Autumn Has Arrived

Always an independent thinker, Rudi has not shied away from making big out-of-consensus predictions that proved accurate later on. When Rio Tinto shares surged above $120 he wrote investors should sell. In mid-2008 he warned investors not to hold on to equities in oil producers. In August 2008 he predicted the largest sell-off in commodities stocks was about to follow. In 2009 he suggested Australian banks were an excellent buy. Between 2011 and 2015 Rudi consistently maintained investors were better off avoiding exposure to commodities and to commodities stocks. Post GFC, he dedicated his research to finding All-Weather Performers. See also "All-Weather Performers" on this website, as well as the Special Reports section.

Rudi's View | Nov 15 2018

In this week's Weekly Insights (published in two parts):

-Autumn Has Arrived, Plus Seven Quotes
-ESG Focus Should Be Yours Too

-Conviction Calls
-Bond Yields & Decelerating Growth
-Rudi On TV
-Rudi On Tour

[Non-highlighted parts will appear in Part Two on Friday]

Autumn Has Arrived, Plus Seven Quotes

By Rudi Filapek-Vandyck, Editor FNArena

This week, while thinking about how best to describe the changed dynamic for global equities, I came up with the idea of "autumn has arrived". The message here is that while winter is not yet announcing itself, investors should stop acting like it is still summer, which means: reduce risk, prepare for tougher times ahead.

In line with this, here are six quotes from other sources, each with their own viewpoint about what is happening with global equities since mid-September:

"Markets have changed in 2018 as monetary policy normalizes and peak growth is evident. Nothing captures this better than our Quantitative Derivatives Strategy team's observation that the buy-the-dip strategy that performed so well in the QE era is no longer working.

"October was not just a technical sell-off like the one in February. We now have fundamental drivers: higher interest rates, slowing economic growth next year, margin risk, and tighter financial conditions.

"They all add up to investors holding less risk and, without incremental money flows, this new primary downtrend will likely take time to reverse."
Morgan Stanley Chief US Equity Strategist, Michael Wilson


"The bounce in the market since the October 26th low has been all PE, not EPS. The EPS picture is deteriorating fast, so worthwhile being a little bit cautious despite value."
Shaw and Partners Chief Investment Officer, Martin Crabb


"The recently completed bank reporting season suggests the outlook for the banks remains challenging. However, we believe the rapidly deteriorating housing market is a signal of even tougher times ahead.

"We remain cautious the banks despite the share price correction and believe the risk of the current housing Credit Squeeze turning into a Credit Crunch is real and is rising.
UBS's team of banking sector analysts led by Jonathan Mott


"Lead indicators of global growth continue to lose momentum. In October, ANZ's Global Lead Indicator fell into negative territory for the first time in over two years.

"Weakness is mainly being driven by China and the euro area, but US manufacturing new orders have also fallen noticeably over the past two months."
ANZ Bank Chief Economist, Richard Yetsenga


"Use rallies as opportunities to sell, rather than buy."
The Trader column in Barron's


"The markets themselves have flashed enough information to make the assertion that the bull market is over and in transition to the next bear market. Topping processes are exactly that - a process. We have already witnessed all three major averages -the S&P500, the Dow and the Nasdaq- this year with two, not one but two, intra-day corrections of at least 10%.

In recent memory, this has happened in 1973, 1974, 1987, 2000, 2001, 2002 and 2008. Note that all but 1987 involved recessionary bear markets; and 1987 still involved a summertime-fall period where we had a 30% market plunge. There is no get-out-of-jail-free card to play here.
Glushkin Sheff Chief Economist & Strategist, David A. Rosenberg


"The market's enthusiastic response to the US midterm elections does not alter the fact macros are either peaking or deteriorating.

"The bounce in equity markets provides another, possibly the last opportunity, to reduce exposure to stretched equities before a traditional end-of-bull market correction of 15-20% proportions occurs."
Head of Equities Research at Morningstar, Peter Warnes

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