• The Argument for S&P 500 to march to 1950 and beyond … the risks of a “deflationary shock” have also begun to be priced back out of the market. Clearly there have been many “false starts” on this theme in the past, and this could just be another one. But the difference this time is that the conditions are now in place for stabilization in the rate of inflation.
• a lot of professionals de-risked and the assets that were sold-off will need to be re-redeployed elsewhere. The key point is that the S&P 500 will have a difficult time falling beyond what already occurred in April without those assets being first reinvested.
• Thematically, we are very sympathetic to the view that a fundamental shift in the market will occur over the next 6-18 months: business-to-business (B2B) will benefit more than business-to-consumers (B2C).
• As a result of this migration into capital expenditures, the top down investment views expressed around housing and corporate share repurchases will be paired back as investors cannot hold all of these macro themes at once. To be clear, this is not a call that buybacks will slow down materially or that the stocks that have benefited the most from this capital redeployment will start to fall. It is a call that buyback strategies will underperform the capex theme even though both could rise at the same time
• the traditional “sell in May and go away” rule will not hold true coming back from the holiday break this year.
• We believe that alongside a basket of long “capex plays”, i.e. US energy and the US Dollar, there is also room for a short Gold position
• We initiated a starter short position in Gold last night
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