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Equity & Investment Strategy ResearchEquity & Investment Strategy Products: Investment Strategy Weekly, Asset Allocation Quarterly, Politics & Themes, Surveys.
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• Short-term risk of a ‘no deal’ Brexit is likely off the table
• But new deal lays ground for a distant UK-EU economic relationship
• An extension still seems likely, possibly followed by an election
• Cashflow is Strongly Related to ISM and Economic Cycle
• Record US Cashflows fully Allocated to Capex, Dividends & Buybacks
• Little Headroom if they fall. Already Buybacks being Cut Back
• Cash Burn stocks could be forced to Prioritise Cashflow over Growth
• Many investors believe that 2019 has seen a bull market in Global Equities – we disagree.
• Rather, we are increasingly convinced that a rolling bear market began in January 2018.
• The strong headline gains for the headline S&P index have hidden a broad sell-off in Global, and even US, Equities.
• The eight charts in today’s note show how the start of this ‘rolling bear market’ can be confirmed by prices falling, valuations peaking and volatility rising.
• In recent weeks we visited 4 continents, 7 countries and 15 cities
• We found that the ASR recession call resonated with many investors• But few were positioned for macro and markets shifting into recession
In our recent trips to Europe, North America, Asia and the Antipodes we were struck by how strong the ‘bull market’ equity narrative remained, despite Global equity prices being down 10% since their January 2018 peak and even the US market showing signs of stress, with 198 S&P stocks in bear market territory since 2018.
• September saw Factor rotation out of Momentum into Value
• Momentum Drawdowns can warn of Bear Markets and Regime Change
• Further Value Rally implies Buying the Disrupted & Selling Disruptors
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