GSBulletIn: Pre-Summer Sale?

28 June 2018
Pre-Summer Sale?   As the first half of 2018 comes to an end, financial markets are again in heightened geopolitical fear mode. Only the S&P 500 […]
 

Pre-Summer Sale?

 

  • As the first half of 2018 comes to an end, financial markets are again in heightened geopolitical fear mode. Only the S&P 500 index is still slightly up year-to-date … but only thanks to a handful of skyrocketing FANG stocks. All other major indices are in the red now, very much so emerging markets which not so long ago were still “everybody’s darling” and high up on top pick lists.
  • We doubt Donald Trump wants to be remembered as the president who “tweeted” the Global economy into recession. In our opinion, this is more about flexing mussels than about seriously knocking each other, although we have to admit that the risk of a full blown trade war, while still unlikely, seems higher now than we initially expected.
  • With the next earnings period starting in two weeks, we would assume that investors will turn their eyes back to fundamentals, such as strong company earnings and still robust global growth. Let’s not forget that first quarter earnings in the U.S. were initially expected to rise 17%, but happened to spike a staggering 26% year-on-year.
  • We believe that the current “Pre-Summer Sale” represents an opportunity to increase exposure to equities in general and to the most battered markets in particular, such as Emerging Markets or Swiss Blue Chips which are both about 10% down year-to-date and 15-20% down from this year’s peak. We wouldn’t be surprised if “Pre-Summer Sale” will be followed by a nice little “Summer Rally”.
 

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