vovamommy.blogg.se - Macro trend

While these companies have turned into incredibly profitable businesses, they have yet to become new darlings for investors.Ĭommodity producers remain so financially restrained to invest in their businesses that they are almost giving more capital back to shareholders than what they spend on CAPEX. To be exact, they reported three times more annual free-cash-flow than their historical peak. Natural resource industries are now generating more free-cash-flow than any other time in history. When adjusted for GDP levels, the aggregate capex for commodity producers remains lower than it was in 2003, almost 20 years ago. Years of misallocation of capital, equity dilution, corporate mismanagement and money-losing operations have now turned into excessive conservatism. By and large, these are long-term cycles that take time to reverse. Ultimately, the sustainability of commodity bull markets is predicated on the spending trends for natural resource industries. If there was ever a time to own tangible assets and businesses that benefit from the appreciation of these underlying assets, that time would be now. Let’s dive in on each of these themes to share our detailed views about the global economy. For macro investors, we think this is one of the most opportunistic times ever. This scenario is setting the stage for significant changes in portfolio allocations from crowded and overvalued assets to unloved and historically cheap alternatives. Unparalleled to any other time in history, the current macro imbalances have drastically distorted the market perception of value and risk. Upcoming challenges to historically indebted net importers of commodities, i.e.Geopolitically neutral and commodity-driven economies to gain relevance on the global stage, i.e.A major shift in market leadership from technology to natural resources related businesses.A re-pricing of long duration growth stocks from record valuations as cost of capital increases.The resurgence of fundamental analysis and value investing principles as profitability becomes a priority.Overall corporate margins to be squeezed by the rise in cost of capital, commodity prices, and labor cost as the Fed tightens monetary conditions.

Ongoing flood of sovereign debt issuances and persistent inflationary pressure to cause long-term interest rates to rise globally.

The continuation of one of the most extensive fiscal agendas in history, driven by the Green Revolution, social equality programs, infrastructure revamp, and defense spending.

Rising geopolitical tensions spur increase in defense spending from historic low levels compared to GDP.

Deglobalization trends prompt a long-overdue manufacturing re-build in developed economies including a boost to non-residential construction.

A new “Exploration Age” for commodities as major producers address their supply cliff.

The beginning of a commodities cycle after chronic under-investment in natural resource industries.

Central banks ultimately forced to cap long-term yields creating a major tailwind for inflationary assets.

Monetary metals and other tangible assets to regain relevance in crowded 60/40 portfolios as inflationary hedges.

Governments and central banks to seek high-quality international reserves in attempt to restore the credibility of fiat currencies gold will play a major role as a monetary asset.

These are long-overdue structural shifts powered by decades of easy money policies and record levels of debt-to-GDP among developed economies: If you don't already have a USP account please get in touch and we can show our services.We are currently experiencing profound changes in the global economy that are likely to unleash a plethora of early-stage secular trends in a new inflationary regime.

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