After just bombarding you with our lengthy year-end treatise, this week's message will be very short and sweet.
Here's part of an interoffice memo I sent this morning:
Looking at present global macro, our thesis from the beginning of last year (dollar risk to the downside) is, for now, continuing to play itself out (better opportunities abroad forcing the dollar lower). This year's thesis (higher dollar), nonetheless, remains very much intact, but looking at the immediate weight of the evidence it could be (if it plays out at all) a later in the year story.
What makes our opinion this year even more compelling is that it's very much in the minority (as was last year's, which turned out to be correct). I.e., when/if the tide turns on the dollar, it'll get ugly (to the upside) as the masses move from the crowded side of the boat (gold bears would make out hugely in that scenario -- and, among U.S. sectors, tech will take the biggest hit).
Today's weak jobs number (145k) surprised me. I thought we'd see 200k+. This supports the dollar bears, and smacks of a goldilocks scenario for stocks (good economy, low inflation, low interest rates). I'm guessing what it really speaks to (if anything) is a lack of available, qualified, labor (i.e., there are plenty of job openings). If that's the case inflation will surprise to the upside (particularly when the stimulus from the tax-cut, etc., takes hold), turning the consensus on its head.
Of course, the 'weaker' jobs number could be a one-off and/or we'll see it revised much higher when next month's number is reported. Wednesday's ADP (private sector report) was +250k!
Ironically, if our currency thesis proves wrong in 2018, our clients’ portfolios probably do better. So let's hope we're wrong!Have a nice weekend!