Monday, July 10, 2023

Morning Note: Bullish (long-term) on Emerging Markets, And Your Weekly Sector, etc., Update

The following from Louis Gave's excellent interview on last week's Top Traders Unplugged podcast very much comports with our longer-term thesis:

"What's interesting to me today is that we have one message from the equity markets, which is oh, the next bull market is from artificial intelligence, and we have a message from the bond markets that the next bull market is going to be in emerging markets.

I mean, if you look at the past 18 months, Brazilian government bonds have outperformed US treasuries by 50%, that's never happened... Indian government bonds have outperformed US treasuries by like 25%, that's never happened... Same for Indonesia, same for so many of these markets.

Now, to me, a real proper bull market, like something that goes on for 10 years where you make five times your money, is what we call in our research a triple-merit scenario; where you make money on the currencies, you make money on the bonds, you make money on the equities."

"Today, where you're seeing this is in places like Brazil, like India, like Indonesia, like Mexico... And if you take just an axis from basically Istanbul to Jakarta, you draw a line, you got 3.5 billion who live there, incomes are growing by 5% a year, and infrastructure spending in that area is going absolutely bananas because they have access to commodities that they never had before*."

"The excitement is in all these other emerging markets, that are trying to do what China has accomplished, because what China has accomplished throws the gauntlet down to the Indias of this world, to the Saudi Arabias, to the Indonesias, to the Brazils."

"I'm very bullish on all emerging markets."

*With regard to "access to commodities" he's referring to the fact that today's emerging markets (the big, investible, ones) suddenly have access to essential industrial commodities in their own currencies... This is big, and of course it also jibes with our long-term weaker-dollar thesis, as well as our long-term bullishness on commodities.

Stay tuned...

Here's your weekly sector, regional and asset class results update:

Asian stocks leaned green overnight, with 9 of the 16 markets we track closing higher.

Europe's mostly green so far this morning, with 15 of the 19 bourses we follow trading up as I type.

US equity averages are mixed to start the session: Dow up 190 points (0.56%), SP500 up 0.13%, SP500 Equal Weight up 0.96%, Nasdaq 100 down 0.39%, Nasdaq Comp down 0.34, Russell 2000 up 1.22%.

As for last Friday’s session, US equity averages traded mixed as well
: Dow down 0.6%, SP500 down 0.3%, SP500 Equal Weight up 0.2%, Nasdaq 100 down 0.4%, Nasdaq Comp down 0.1%, Russell 2000 up 1.2%.

This morning the VIX sits at 15.27, up 2.97%.

Oil futures are down 0.32%, gold's down 0.07%, silver's down 0.16%, copper futures are down 0.02% and the ag complex (DBA) is up 0.45%.

The 10-year treasury is up (yield down) and the dollar is down 0.07%.

Among our 34 core positions (excluding options hedges, cash and money market funds), 27 -- led by VNM (Vietnam equities), Dutch Bros, MP Materials, XLI (industrial stocks) and URNM (uranium miners) -- are in the green so far this morning... The losers are being led lower by AT&T, XLK (tech stocks), SLV (silver), VPL (Asia-Pac equities) and VWO (emerging mkt equities).

"It is impossible to understand the world if you insist on thinking in absolute terms. The world is not black and white. Everything has shades of gray."

--Euan Sinclair 

Have a great day!

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