In the wake of governments around the world taking on a considerable amount of debt to deal with the ramifications of the ongoing pandemic, Robert Swift breaks down the current situation and looks at a couple of the likely outcomes.
We begin this week with the latest update in the throwing of the kitchen sink story which we first elaborated upon, what seems like years ago, in March. Back then we posited that the Federal Reserve would become the lender of last resort for the corporate sector and dispense with all sense of normality. And so here we are, the Federal Reserve has, as of last night (15 June), made a commitment to buy corporate bonds on an individual basis (as opposed to the high-yield ETF that was bought through a special purpose vehicle). This latest action should make for some interesting watching when Powell goes up in front of Congress on June 16th and 17th where he will surely be asked the question of whether the Fed is in the process of nationalising corporate debt. At this point, we ask the question: is it such a stretch to imagine that once you can put credit risk on the balance sheet of a central bank it's not too far to equities risk, is it?
This week we visit perhaps one of the most prominent thematics in the market, that is the Buy Now Pay Later (BNPL) space. In particular and given the outsized returns of the market darlings, including APT, we would like to ask ourselves the question, where to next? Is the optimism warranted? Or is it perhaps the outcome of a rather irrational market?
Some equity managers, who presumably sold heavily in March and April, are still calling this a ‘dead cat bounce’. It is unusual for the cat to bounce higher dead than where it was when alive. Yet this is now where we find ourselves. And so we must ask, is the future becoming clearer?
Following our 10 Principles to Invest By for the long-term, we thought we might once again try and grapple with some concepts and principles that we would have liked to impart to our younger selves.
Markets & Commentary
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TAMIM Asset Management provides general information to help you understand our investment approach. Any financial information we provide is not advice, has not considered your personal circumstances and may not be suitable for you.