Stéphane Renevier, CFA on LinkedIn: #valuations #us #growth #india #brazil #european #uk #investing… (2024)

🧘 This Is The Real Reason Why Market Volatility Has Been So ChillStock markets were eerily calm in 2023, with the VIX falling well below its 2000-19 average. Sure, the economy has improved and the falling probability of a harsh recession would give investors reason to feel more relaxed. But seeing volatility drop below its levels of the previous decade –at a time when the Fed was hiking interest rates more aggressively than ever –seems, well, counterintuitive. Rate hikes have in the past led to market and economic mishap, more often than not, after all. So perhaps there are other things at play. One is that investors are increasingly using short-term 0DTE (0-days-to-expiry) options, which are not captured by the VIX. The BIS seems unconvinced, though. It’s got a different one in mind: yield-enhancing structured products. Such products promise investors a higher yield, in return for giving up some gains. Covered call structures (which entails buying an asset and selling a call option on it) and autocallable products (which promise juicy extra returns, but only as long as an asset stays in a certain range) are two that have risen in popularity recently. When investment banks offer these products, they’re essentially long options and must manage their risk by trading the related asset. Using “dynamic hedging”, they manage their risks by buying when prices drop and selling when they rise. Since this approach goes against market movements, it tends to smooth out market swings, which may explain why volatility has fallen despite the still high levels of uncertainty. Now, as usual, technical factors seem like they don’t matter… until they’re all that matter. As we saw with 2018’s “Volmageddon” event that wiped out two popular exchange-traded products, things can quickly spiral out of control. Here’s the situation now: autocallables are hot because the market’s quiet, but the market’s quiet because everyone’s into autocallables – a classical example of George Soros’s “feedback loop” theory. But if the market drops deeply and volatility shoots up, the loop could break.Cascading losses can force investors to dump other stuff, kicking off a wider market meltdown, leading to more losses, and even more selling. Higher volatility impacts the banks’ trading desks too, forcing them to reduce their risks. And as volatility climbs, the appetite for these “calming” products vanishes, removing another supporting factor.Of course, there are other factors at play, and markets can go a very long time without a significant spike in volatility. But if there’s one lesson to remember from the late great economist Hyman Minsky, it’s that stability breeds instability. So don’t bet on low volatility to last forever, instead stay on high alert and make sure your portfolio can survive those extreme scenarios. The good news is, the current calm in the market has made it quite affordable to safeguard your portfolio using options. >> Finimize

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💰 Investors Are Paying Super-High Premiums For The Market’s Favorite StocksBig, fancy, high-quality growth stocks have been smashing it for a while, leaving the smaller, not-so-flashy value stocks eating their dust.It’s easy to see why: these corporate giants have a lot less debt and make more money, so higher interest rates don’t hit them as hard. They’re more profitable too, and their strong competitive advantages keep them cruising even in uncertain economic seas. On top of that, the tech titans among them –like Microsoft, Alphabet, and Nvidia –have been riding the AI wave all the way to the bank. So it’s no wonder investors are throwing love (and money) at these behemoths while giving a cold shoulder to the smaller, budget-friendly options.The issue is, the “premium” investors are paying for those in-demand attributes has reached extreme levels in terms of valuations. Dive into the chart here, and you’ll spot that the additional premium forked over for stocks with lofty profit margins, solid financials, and zippy growth is between one and two standard deviations above their ten-year (light blue) and 35-year (dark blue) norms (the zero, gray horizontal line). Let me break that down a little: standard deviation measures how far figures have drifted from the average. In a normal distribution, only about 16% of values lie above a single standard deviation above the mean, and only 2.5% above two. So the premiums and discounts we’re seeing are very high.Meanwhile, the more low-key players – the steady-Eddie low-volatility stocks, smaller fries, dividend darlings, and budget buys – are sitting in the bargain bin, trading at quite exceptional discounts compared to their usual going rate.That doesn’t mean it’s time to jump ship from the titans of industry and swim with the underdogs instead. Investment decisions based solely on the present cost of certain traits aren’t a guaranteed winner. Besides, with plenty of economic uncertainty still out there, the market’s current crush on big, growth-oriented stocks is likely to hang around.But if the economic climate takes a turn and investor preferences shift (for example, if inflation worries fade), then the resulting market shake-up may be significant given the size of the disconnect. So make sure your portfolio isn’t entirely dependent on those big, fancy, high-quality growth stocks but is also cozying up with some of those smaller, undervalued gems. It’s all about not putting all your eggs in one basket, especially in a market that can change like the weather.>> Finimize

