve mentioned above.

Stay the course.

Image courtesy Goldman Sachs.

Finally, RIP one of the all-time greatest meme generators of our time. Jack Karlson, who I hope will be able to watch over us as he enjoys a meal, a succulent Chinese meal in the big restaurant above.

All the best and stay safe,

James

 

Theory of Thing podcast > Listen here for all the market news you need.

 

The views, information, or opinions expressed in the interview in this article are solely those of the writer and do not represent the views of Stockhead.

Stockhead has not provided, endorsed or otherwise assumed responsibility for any financial product advice contained in this article.

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