Global Thematic Diary June 12th 2020
Comment of the Day

June 15 2020

Commentary by Eoin Treacy

Global Thematic Diary June 12th 2020

Thanks to Iain Little for this edition of his investment note. Here is a section:

After the recovery from the 23rd March lows (supreme irony: the very date that many countries went into social and economic “lockdown”) and the -6% mini-crash last Thursday, we see stock markets as being in a redistribution phase as “shareholder regret” kicks in. Nervous Nellies who regret holding equities will either exit altogether (“phew, I’m out!”), or switch money into “cheaper”, lagging sectors like banks, oils, real estate, airlines. Optimists will do something similar except that they’ll be more inclined to hold onto the quality (tech, healthcare, FMCG) that has stood them in good stead. These bulls will regret not holding lower quality sectors if their relative outperformance starts to slip. So lower quality could out-perform higher quality for a while. But….Caution!

A man-made Frankenstein (Modern Monetary Theory, which means hiring monetary policy to do the job of fiscal policy) is ringing an early bell for “stagflation” (low growth plus inflation). There may not be enough global demand or monetary velocity to revive stagflation…..yet. But survivors of the 1970s know what this implies for portfolios at the end of the day: inflation-proof growth equities, index linked bonds, real assets and……gold.

Eoin Treacy's view

We are at a very interesting point in the market. There are completely different ways of looking at the market. For those who are long, the clearest rationale is $10 trillion has been thrown into the global market and more is on the way. One way or another that is going to inflate asset prices.

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