Given the war and inflation that marked the beginning of 2022, investors will be forgiven for holding their breath over the rest of the year’s offerings.
Ours bell of the day from the Saxo Bank team sees a “wild ride” ahead in the second quarter and offers tips on which companies are best to survive the shocks.
The world is experiencing nothing more than “the arrival of the endgame for the paradigm that has shaped markets since the advent of the Greenspan Federal Reserve, which followed the LTCM [Long-Term Capital Management] the 1998 crisis, ”Saxo chief investment officer Steen Jacobsen said in the bank’s second-quarter forecast for Tuesday.
Read: Get ready for the “new world order” that drives stocks and bonds: BlackRock
Shki from the proposal from the Russian invasion of Ukraine and COVID-19 “accelerated our path to productivity. Politics should simply lead us to greater pricing and positive real returns, as markets and governments are struggling to invest in the world we now understand is very limited by absolute constraints on energy, the environment and capital, ”he wrote.
Saxo sees three cycles affecting markets simultaneously: the long cut in supplies due to COVID-19, the war in Ukraine and the “physical borders of the world”, rising asset prices as inflation rises and a new cycle of tightening the Fed, which began in March .
This will result in higher spending on energy, defense, and supply chain diversification, and negative real rates will be positive as the global economy prepares to increase productivity.
That’s where the stocks come from. “With the large-scale war in Europe and the coup in commodity markets, this has exacerbated inflationary pressures, and stocks have entered an environment not seen since the 1970s. High inflation is, in effect, a tax on capital and raises the rate of return on capital, and thus inflation will ruthlessly filter out weaker and less productive companies, ”said Saxo stock strategy manager Peter Garni.
And one only has to look at the shareholders ’letters of the 1970s from BRK from Berkshire Hathaway
chairman billionaire Warren Buffett, who pointed to performance, innovation or pricing as a set of survival tools for companies, Garni said.
“The world’s largest companies have recently been hit by tougher financial conditions, and they also have the price power to pass on inflation to their customers for longer than smaller companies,” Garni said. This means goodbye to zombie companies that are supported by low interest rates and excess capital.
Garni said one way to measure productivity is by looking at adjusted net income for an employee, according to the theory that the bigger a company grows, the less its revenue per employee.
“If a company tries to maximize profits, then it will often naturally lead to a loss of productivity; but what is lost in productivity comes from economies of scale in its operations, and this allows for higher levels of aggregate profits, ”Garni said.
Leads a number of companies that are the most productive compared to size – above the regression line – Apple AAPL,
Here is a selection of the best companies for performance and innovation from Amazon AMZN,
and the GOOGL alphabet
at the top of these lists.
Click here to learn about other Saxo companies and full prospects.
The President of Ukraine Volodymyr Zelensky warned that the atrocities would be even newer after Russian troops killed civilians in Bucha near Kyiv. He will address the UN Security Council on Tuesday. The European Union may be prepared to ban imports of Russian coal, while the US Treasury Department has reportedly stopped paying off Russian debt through US accounts.
CEO and TWTR Twitter
new biggest stakeholder Elon Musk asked users to vote for the tweet edit button – it was decidedly so. Twitter, by the way, is worth $ 8.5 billion more, thanks to Mask.
Read: Can Elon Musk change the way people write in tweets now that he is Twitter’s largest shareholder?
The negative foreign trade balance fell to $ 89.2 billion, but remains near a record high. Still ahead is the Service Management Institute’s services index, followed by three Fed speakers – Fed Governor Lael Brainard, San Francisco Fed President Mary Daly and New York Fed President John Williams.
Read: The US economy will fall into recession this summer, as inflation eats away at consumer spending, warns a former Fed official
a re-tilt below. The Treasury yield curve remains inverted, with 2-year BX: TMUBMUSD02Y
slightly higher than the 10-year-old BX: TMUBMUSD10Y.
CL00 oil prices
growing, and the dollar DXY
“It turns out that if consumers are scared of buying stocks, one of
the best investments are consumer stocks! ” It was Jim Polsen, chief investment strategist at The Leuthold Group, in a note to clients. Here is a chart that measures this pessimism.
If the consumer indicator “bull-bear” is the lowest quintile, the consumer at its discretion
shares outperformed + 9.4% year-on-year compared to a small shortfall of -0.8% for the other four confidence quintiles, ”he said, noting that there is now less time for finance, utilities and communications.
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