Cet article a été mis à jour pour la dernière fois le juin 10, 2022
Sur les marchés de Wall Street animés par une ferveur dynamique, y compris des années de rachats d’actions record et un effet de levier accentué, les considérations ont souffert des aspects véritablement systémiques de la solidité du bilan/financière.
Les conditions modifiées vont maintenant probablement imposer un examen minutieux du bilan pour le risque. Il convient de noter dans la préface de l’édition originale de 1934 de l’analyse de la sécurité de Benjamin Graham et David Dodd que « … pour tous ceux qui s’intéressent sérieusement aux valeurs de sécurité … l’accent a été mis [par les auteurs] sur la distinction entre l’investissement et l’approche spéculative , sur la mise en place de tests de sécurité solides et réalisables, et sur une compréhension des droits et des véritables intérêts des investisseurs… ».
Chaque période est différente à Wall Street. Certains soulignent l’importance de la solidité financière, en particulier lorsque les conditions changent. À la suite des excès spéculatifs, de la dépression et de la Seconde Guerre mondiale, la décennie et demie suivante a été celle des bilans. Ensuite, dans les années 1980, alors que le coût du capital augmentait pour freiner l’inflation, des considérations de bilan ont émergé lorsque des gouvernements de toutes sortes dans le monde ont réalisé que la propriété de l’État sur les moyens de production et les services n’était pas optimale et s’en est débarrassée. Cette réalité a également été imposée à de nombreux conglomérats d’autrefois. D’autres événements et réponses plus localisés incluraient dans les années 1990, la crise asiatique de la dette et de l’endettement. Dans les années 2020 et à mettre en œuvre d’ici janvier 2023 ont été les exigences de Bâle III et SIFI (établissements financiers d’importance systémique). La solidité financière globale reste un problème souverain et commercial.
Sur les marchés de capitaux actuels, un test de résistance dans le monde réel semble se dérouler avec une phase de considération du bilan/de la solidité financière. Non seulement la valorisation des titres à revenu fixe et des actions, mais aussi la dislocation des marchés des changes apparaissent à nouveau comme des aspects liés au risque. La volatilité et la bifurcation accrues devraient s’étendre. L’inflation élevée impose des changements aux banques centrales éprises depuis la fin des années 1990 d’assouplissement quantitatif. La pandémie afflige toujours les contraintes sanitaires et logistiques. Les caprices du temps et la guerre vicieuse bloquent même les céréales nécessaires à l’existence de base. Nous estimons que les primes de risque continuent d’être réajustées par les décideurs politiques des banques centrales et les marchés de capitaux.
The outer limits of massive quantitative ease appear past their peak of effectiveness in addressing known and unknown liquidity stresses. When compared to the first quarter century of the 2000s, fixed income and administered interest rates signal further increases ahead in levels and in spreads. In asset mix, we favor precious metals as hedge alongside short duration quality fixed income as inflation/ credit risk expands.
Already seen in Q1/2022 and unlike into 2021, markets have not been relieved at actual corporate reporting meeting sharply reduced consensus. Further, actual reports such as in retailing have been below estimates. As interest rates increase, salient are late developing erratic pressures including in currency translation and in the operating costs of being in business appearing distinctive. Irrespective of whether recession is avoided in whole or in part, worldwide revenue challenges appear. Geopolitics appear likely to be a catalyst for scrutiny favoring conservative business and financial posture that until recently focused on leverage and share buybacks. Quality of balance sheets are likely to be favored across equity geographies and sectors. In growth, rather than the erstwhile fascination for concept, more preference is likely to be on the quality of tangible delivery of goods and services and favoring Healthcare. In cyclicals, materials companies for instance have spent years restructuring in contrast to airlines once again having engaged in massive share buybacks only to then to be financially exposed.
The wall street capital markets of the first quarter century of the 2000s were enamored by central bank quantitative ease and its panoply. The conflicts of the Middle East have not yet eased. Those in the peripheries of Europe have now exploded into outright and vicious war in Ukraine including consequential sanctions. Energy supply has had potentially of long term impact. Europe has to wean off from Russian connections, for instance. Meanwhile, for the advanced industries of information technology there appear aftershocks over cyber security and from increased regulation on the role of social media arguably being led by the European Union but being addressed by others. Security of supply and competition remains intense in its building blocks ranged from semiconductors and well into the rare metals that are so crucial for powering alternate energy sources like batteries. Geopolitics had been simmering and now have intruded forcefully.
The Mediterranean space into south Asia remains chronically volatile. Since early 2022, the war inflicted upon Ukraine has had several aftershocks. The defensive overlay in the NATO area appears being redrawn. There has been blockading even in the supply of basic grains to around the world even as weather turns to tortuous. First experienced in the accidental blocking of the Suez Canal in March 2021, the fragilities of logistics have again been cruelly exposed across the supply demand chain. The Covid pandemic has been morphing even in strict lockdown countries like China and east Asia. Many parts of the world remain poorly vaccinated. Governments have been feeling the reactive wrath of many tiring from of Health restrictions. Elections have been fractious from Germany to France to the Philippines and likely in those to come imminently in Australia, Latin America and in November 2022 in the United States. Competition remains intense between China and the United States over the Indo Pacific and indeed about economic heft. Meanwhile, small but collectively relevant countries from Sri Lanka to Africa appear in stress. Geopolitics appear as likely factors arguing in favor of a more conservative business and financial posture of wall street that until recently has focused upon leverage and share buybacks.
