Global Multi-Asset Investment Strategist, True Insights

Jeroen Blokland

Global Multi-Asset Investment Strategist

Build Well-Diversified Multi-Asset Portfolios

True Insights

Our research helps investors build well-diversified multi-asset portfolios and profit from market developments. In addition, our unique and proven Macro – Sentiment – Valuation (MSV) investment framework ensures a consistent flow of new investment opportunities. Together with our market views, these opportunities will be reflected in our live ETF-based Global Multi-Asset Portfolios.

Cross Asset Strategy

<ul>
<li>The Federal Reserve raised interest rates by another 25 basis points, expecting inflation to come down 'not so quickly.'</li>
<li>Powell feeds the overly-enthusiastic market narrative by betting against history, anticipating that the current Fed tightening cycle will not significantly push up the US unemployment rate.</li>
<li>Powell and the Fed dodged accountability back in February, and the PacWest collapse hours after stating banking 'conditions have broadly improved' is very painful and disturbing.</li>
</ul>


The Federal Reserve raised interest rates by another 25 basis points, expecting inflation to come down 'not so quickly.'
Powell feeds the overly-enthusiastic market narrative by betting against history, anticipating that the current Fed tightening cycle will not significantly push up the US unemployment rate.
Powell and the Fed dodged accountability back in February, and the PacWest collapse hours after stating banking 'conditions have broadly improved' is very painful and disturbing.


Powell Press Conference: Persistent and Painful

<ul>
<li>Year-On-Year, M2 broad money supply has dropped by 4.1%. The 6-month annualized rate of decline is a whopping 6.5%. </li>
<li>As a result, Excess Liquidity (Money Supply Growth - Nominal GDP growth) has turned very negative, revealing money is being drawn from equities at a historically rapid pace.</li>
<li>Given the historical relationship between Excess Liquidity and Valuation, the forward P/E ratio of US Equities must drop to 16 from 19 for the two variables to align.</li>
</ul>


Year-On-Year, M2 broad money supply has dropped by 4.1%. The 6-month annualized rate of decline is a whopping 6.5%. 
As a result, Excess Liquidity (Money Supply Growth - Nominal GDP growth) has turned very negative, revealing money is being drawn from equities at a historically rapid pace.
Given the historical relationship between Excess Liquidity and Valuation, the forward P/E ratio of US Equities must drop to 16 from 19 for the two variables to align.


Money Supply-Driven Excess Liquidity Unveils 20% S&P 500 Downside Blog

<ul>
<li>Positioning has been one of the few positives for equities in recent weeks, but a storm is brewing.</li>
<li>Systematic Macro investors have been absorbing USD 170 billion in global equities in recent weeks for just one reason, volatility.</li>
<li>Should equities drop to their October lows, our charts suggest volatility-related equity selling pressure of USD 300 billion. We remain underweight equities.</li>
</ul>


Positioning has been one of the few positives for equities in recent weeks, but a storm is brewing.
Systematic Macro investors have been absorbing USD 170 billion in global equities in recent weeks for just one reason, volatility.
Should equities drop to their October lows, our charts suggest volatility-related equity selling pressure of USD 300 billion. We remain underweight equities.


Systematic Macro Investors Represent USD 300 Billion in Selling Pressure!

<ul>
<li>‘We lower the weight of equities. With markets pricing several Fed rate cuts, valuation rising, and earnings expectations too upbeat, catalysts for further increases are vanishing. </li>
<li>After the significant decline in March building permits, the implied recession odds linked to this indicator are rising again.</li>
<li>There's a classic example of reverse operating leverage going on: earnings growth is negative, while sales growth is positive. Most of the time, this is followed by a recession.</li>
</ul>


‘We lower the weight of equities. With markets pricing several Fed rate cuts, valuation rising, and earnings expectations too upbeat, catalysts for further increases are vanishing. 
After the significant decline in March building permits, the implied recession odds linked to this indicator are rising again.
There's a classic example of reverse operating leverage going on: earnings growth is negative, while sales growth is positive. Most of the time, this is followed by a recession.


Weekly Market Monitor (16) - The Odds of a Recession Is Rising; Earnings Just Don’t Know It Yet

<ul>
<li>US retail sales fell 1.0% in March, the fourth decline in the last five months. We expect the downturn in the housing market to cause another dip in consumer sentiment.</li>
<li>Our earnings-per-share vs. P/E ratio analysis provides little upside. It will demand higher valuations and/or positive earnings growth to allow for meaningful upside.</li>
<li>Sentiment has been the key market driver in recent weeks. But with the VIX Index down to 17 in a weakening macro environment, the impulse may be fading.</li>
</ul>


US retail sales fell 1.0% in March, the fourth decline in the last five months. We expect the downturn in the housing market to cause another dip in consumer sentiment.
Our earnings-per-share vs. P/E ratio analysis provides little upside. It will demand higher valuations and/or positive earnings growth to allow for meaningful upside.
Sentiment has been the key market driver in recent weeks. But with the VIX Index down to 17 in a weakening macro environment, the impulse may be fading.


Changes in Portfolio Weights: Lowering the Weight of Equities

China

The MSCI Em (Emerging Markets) Index is a free-float weighted equity index that captures large and mid cap representation across Emerging Markets (EM) countries. The index covers approximately 85% of the free float-adjusted market capitalization in each country.

MSCI Emerging Markets Index (MXEF INDEX)

Powell Press Conference: Persistent and Painful

Powell is not thinking about rate cuts, contrary to what markets believe. Unfortunately, he also thinks banking conditions have 'broadly improved.'

Jeroen Blokland

Money Supply-Driven Excess Liquidity Unveils 20% S&P 500 Downside Blog

Money Supply is shrinking, taking liquidity out of the stock market at a historically swift pace, but valuation does not reflect this at all.

Jeroen Blokland

Systematic Macro Investors Represent USD 300 Billion in Selling Pressure!

When volatility rises, as several indicators suggest, Systematic Macro investors will be forced to dump billions of stocks onto the market.

Jeroen Blokland

Weekly Market Monitor (16) - The Odds of a Recession Is Rising; Earnings Just Don’t Know It Yet

Welcome to the weekly Market Monitor, keeping you updated on the week’s most important charts and developments in financial markets.

Jeroen Blokland

Changes in Portfolio Weights: Lowering the Weight of Equities

We lower the weight of equities in our Global Multi-Asset Portfolios as the catalysts for an extension of the rally are fading.

Jeroen Blokland