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🚀 What You Really Need To Know About Reddit's IPO, In 7-MinutesReddit, Inc., the powerhouse behind the r/wallstreetbets saga, is stepping into the spotlight with its upcoming IPO under the ticker RDDT. As it prepares to make waves on the NYSE, the question on every investor's mind is: to upvote or downvote Reddit's stock debut?🔍 Dive into the analysis I've done for Finimize, where I break down what you really need to know in 7-minutes:-Reddit's unique position in the social media landscape.-Key insights on Reddit's revenue streams and user base dynamics-Its journey from meme-central to monetization.-The enticing and the risky bets of investing in RDDT.-Plus, find out why this isn't just another stock market debut.👀 Read the full analysis and decide if Reddit's IPO is worth your investment.#RedditIPO #Investing #DigitalAdvertising #StockMarket #RDDT>> Check-out Finimize for more brief & to-the-point analysis

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🪁 This May Keep Interest Rates Higher For LongerThe end of the global savings boom could have a big impact on your portfolio.For a good long time, there was a big upheave in the amount of money being saved up: baby boomers were socking away cash for retirement, wealthy people (who tend to put more away) became even wealthier, and companies stopped spending so much, thanks to technological improvements. Plus, a lot of emerging economies adopted policies to increase their savings and foreign currency reserves, adding to this huge financial surplus.This abundance of savings led to a big increase in the amount of money available for borrowing. And just like in basic economics, when there's more of something around, its price usually goes down, assuming everything else stays the same. Since interest rates are essentially the “price” of borrowing money, this explains why they fell for so long.But now, we’ve hit a snag –and it’s not just those interest rate hikes. Several of those factors are reversing – for instance, baby boomers are beginning to spend down their savings, and previous savers like China are facing financial trouble and having to spend more and put away less. And that means global savings may be about to fall, rather than rise further. Some think it may already have started: that line in the chart does seem to have flattened out since 2010, to be fair. The worry, of course, is that we could soon be skating toward a savings drought. And that would mean less cash floating around, which, in turn, means interest rates – particularly longer-term ones – could start to creep up or remain higher for longer (remember, it’s all about supply and demand). The implications of that could be sweeping: it could mean that the bond market might not be the gold mine it was, as investors may not be able to count on rising prices driven by sharply falling interest rates. Companies that were riding a wave of relatively cheap loans might find the surf’s up, especially the unprofitable, speculative growth ones. Even some governments may struggle with rising payments on their debt. On the flip side, reliable value stocks with steady cash flows and solid, high-quality companies that maximize return on capital, rather than relying on cheap loans, could do well. Other potential beneficiaries are infrastructure, green energy, defense companies, and commodities, all of which could thrive as economies move from just shuffling money around to building and growing stuff, thanks to those nudging interest rates.>> Finimize#savings #economy #investing #interestrates

