Deja View If the text below looks familiar, it should. I cut and pasted most of it from Seeds 15-37 which went out Sept 14, 2015. Back then, I was making the point that risk had developed a habit of doing well in the final quarter of the year. I’m making the same argument for the Feb-Apr period now.
Let’s cut to the chase. My view is that nothing has fundamentally changed. The exact same issues we’ve been dealing with for the last 6 years remain in place, and no new solutions have been proposed. The impact of China’s urbanization is still over. Inflation remains contained. Underemployment remains elevated. Emerging markets continue to struggle. Growth continues to disappoint. Wealth and income disparity continue to grow. Capital continues to come home. Velocity continues to go lower. Illiquidity remains an issue. Stocks continue to beat expectations. Wait, what? Stocks are doing poorly, you say? Well, let’s see if recent price action disproves my thesis, that what has been going on for almost 6 years continues unabated.
I’ll admit, it’s difficult to make a strong case that what has been going on for 6 years continues unabated, but doesn’t the burden of proof lie with the side that wants to argue for the end of a trend?
More than anything, in this edition I simply want to highlight the possibility that the reason so many investors have underperformed over these 6 years is that they have been what I call “reluctant longs” and in those moments when price action has validated their bearishness, they’ve jumped on it as evidence of a sea change just before the next big rally. In that vein, looking through the S&P price data, bears might want to take note of the February - April S&P rallies in every single one of the previous 6 years. February is the only month that saw gains in all 6 years. On a separate note, and I do want to make it clear I do NOT equate emerging markets with US equities, take note of the phenomenal track record for emerging markets in the month of April every year too.
About the Author For nearly thirty years, Stephen Duneier has applied cognitive science to institutional investment management. The result has been career best returns for experienced portfolio managers who have adopted his methods, the turnaround of numerous global trading businesses, the development of an award-winning $1.25 billion dollar hedge fund and 20.3% average annualized returns as a global macro portfolio manager.
As a speaker, Stephen has delivered informative and inspirational talks to audiences around the world for more than 20 years on topics including global macro economic themes, how cognitive science can improve performance and the keys to living a more deliberate life. Each is delivered via highly entertaining stories that inevitably lead to further conversation, and ultimately, better results.
Stephen Duneier was formerly Global Head of Currency Option Trading at Bank of America and Managing Director of Emerging Markets at AIG International. His artwork has been featured in international publications and on television programs around the world, and is represented by the world renowned gallery, Sullivan Goss. He received his master's degree in finance and economics from New York University's Stern School of Business.
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