Epochal Shifts, Generational Bears

"We expect new highs in yields and new lows in stocks." That was the message from BofA's Michael Hartnett, who painted a somewhat grim picture in the latest installment of his popular weekly "Flow Show" series. Much of the story is familiar. Hartnett sees a regime change -- an epochal shift in global trade dynamics, geopolitics and power relations between economic actors. Together, it argues for a secular de-rating in equities. A 21st century multiple on trailing earnings gets you S&P 4,4
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3 thoughts on “Epochal Shifts, Generational Bears

    1. @Dean, what I think is interesting is that we may be in a sea change of technology exerting deflation.

      Uber kneecaped the taxi industry, now it is free to raise its rates without competition. The same will happen for food delivery.

      Sure, Amazon may spend less on human labor as it converts its warehouse fulfillment to bots, but the price of software and the hardware for these bots will likely keep increasing with deglobalization.

  1. I do not doubt Harnett. “…the secular view remains cash, commodities and volatility will outperform bonds and stocks.”

    No matter the macro environment and the mood of the market, quarterly earnings and/or a series of quarterly earnings reports will always tell an important “here and now” story about any company’s profitability (or not) and the state of its affairs. There are always companies that will shine in the evolving regime. You may not know them. But they will shine.

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