Cross-Asset Strategist & Quantitative Analyst, Pennock Idea Hub

Cam Hui

Cam Hui has been professionally involved in the financial markets since 1985 in a variety of roles, both as a quantitative equity portfolio manager and as a sell-side analyst. He graduated with a degree in Computer Science from the University of British Columbia in 1980 and obtained his CFA Charter in 1989.

Cross-Asset Strategist & Quantitative Analyst

Pennock Idea Hub

We are creators of independent equity research. The Pennock Idea Hub team are veterans of the investment industry. Much of our team has spent their careers at Merrill Lynch, Deutsche Bank, RBC Capital Markets and Wood Gundy. We have taken every aspect of research back to the studs and returned to first principles. The Pennock Idea Hub marries the interests of the sell and buy side. 

We offer the best research for institutional investors by:

-Only publishing research from veteran analysts
-Eliminate the inherent conflicts of the traditional sell and buy side relationship
-Ensure our team is always accessible; collaboration with clients nurtures our collective success

Cross-Asset & Quantitative Research

Cross Asset Strategy

Multiple Countries / Cross Asset Strategy

This crisis has so far gone through two phases of market psychology. The first phase was panic, as it became apparent that COVID-19 had become a global pandemic, and economies around the world were shutting down. Stock prices rebounded during the hope phase, supported by a flood of fiscal and monetary stimulus and the hope that re-opening the economy might bring some semblance of normalcy.What’s the next phase of the market’s narrative, and how should investors position themselves? We have a few ideas.<ul>
<li>Will the economy be able to re-open successfully?</li>
<li>Will the trade war return, and what are its implications of the fight against COVID-19?</li>
<li>The risks of a wave of bankruptcies, or worse, an Apocalypse of zombie companies.</li>
<li>A new threat to eurozone stability arises.</li>
<li>The evolution of a business environment that is increasingly hostile to businesses.</li>
</ul>From a tactical perspective, the stock market has recovered and is stabilizing after its initial panic phase. It is now caught between a bullish perception of the Fed’s unlimited liquidity and the bearish perception of uncertainty over the economic economy and resolution of the pandemic. If the bulls were really in charge and Fed liquidity were dominant, the index would be in an uptrend, but it broke down from its uptrend line in April and it is now trading sideways. We are likely in for a period of consolidation until psychology starts to focus on the next narrative, after the hopes for re-opening and recovery play out. Barring the discovery of a miracle treatment or vaccine, the next likely market narrative will have a bearish tone. With the S&amp;P 500 trading at a forward P/E of 20.4, which is a level last seen in 2002 when the market deflated from the Tech Bubble, investors are at risk of a disorderly adjustment in stock prices over the next few months.

This crisis has so far gone through two phases of market psychology. The first phase was panic, as it became apparent that COVID-19 had become a global pandemic, and economies around the world were shutting down. Stock prices rebounded during the hope phase, supported by a flood of fiscal and monetary stimulus and the hope that re-opening the economy might bring some semblance of normalcy.What’s the next phase of the market’s narrative, and how should investors position themselves? We have a few ideas.
Will the economy be able to re-open successfully?
Will the trade war return, and what are its implications of the fight against COVID-19?
The risks of a wave of bankruptcies, or worse, an Apocalypse of zombie companies.
A new threat to eurozone stability arises.
The evolution of a business environment that is increasingly hostile to businesses.
From a tactical perspective, the stock market has recovered and is stabilizing after its initial panic phase. It is now caught between a bullish perception of the Fed’s unlimited liquidity and the bearish perception of uncertainty over the economic economy and resolution of the pandemic. If the bulls were really in charge and Fed liquidity were dominant, the index would be in an uptrend, but it broke down from its uptrend line in April and it is now trading sideways. We are likely in for a period of consolidation until psychology starts to focus on the next narrative, after the hopes for re-opening and recovery play out. Barring the discovery of a miracle treatment or vaccine, the next likely market narrative will have a bearish tone. With the S&amp;P 500 trading at a forward P/E of 20.4, which is a level last seen in 2002 when the market deflated from the Tech Bubble, investors are at risk of a disorderly adjustment in stock prices over the next few months.

What's the Next Market Narrative?