18 January 2018 · 2 min read

Earnings: The real Trump bump

Median per share earnings upgrade of 4% for S&P 500 following tax reform

Analysts’ profits forecasts have edged modestly higher in the first month of the year in continental Europe and the UK, as would be expected during a period of above-consensus global economic data. In the US however, tax reform has added to the cyclical economic strength, pushing median 2018 profits forecasts dramatically higher, up 4% over the past month alone. This represents 2/3rds of our total expected benefit to US earnings from tax reform. Earnings revisions data supports our strategic view of strong momentum carrying over into Q1/Q2 2018. However we also note that economic surprise indices may have peaked in January and combined with forecast rate increases, markets may yet tread water as the year progresses.

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20 December 2017 · 3 min read

Canaries in the monetary coal mine?

High profile difficulties in a hot corporate debt market are intriguing

Steinhoff and HNA Group are from different regions and sectors. Yet they are making the headlines for the wrong reasons as the market raises questions over their debt sustainability. What these firms do have in common is that have pursued a policy of debt-financed acquisitions during this cycle. Now, LIBOR rates are pushing markedly higher. These signals of tightening credit bear watching in our view, even if they are presently not a cause for immediate alarm. It is however our important to be alert to early signs of a turn in credit availability. This is likely to first occur at the margin of the credit risk spectrum, as in 2007/8.

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14 December 2017 · 5 min read

Market volatility unsustainably low as bonds and equities diverge

Bonds and equities appear to be simultaneously pricing two scenarios – so why is volatility so low?

There is now a growing disconnect between low global government bond yields which appear to indicate that the global recovery of 2017 may prove transient and high equity market valuations which discount an extended period of strong profits growth. In addition, starting from Q1 17 there has been an astonishing and sustained decline in equity market volatility. While there is nothing which suggests a market regime change is imminent, we continue to believe that re-normalisation of monetary policy is likely to result in the re-normalisation of volatility, bond yields and equity valuations over the 2018-19 period. This is not in our view a good time to be seeking to maintain returns by increasing portfolio risk.

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Elaine Reynolds
13 December 2017

Kosmos exploration hiccups

Kosmos this week announced that its most recent exploration well offshore Mauritania, Lamantin-1, was water bearing.

The well is the second disappointment in a four well exploration campaign offshore Mauritania and Senegal designed to test the outboard basin floor fan fairway. Since its Tortue-1 discovery in 2015, the company had enjoyed a 100% success rate in the region, with 25 Tcf discovered across five wells.

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Richard Windsor
13 December 2017

Broadcast TV - Sword of Damocles pt. IV

Cable TV looks finished while OTA has another chance

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Richard Windsor
11 December 2017

Qualcomm & Microsoft – Dream with caveats.

Some space left for this proposition

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Richard Windsor
7 December 2017

Google & Amazon – Battle for the smart home

We don’t think Google will go out of its way to patch things up with Amazon as having YouTube absent from Amazon devices could disincentivise users from going with Echo products giving Google Home a badly needed boost. Google and Amazon have been sparring for several months but the move by Google to pull YouTube off Amazon ecosystem devices may bring this issue to a head.

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Elaine Reynolds
6 December 2017

Positive news from Genel’s Taq Taq

Results from TT-29w, the latest well to be drilled in the field, have proved an oil water contact (OWC) to be 145m deeper than estimated pre-drill at this location, implying that more oil could be recovered from the flanks of the field than currently planned.

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Richard Windsor
6 December 2017

Xiaomi – Market timing

Xiaomi considers a market event just as growth peaks again

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Richard Windsor
5 December 2017

Google - Brain game pt. II

Google remains out front in AI but Baidu most interesting.

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