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Your Quiver | Tuesday, April 11, 2023

CIO | Nadine Terman @SolsteinCapital details what she's seeing in global financial markets.

Waiting for Wednesday

VIX remains low, given holidays and spring breaks. But tomorrow we get a bunch of CPI stats, and right now consensus is for another raise—so anything too hot or too cold will move the market. Moreover, earnings season is starting, and guidance is where the action is at. Multiples are still high, profit estimates are still declining, and management teams have to decide whether to display caution or not.

Wall of Worry

That is what JPM is signaling for tech, given that 85% of market gains YTD have come from the sector and bond yields may not decline as much as embedded in current valuations.

1Q23 Results

Per HFR, the ave long-short hedge fund gained +0.9% net in Mar versus +3.5% for the S&P ex dividends. The ratio of these two returns is 0.25x, compared to the long run beta of around 0.5x. Thus, most managers probably stayed hedged and then unwound those and bought into the MOMO towards April. UBS pointed out that despite a lot of capital coming into the market, the SPY has not hit its Feb high, so it is taking more capital to drag the index higher.

Late to the Party?

Buffett told the Nikkei that he wants to increase his exposure to Japanese stocks. Per the 6 mo chart below (white for the EWJ Japan ETF and pink for the SPY S&P ETF), it’s already had a nice run and is staring down a major deflationary environment in the next few quarters. So, we’d have agreed with him a couple of quarters ago but caution that we’re looking at a different macro picture ahead.

Gimme Credit

Credit in China increased faster than consensus expectations in March, with the PBOC opening long-term liquidity for its banks. Aggregate financing grew about 15% to $784bn versus last year. This is coming at a time when China’s inflation (consumer and producer) is still subdued.

Blackstone Bonanza

Blackstone closed on its largest global property drawdown fund at $30.4bn. The fund targets a broad range of properties from data centers to rental housing. Sounds like they got their ducks in a row for the next 18 months, which we expect will surface a lot of properties that cannot refinance sufficiently.

CS Gossip

Sweden’s Prez said that they had to use emergency measures to stop CS’ collapse, which would have happened without the Mar 19 rescue.

Maintaining Media

Overall, UK consumer spending rose 4% y/y, but there were winning and losing categories. Groceries and dining out fell in March, per Barclays, but spending rose on digital content and subscriptions which hit a 5-mo high.