Gary Dugan

Opinions my own | RTs not endorsements

[Gary Dugan @GaryDuganCIO]

Fed Chair Powell’s latest remark about not hesitating to tighten policy further if necessary marks a notable contrast to his comments from last week. Regardless, with inflation well above the Fed's 2% target, I believe a near-future rate cut is unlikely. https://t.co/GuAHA94oIR

[Dalma Capital @DalmaCapital]

“Modi will carry the day in the next national elections and that the current market friendly policies of the government will be maintained and built upon,” said @GaryDuganCIO, CIO at Dalma Capital.

https://t.co/NmmwM8nDiv

[Gary Dugan @GaryDuganCIO]

Enjoyed discussing the current US stock rally on @MoneyFM893. Wall St. sees more gains, but I’d be cautious. Fed is unlikely to cut rates without an economic slowdown, which could hurt corporate profits and stocks. https://t.co/10TVwi0IJB

[Dalma Capital @DalmaCapital]

Latest weekly market commentary from @GaryDuganCIO , CIO of Dalma Capital.

https://t.co/bNOjyoRO0x

[Gary Dugan @GaryDuganCIO]

So, while international investors may argue that Chinese equity markets are uninvestable, the good news may not be lost on the domestic investor.

[Gary Dugan @GaryDuganCIO]

Note that consensus forecasts for Chinese GDP have been on the rise most recently; however, the consensus view is that 2024 will be more troubling, with GDP growth forecast to drop well short of the target 5%. While we agree that China faces headwinds from the real estate sector, policymakers remain on the front foot with solid, if unspectacular, pro-growth policies. The government is promoting growth in a focused way. The PBOC continues to loosen policy in a measured way, with capital injections and likely further reductions in the reserve requirement ratio. The PBOC recently injected net liquidity of 600 billion yuan into the system. Analysts believe the PBOC is ready to provide a special lending facility to support ongoing debt restructuring efforts to address the local government's hidden debt problem. This week, Bloomberg reported that the PBOC will launch a 1 trillion yuan ($140b) package to support urban village renovation and public housing.

[Gary Dugan @GaryDuganCIO]

We note the flow of some better news from #China in recent days. Industrial production continues to grow steadily at +0.6% MoM in Oct, following +1.0% MoM in Sep. It was encouraging to see that retail sales rose 7.6% YoY in Oct. China-based economists have often argued that the West was too demanding of China's recovery from the COVID shutdown. Like any country, it needed time to find its feet again. There is some truth in such a view, although much of the recent concern has been about problems in the real estate sector, so structural concerns rather than just cyclical.

[Gary Dugan @GaryDuganCIO]

We must be cognisant of the pain trade – how long can investors keep buying longer-dated bonds with cash yields so high? Chart below shows the difference between the US 10-yr yield and Fed policy rates. Over extended periods, the US 10-yr bond yields 100-200bps more than the cash yield; today, we are at -84bps. If the Fed looks like it will not play ball by cutting rates sooner rather than later, this chart only unwinds with higher long-term bond yields.

[Gary Dugan @GaryDuganCIO]

Markets are increasingly in two minds as to what vision of the future to discount. In the very near term, the good news is in the ascendancy. Central banks are increasingly on hold rather than aggressively tightening, global activity is abating, and inflation news improves as food and energy prices drop. Chart below shows that the global economy is in the neutral zone, with global economic data neither surprising to the downside nor upside. Investors start to paint the outlook as more positive… a kind of economic slowdown and a peaking of interest rates without the pain of a recession …. a perfect soft landing.

[Gary Dugan @GaryDuganCIO]

The dollar weakness post the Fed meeting appears to be abating. It would need a greater level of conviction that the Fed will cut rates by the middle of next year to pull the dollar much lower.

[Gary Dugan @GaryDuganCIO]

Notable is the setback in oil prices with Brent below $82 and WTI at $77 after a 4% fall yesterday. Traders are concerned with the recent increase in inventories which is thought to reflect weakening global demand.  The current situation in the oil market is a remarkable turnaround from where we were at the end of September. Oil equity stocks were off 2-5% yesterday

[Gary Dugan @GaryDuganCIO]

Comments from Fed Governors are grabbing the headlines as more commentary emerges to nuance the recent statement from the Fed on the pause in rate rises. Hence both bonds and equities are stabilising after the strong run up in bond and equity indices. Fed Chair Powell speaks today. For the moment there appears to be a positive bias to trading – lower bond yields across the board in early trading.

[Dalma Capital @DalmaCapital]

"If oil prices were to rise to the $100 [per barrel] level, we would expect Opec to increase production and bring a better balance to the markets," said @GaryDuganCIO, CIO of Dalma Capital.

https://t.co/l4tHVGkX0g

[Dalma Capital @DalmaCapital]

“Inflation may be down, but it is not out. US bond yields may be lower on the week, but they are still higher than what we have witnessed for many years,” said @GaryDuganCIO, Chief Investment Officer of Dalma Capital.

https://t.co/rfBgP6Z3Mg

[Dalma Capital @DalmaCapital]

Gary Dugan , CIO of Dalma Capital, @GaryDuganCIO believes the impact of South Korea’s short-selling ban may be limited given the low levels of short positions in the overall market.

https://t.co/R94EOUm6ro

[Gary Dugan @GaryDuganCIO]

Five Indian state elections begin today with the central state of Chhattisgarh being held in two stages today and on Nov 17. The voting in the heartland and Hindi speaking states of Rajasthan, Madhya Pradesh and Chhattisgarh will give an early indication of how the ruling BJP party will fare in national elections next year. By state MP is held by the BJP while the other two parties are held by Congress.

[Gary Dugan @GaryDuganCIO]

A glimmer of hope for less restrictive lending conditions in the US?
The Senior lending officers survey showed 1.7% of officers eased somewhat their lending conditions the first positive percentage in a year. Unfortunately, there remain many banks still tightening conditions with 35.6% of loan officers tightening credit conditions in Q3, down from 50.8% in Q2.

[Gary Dugan @GaryDuganCIO]

As a measure of the ongoing institutional interest in the alternative asset classes Brookfield Asset Management announced that they had raised $26b in Q3, on track to raise $150b for the year. The more recent product launches have focussed on the infrastructure sector.

[Gary Dugan @GaryDuganCIO]

The news lifted the US 10-year yield 10bps from its recent low of 4.4798%. Yields are back to the average of the last three months.

[Gary Dugan @GaryDuganCIO]

A bit of a reality check in the markets with Fed Reserve Bank of Minneapolis President Neel Kaskari saying it’s too soon to declare victory over inflation. “…lets get more data and see how the economy evolves”.