Already having impact in both advanced and emerging country currency markets is the dissonance about economies being weaker but central bank policy having to urgently address heightened inflation in order to contain a repeat of embedded expectations. Even if overall recession in whole or in part is avoided worldwide, many economic projections appear being tempered due to war and circumstance. Irrespective, inflation tensions have been building into forced policy change from the major central banks led by the Federal Reserve and several others. It is now being signaled from the European Central Bank as likely from July 2022 but curiously not from the Bank of Japan where there appears economic contraction continuing into Q1/2022. Pandemic has been constraining growth in China while many smaller emerging countries such as Sri Lanka, South Africa and Argentina are in outright crisis. The present appears to be one of strengthening of the U.S. Dollar. The major currency crisis of the second half of the 1980s included the Yen and European currencies strengthening. The commonality is likely to be one of currency dislocation causing real world stress.
With inflation in advanced countries close to 7% and even higher in emerging countries, the 10 year U.S. Treasury Note yield has expanded from its lows by some 150 basis points to close to 3% and is still likely to rise substantially on our estimation to 3.50% by late 2023, arguably even sooner than our expectation. The yield of 10 year German Bunds has gone from erstwhile negative yields on imagined shortages to now being close to 1% but still low even relative to European inflation pressures; that of emerging country bond yield aggregates have increased by some 300 basis points to close to 7% and yields of U.S. CCC corporate aggregates appear close to doubling to close to 12% which is nonetheless only half of the levels reached in the credit crisis. Fixed income dislocation risk remains high.
To their credit, the central banks have attempted to contain stress more robustly than that around the credit crisis of 2008. Containment has been engineered via a series of Basle I, II and (postponed due to pandemic but with implementation due in January 2023) III agreements as well as the designation of some 30 (SIFI) Systemically Important Financial Institutions requiring strengthened capital and reserve requirements on a grid, However, only a few like the Federal Reserve have published rigorous stress test simulations. Meanwhile, the prolonged low interest rate environment has spawned fragility via sharply higher government budget deficits and among corporations, a plethora of record share buybacks alongside higher leverage.
When compared to the first quarter century of the 2000’s, fixed income and administered interest rates developments presage further increases to come in both levels and in spreads. The outer limits of massive quantitative ease appear past their peak of effectiveness in addressing known and unknown liquidity stresses. The fortitude of non-bank financials is likely to be tested as they that appear to have been major repositories of leveraged fixed income securities. A real world stress test of capital budgeting looms. In asset mix, we favor precious metals as hedge alongside short duration quality fixed income as inflation/ credit risk expands.
In the subsequent phases of the unfolding of credit crisis of 2008, massive quantitative ease ensued globally as central banks acknowledged uncertainty about the locations of liquidity blockages. Subsequently, company earnings such as in the S&P 500 bottomed in Q1/2009. For a prolonged period therefrom, even as perennially optimistic consensus estimates had to be reduced, momentum markets rewarded even just the meeting of the most recent consensus. Already seen now in Q1/2022 and unlike the prolonged experience into 2021, markets have presently not been relieved at actual reporting at the company level meeting sharply reduced consensus. Irrespective of whether recession is avoided in whole or in part, worldwide revenue challenges appear.Further, actual reports such as in retailing have been below estimates reportedly on cost pressures. It indicates that even as interest rates rise further, late developing erratic additional pressures include in currency translation and in the operating costs of being in business appearing.
Worldwide revenue challenges appear amid sharp competition. As in past such periods and especially if they were to be long lasting, currency translation dislocations are likely to become more prevalent than has been the case in recent years. Potentially appearing as an accounting consideration affecting the reporting of results is inflation as a source of angst due to inadequate depreciation based on historical costs. The central banks may have constructed Basle III and SIFIs as mechanisms to buttress key financial companies but the penchant of the last several years for higher leverage and share buybacks in businesses at large carries within it capital budgeting and cash flow risks likely being underestimated. Especially impactful would be were interest to have to rise above neutral levels in order to resist inflation being embedded took place into the 1980s.
Geopolitics appear likely to be a catalyst for scrutiny favoring conservative business and financial posture that until recently focused on leverage and share buybacks. Quality of balance sheets are likely to be favored across equity geographies and sectors. In growth, rather than the erstwhile fascination for concept, more preference is likely to be given to the quality of tangible delivery of goods and services and favoring Healthcare. In cyclicals, contrast appears in materials companies for instance having spent years restructuring compared to airlines having engaged in massive share buybacks and then being subsequently exposed. StrategeInvest’s independent consultancy operates as Subodh Kumar & Associates. The views represented are those of the analyst at the date noted. They do not represent investment advice for which the reader should consult their investment and/or tax advisers. Any hyperlinks are for information only and not represented as accurate.