Macro Dragon: Keep Industrials on the Radar…

Macro Dragon: Keep Industrials on the Radar... by Michael McKenna
Macro Dragon = Cross-Asset Daily Views that could cover anything from tactical positioning, to long-term thematic investments, key events & inflection points in the markets, all with the objective of consistent wealth creation overtime.
(These are solely the views & opinions of KVP, & do not constitute any trade or investment recommendations. By the time you synthesize this, things may have changed.)

Macro Dragon: Keep Industrials on the Radar…. 

 

Top of Mind…

  • So this one is potentially a touch in the INIL camp – Invest Now, Investigate Later… which allows one to dip a toe into a theme, with the pros of not forgetting about it down the line – yet put it on your radar folks… its going to be big when the move comes…
  • And yes, like Gold’s eventual (high probability) big break-out here, this is a question of when, not if…
  • All this Fiscal spend globally in a C19 impacted world is going to continue – the current spend has been more like relief/stability packages at best. One cannot stimulate an economy that is not moving…
  • So once again, we can say with high certainty (high probability) that the taps of fiscal policy will be like monetary policy open & loose for a very long time
  • Fiscal almost certainly “ends” with infrastructure spend – this will be the paragon of saving the best for last (yes, should already have been out in force), as this will be the most powerful element of an already very strong element of a country’s policy
  • A multi-trillion infrastructure spend will spur “real” demand globally & likely be set out of the US… be it before the election or with a future Trump or Biden presidency. For those who have been in the US & Europe – you know doubt have seen some of the 4th world infrastructure, bridges collapsing, pot holes the size of mini-craters, etc… its long overdue.
  • Don’t know about you, yet if KVP has to pick his form of debt… he’d rather take $2-4 trillion of debt going into infrastructure, that will pay dividends for decades to come for a country (not to mention spur millions of jobs)… rather than another $2-4 trillion of wall street paper to protect the vested interests & buds of the Fed & treasury – and no, they don’t have to be exclusive, but clearly main street continues to be the undisputed 2nd class citizen, that all politicians & policy makers say they are serving, but in actuality are like a multi-decade underperforming hedge fund manager – they are charging you, for the privilege of underperforming on your capital (in this case tax payers money).
  • Whilst focusing here on the US, this would be a global theme – i.e. more of Europe doing what Germany is going to do.
  • Our Equity strategist Peter Garnry highlighted some of these names, yet there are also etfs like XLI – industrial etfs. Obviously energy, materials & likely A&D would also get massive structural bids, things like copper, iron ore, steel, concrete, sand, etc… would be in tremendous demand… so keep that in mind with the likes of Australia (AUD) & Chile (CLP)

Summary:  In today’s equity note we show a basket of 30 US construction related stocks that could benefit from the potential new $1trn infrastructure plan by the Trump administration. This basket of stocks is high beta to the S&P 500 but has historically outperformed S&P 500. The basket has a lower net-debt-to-EBITDA than the market highlighting the industries’ prudent financial management and valuations are generally in line with the market

On The Radar Today

Flash PMIs Tuesday across the board… remember RBNZ tmr Weds @ 10:00 SGT

Start-End = Gratitude+Integrity+Vision. Create Luck. Process > Outcome. Sizing > Idea.

Namaste,

KVP

Topics: Macro AUD JPY CHF EUR GBP NZD Bonds Gold Apple USDTRY USDNOK EURNOK USDMXN FX Technical

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