Albert Edwards, the notoriously bearish Societe Generale strategist, is warning investors not to rely on equities as a definite way of avoiding losses during the impending recession, calling such suggestions "ludicrous."
- Albert Edwards, the notoriously bearish Societe Generale strategist, is warning investors not to rely on equities as a definite way of avoiding losses during the impending recession, calling such suggestions "ludicrous."
- "Many equity bulls think it is inevitable that massive central bank liquidity will boost equity prices. This strikes me as ludicrous."
- Central banks have pumped unprecedented amounts of stimulus into markets in recent weeks, aimed at helping prop them up during the coronavirus crisis.
- Edwards expects bonds to do better than equities during this downturn.
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Edwards, chief strategist at the French bank, said in research note on Thursday: "Many equity bulls think it is inevitable that massive central bank liquidity will boost equity prices," referring to the unprecedented measures unleashed in recent weeks.
"This strikes me a ludicrous."
He said: "Equities are a cyclical risk asset just like commodities, and they are driven by fundamentals and liquidity, just like commodities. And both usually slump in deep recessions just like this one."
He added: "Over the past few years many clients have been sympathetic to my warnings of a deep deflationary recession and they also agreed this would prompt a monetary and fiscal tidal wave of easing the like of which has never been witnessed before. Quite a few though remained bullish on equities purely because of the likely magnitude of the policy response."....MORE
Instead Edwards expects investors to take the ultimate flight to safety with much money to flow into government bonds.
"The collapse in profits is highly likely to fatally undermine the argument that equities can look through the valley. I expect instead ample liquidity to flow into government bonds. But watch commodity prices closely: they should tell us when it is finally safe to rotate back into corporate risk assets. But that time is not now," he said.
Why quantitative easing won't help equities
The Fed has engaged in a number of policy measures aimed at boosting liquidity, and at minimizing the economic impact from the novelty coronavirus pandemic.
Edwards said: "Many equity bulls think it is inevitable that massive central bank liquidity will boost equity prices. This strikes me a ludicrous. As we saw with industrial commodity prices between 2012-2016, when the fundamentals turn against any risk asset, it struggles — despite ample QE at the time."....
Every now and then a a mini mania grabs hold of Chinese speculators, usually when they think government infrastructure spending is about to tick up.
From Recycling Today, March 18:
Steel rebar attracting investors in China
Construction material has retained investor attention through the COVID-19 epidemic.
Steel reinforcing bar, or rebar, is reportedly retaining its value in the Chinese futures market. That is occurring despite a global commodities market that has seen most materials plunge in value with the global spread of the COVID-19 coronavirus.....MORE
Rebar, made in most parts of the world with ferrous scrap as a significant percentage of its feedstock, is used in road building and other construction applications.
According to a March 17 Bloomberg report, investors in China are turning to rebar as a safe haven investment, as they anticipate governments in China and elsewhere will pour money into infrastructure to stimulate their economies....
This is the third time in four years we've seen these reports.
