MarketScreener's beliefs for 2019
12/24/2018 | 07:14am EDT
Of course, no one on the MarketScreener team used a crystal ball to write the following comments. Above all, it is a question of sharing thoughts, sometimes beliefs, about the year 2019, without falling into divination: we are quite unable to say what will happen next. In the following lines, you will find reading about gold, the month of March, luxury, and even a stock exchange technique price on derivatives.
Gold is waking up. Jordan Dufee
"I see an environment that is increasingly conducive to the evolution of gold prices. What I mean by propitious is a juxtaposition of factors that are occurring simultaneously, which could literally change the market sentiment for gold."
For what reasons?
The Fed cannot raise its rates quickly, this is obvious given the indebtedness of the United States and Powell's latest speech clearly goes in this direction (the famous "we are just below the neutral rate"). As a result, no major friction on bond rates, there will be no precipitation on the dollar, a good thing for gold denominated in dollars.
On the same theme of monetary policy, let us talk about real rates. The fall in energy prices will temporarily weigh on a component of inflation, but the latter should structurally intensify as a result of tensions on the US labour market. So we have our following formula: Stable nominal rate and rising inflation = lower real rates, a good thing for gold, which by definition does not deliver any return.
Of course, we cannot ignore the rising risk aversion on the equity markets, which makes the price of gold more and more attractive to traders who are considering hedging, not to mention a crash or a major stock market crisis.
"I have dwelt on gold but at the same time silver does not make any noise but has such an important potential for appreciation, especially if we adopt a statistician's point of view on the fact that historically, silver amplifies the movements of gold".
March, and it starts again. Anaïs Lozach
"Uncertainties in the markets will persist in the first quarter of 2019, before a month of March full of macroeconomic events, which could act as a pivotal period".
With global growth prospects revised downwards due to commercial tensions, it is difficult to expect listed companies to follow an upward path, at least in the short term. March is likely to have an unprecedented concentration of events. The deadline for the Sino-American truce is March 1, 2019. In the meantime, markets are likely to remain nervous: one day investors will be more optimistic, and the next day risk aversion will once again dominate. Brexit will also influence the trend, it is possible that decisions will be taken at the last minute, i.e. until March 29, when the United Kingdom will leave the European Union. In China, the "National People's Congress" will happen in March. The government should announce a series of measures to support the economy. The Fed, which is expected to slow the rate of rate increases in 2019, should raise rates only twice next year: the probability of doing so in March is 26% (against 0% in January and 39% at the end of the year). So watch out. Until then, defensive stocks will continue to outperform (or better resist), and safe haven stocks such as the yen, Swiss franc and gold will be sought. "The natural movement of the stock market is to rise," a former MarketScreener alumnus liked to recall. What if the year-end bull rally is postponed to spring?
Consolidation in luxury. Anthony Bondain
"The luxury sector is hitting a plateau, with growth slowing after the post-crisis subprime frenzy. We will have to find relays to maintain the momentum."
The major French luxury groups are in pole position to benefit from this, with full cash registers and very strong credibility with investors. While Hermès and its monobrand strategy do not appear to be a predator, LVMH and Kering have a good card to play. It remains to find the appropriate targets in a sector where it is better to move forward hidden so as not to blow up already high valuations. In the meantime, the French duo is working on their weapons. In December, LVMH announced the acquisition of the ultra-luxury Belmond hotel chain for $3.2 billion, but this is more of an exploratory (and opportunistic strategy, as the brand is in a kind of deadlock) than a real consolidation. Kering has not yet let anything filter out of its projects, except for the launch of an ultra-high end jewellery collection under the Gucci brand. I am betting on medium-sized transactions in 2019, why not on the Italian side, where one of the world's largest pools is located.
A new year in the tunnels. Patrick Rejaunier
"No need to be a fortune teller: a little anticipation and stock market technique are enough".
Mapping the future stock market year has always been very uncertain, even more so in an increasingly complex world where financial trajectories are precisely the consequences of this complexity. Rarely has the transition from one year to the next been so abstruse because the world has never undergone such an evolution, or even such a revolution. Technological change and its productivity gains have been able to generate abundant wealth on the planet. But an unbalanced wealth, hence the sometimes violent reactions of peoples. Balance - justice, dominant themes in popular demands or even in those of leaders, take on more prominence. Isn't Donald Trump's original attitude tinged with this legitimate validity, even if the posture is less sympathetic? As we can see, determining trajectories in the financial world also means taking into account this changing environment.
Adaptation and Reactivity to the unexpected
The real quality of the manager is not to try to anticipate the unpredictable but to adapt, to be reactive to the present, i.e. to make the right choices in a more or less efficient timing, during changes in stock market cycles. To be more concrete, let us try to determine the contours of the market for early 2019. Volatility should accompany index trajectories. Indeed, the United States is simply in the process of initiating the downward trend that will prevent any lasting recovery on the European front. Nevertheless, the continental indices are already located in an oversold zone, which should make them more resilient to sharp declines across the Atlantic. Valuation levels in sectors highly affected by a surge in protectionism create opportunities for investors with a long-term vision. The fear of the short term often blinds us to opportunities for the long term. Low valuation, increased volatility: perfect environment for Optional Bullish Tunnels
A fan of options, if volatility were to intensify in the coming weeks with a further decline in the markets, I would see the implementation of some bullish tunnel strategies via puts spreads. The approach is intended to be basic:
Identify stocks that are in the overbought phase, backed by strong intrinsic qualities: the StockScreener allows you to select these dual technical and fundamental criteria.
Set up the optional strategy: Bullish Tunnels on options with sale of credit "puts spreads" allowing to Buy a call outside the currency.
These transactions are highly profitable in the event of a market rebound. In the event of a decline, the risk is limited to the spread or to the purchase of the security at the exercise price of the put sold, i.e. approximately 5% below the share price on the day of the transaction. The advantage of implementing these combinations lies in the margin of error, because everyone knows that it is impossible to buy, without the lucky move, at the lowest price. The positioning of this strategy will make it possible to be more flexible on the entry price, to outperform in the event of a decline, compared to a direct purchase on the stock, while producing an upward return. What more could you ask for?