Each week Bill Blain covers the main Macro and Micro themes moving markets, and gives his own take on what to watch for.
Bill Blain talks through the current markets.
Bill Blain's Morning Porridge Podcast October 6h 2019
This week Bill look's at the changing pattern of risk across markets:
October is often considered to be one of the most dangerous months for stocks. As we enter the final quarter of the year, investors are either too cautious trying to protect the year's gains, or too desperate to make returns after losses. Stock prices are still high but its worth considering a cautious and selective market entry. The Unicorn disruptive tech sector is still likely to struggle after the We-Work debacle, but dividend yields from strong, profitable well managed firms are better than bonds. The problem is to balance the risks.
Global politics looks more uncertain than ever with Brexit dominating the UK, impeachment in the US, while China faces Hong Kong, recession and Taiwan in China. These could all damage market sentiment, plus an oil shock from Saudi would nail on recession. Why has it gotten so bad and confused? How much worse can it get?
While stocks are looking more fair priced, the Global debt markets look more dangerous - the bulk of Sovereign bonds are trading with negative yields. Investors are increasingly concerned as doubts about the economic wisdom of Negative Rates rise. The High-Yield Junk Bond market is likely to prove the canary in the coal mine in terms of a liquidity lock down that could impact all global markets - when (not if) it goes badly wrong!
So where to put money in these markets? Gold? Cash? or Alternatives? Real Assets that produce dull, boring and predictable returns and a uncorrelated from financial assets look at much more promising market in times of global uncertainty.