Making Hay Monday – August 19th, 2024
Making Hay Monday
High-level macro-market insights, actionable economic forecasts, and plenty of friendly candor to give you a fighting chance in the day’s financial fray.
Charts of the Week
The MacroTourist
Despite a serious scare earlier this month, the consensus belief remains that an economic soft landing is virtually assured. Yet, as you can see, the Citibank Economic Surprise index continues to run in solidly negative territory. That was also the case, though, back in 2022 when a recession was avoided, notwithstanding two consecutive negative growth quarters. What is different this time is that the Leading Economic Indicators have now been in a 29-month downtrend. Another decline was reported this morning. Moreover, there hasn’t been a single positive print in that period. Only February of this year was not in the red and that reading was merely flat. Even the lead-up to the Great Recession was shorter, in that case 20 months. A recession may indeed be avoided, but the risks are not nearly as negligible as the overwhelming majority of Wall Street economists and strategists contend.
The MacroTourist
No major stock market took it on the chin harder during the recent sell-off than Japan’s. However, it has also snapped back with world-leading vigor. Last week alone, it spurted about 8½% and is now up nearly 19% from its August 5th low. Wouldn’t it have been nice to have received an alert on the Nikkei two weeks ago?
Evergreen Compatibility Survey
“In a crisis, the only thing that goes up is correlation.” -Warren Buffett
The 35-Year Catch-Up
Champion
If nothing else, the stunningly quick global stock market correction seen at the beginning of this month once again illustrated the benefits of buying into a worldwide margin call. Another term for what happened is forced liquidation. This is usually where prices of widely held assets crash, forcing leveraged holders to either put up more cash or be sold out by their broker. However, in the case of the early-August convulsions, it was actually an asset — more specifically, a currency — which had been shorted that was the source of the massive margin call. Those alert and brave enough to buy into this most recent iteration of obliteration are already sitting on nice gains…
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IMPORTANT DISCLOSURES
This material has been distributed solely for informational and educational purposes only and is not a solicitation or an offer to buy any security or to participate in any trading strategy. All material presented is compiled from sources believed to be reliable, but accuracy, adequacy, or completeness cannot be guaranteed, and David Hay makes no representation as to its accuracy, adequacy, or completeness.
The information herein is based on David Hay’s beliefs, as well as certain assumptions regarding future events based on information available to David Hay on a formal and informal basis as of the date of this publication. The material may include projections or other forward-looking statements regarding future events, targets or expectations. Past performance is no guarantee of future results. There is no guarantee that any opinions, forecasts, projections, risk assumptions, or commentary discussed herein will be realized or that an investment strategy will be successful. Actual experience may not reflect all of these opinions, forecasts, projections, risk assumptions, or commentary.
David Hay shall have no responsibility for: (i) determining that any opinion, forecast, projection, risk assumption, or commentary discussed herein is suitable for any particular reader; (ii) monitoring whether any opinion, forecast, projection, risk assumption, or commentary discussed herein continues to be suitable for any reader; or (iii) tailoring any opinion, forecast, projection, risk assumption, or commentary discussed herein to any particular reader’s investment objectives, guidelines, or restrictions. Receipt of this material does not, by itself, imply that David Hay has an advisory agreement, oral or otherwise, with any reader.
David Hay serves on the Investment Committee in his capacity as Co-Chief Investment Officer of Evergreen Gavekal (“Evergreen”), registered with the Securities and Exchange Commission as an investment adviser under the Investment Advisers Act of 1940. The registration of Evergreen in no way implies a certain level of skill or expertise or that the SEC has endorsed the firm or David Hay. Investment decisions for Evergreen clients are made by the Evergreen Investment Committee. Please note that while David Hay co-manages the investment program on behalf of Evergreen clients, this publication is not affiliated with Evergreen and do not necessarily reflect the views of the Investment Committee. The information herein reflects the personal views of David Hay as a seasoned investor in the financial markets and any recommendations noted may be materially different than the investment strategies that Evergreen manages on behalf of, or recommends to, its clients.
Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this material, will be profitable, equal any corresponding indicated performance level(s), or be suitable for your portfolio. Due to rapidly changing market conditions and the complexity of investment decisions, supplemental information and other sources may be required to make informed investment decisions based on your individual investment objectives and suitability specifications. All expressions of opinions are subject to change without notice. Investors should seek financial advice regarding the appropriateness of investing in any security or investment strategy discussed in this presentation.
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