It has certainly been a very interesting year. You could easily say that it has been the worst year of overthinking and the best year for following data. Erik Penser Bank (EPB) called an equity trough on the 24th of March- which was a great trading opportunity as the first movers experienced the surge. Erik Penser conduct 28,000 different macro time series per week which enables their top tier rankings as shown in the rankings above.

US Election Forecast

• Biden victory = lower EPS (due to tax policies) and must have solar/wind (shown in June when Biden’s lead was accelerating) in portfolio

• Erik Penser have built in, in their Equity Portfolio, a preparedness for either Trump or Biden due to the murkiness of the election.

V Market

The data, from Erik Penser, showed the sharpest ever V shaped recovery- with no support for an L, U or W shaped recovery.

• What took 4 years to generate on the equity market now took 3.5 months

• In March, an aggregate of 217 variables for the US economy, showed evidence for a V shaped recovery.

• The price on lumber, 2x4inch (one of the best leading indicators), followed the ISM

• US consumption was higher than pre-COVID even in June.

• 12 FED offices: some have forecasted 30% GDP growth for Q3 which is well ahead of the market. EPB believe the forecast will 26.5% for Q3 which will be an over 50% turn around in GDP growth (on the back of the stimulus).

COVID

• The confirmed cases as a % total number tested has been falling

• Quantitative Easing

• Biggest ever QE by the US as a % of GDP- the same is true for the BoJ and the ECB is catching up too.

• Never trade against the FED

OW equities due to

Stimulus (direct to corporates), Macro, Fear/Greed, Leverage, Dividends never stopped, Behavioural Finance, EPS, Corporate Earnings vs analysts, Media reporting, Op. https://travelwithgirls.com/. Profit vs EPS, Speculative positioning in Options, Valuations, Sentiment, Equity Market Euphoria, Corp. Earnings.

Currencies

• The Bull Euro Run is coming to an end –EPB Forecast

• Lower approval rate for US president = lower USD

• A clear path for Brexit would lead to certainty which would lead to a rebound. Thus, Sterling stock shall appreciate and so EPB would then move into the UK and leave their exposures completely unhinged.

EPS Outlook

• Forecasting the biggest EPS growth in the US for 20 years

• Never before in history (20 years) have analysts lagged corporates own predictions to the current extent

• Institutional investors have never been more bullish, compared to retail, and this may be due to media over-reporting (media expressing 3x more concern than investors)

EU Exit

• Hard to capture in data and so EPB have not put out a UK position for years due to the uncertainty

• Europe is lagging and is being slower with QE and stimulus- no European equity strategy that is able to compete with China, Taiwan or the US

• China, Taiwan and the US have been much faster and so EPB find more value in those nations

Trade War

• Clear winners and losers with a trade war

• Global trade has completely collapsed due to COVID. However, trade has not collapsed across the world equally. Taiwan actually increased exports and even the average speeds of cargo ships coming out of the East China Sea.

Q4

• Will have to be a slow down

• There will be gaps in the market (due to the collapse and then the rebound) which is quite natural

• Bought in equitable volatility

• Preparing for more of a volatile equity market for the time going forward

• Solar Power companies just had returns of 60% in 3 months- but will be volatile

Our thanks go to Jonas Thulin and Erik Penser Bank for hosting this event with the BSCC.