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🚀 You Can't Miss This Exclusive Finimize Event: Unlock the Future of Fintech If you're working in product/marketing at a fintech, you can't miss this. Please sign up in the comments 👇Join us for a groundbreaking session with Lightyear's co-founder Martin Sokk and Shares' co-founder Harjas SINGH, two of the UK's most visionary fintech founders. With their roots in Wise and Revolut, they're now leading the charge in crafting Europe's most user-focused investment platforms. This is your chance to dive deep into the minds shaping the future of fintech.🔹Shares is redefining investing with a community-first approach, prioritizing education and engagement to empower new investors. Discover the strategy that's opening up new markets and making investing accessible to all.🔹 Lightyear is setting the new standard with its transparent pricing model - just 0.35% on FX, no execution fees on ETFs, and unbeatable interest rates on cash. They're expanding the horizons of investing across Europe, making financial growth accessible to everyone.💡 Exclusive Insights: Learning from the Best This event isn't just about networking; it's a rare opportunity to gain firsthand insights from the forefront of financial innovation. We'll explore how fintechs can enhance customer acquisition, engagement, and retention, straight from the pioneers of the industry.🌱 Growing Together: Finimize for Business As Finimize for Business flourishes, we're thrilled to see a vibrant community of industry professionals gathering around our events and content. It's a throwback to the early, exciting days of Finimize, and it's only getting better.📅 Mark Your Calendar: March 20th, Spitalfields London This intimate event, limited to 50 participants, promises an unparalleled opportunity to connect with the brightest minds in fintech. Whether you're in product, marketing, or simply fascinated by fintech, this is where you need to be.🤝 Join Us: Elevate Your Brand Interested in showcasing your brand or CEO in our Future of Finance series? Let's talk. This is your chance to shine in the fintech spotlight.👇 Secure Your Spot Don't miss out on this exclusive fintech rendezvous. Sign up in the comments below and be part of the conversation shaping the future of finance.

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💹 Three Lessons Learned From Three Lost Decades In JapanThe #nikkei smashed past 39,000 on Thursday. And, for all the 1980s Japanese stock enthusiasts out there, it was a milestone worth celebrating: the move ended a 34-year wait just to get back to where it used to trade. Here are three lessons you can take from the Nikkei’s fall and slow recovery:Lesson 1️⃣: No giant is too big to stumble. Japan looked unstoppable in the late ’80s: fresh off the heels of a decades-long bull run, it ruled 45% of the global stock market, housed the world’s biggest four companies, and was home to six of the world’s ten richest people. But the collapse and the ensuing lost decade made this clear: good times never last forever, and even the mightiest can fall.Lesson 2️⃣: The long game can be extra long. Stocks do tend to go up over the long term, but that term might span a generation –or more. Japan's 34-year wait without stock gains is a stark reminder: even over a decade or more, there’s no guarantee stocks will generate positive returns. Lesson 3️⃣: High risk, high potential reward, but a wider range of outcomes. Sure, you can expect to earn more attractive returns by investing in risky assets like stocks. But that doesn’t mean you’ll get them. In fact, as Howard Marks elegantly explained, high risk means there’s a higher chance you won’t experience that average return.Those lessons underscore the importance of being cautious with your own portfolio, with a few savvy moves. 👉 Dollar-cost averaging: making set investments at set intervals can allow you to buy more when prices dip and less when they spike. This strategy can cushion the blow of a prolonged market slump and potentially enhance your returns.👉 Paying attention to momentum: pulling back from markets when price momentum turns negative might not work every time, but it can help shrink the size and lengths of losses. 👉 Diversifying: don’t put all your eggs in one basket. Investing in different asset classes and geographical regions can reduce the chance that your portfolio will take on such long-lasting damage.💬How (truly) long is your long-term investment horizon?Let me know in the comments.Please 🔔 Subscribe to my profile & give this post a 👍 if you want to receive more ideas like this. Thanks !>> Finimize

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💸 Goldman’s Best Bets On India’s Growing Wealth ClassThe country’s wealth is growing –and that means stock opportunities.India’s growing fast, but there’s one group of consumers that investors might want to pay particular attention to: India’s affluent crowd. It’s a small but fast-growing segment of the population. While only about 4% of the working-age population is earning over $10,000 annually, this group is projected to expand rapidly from 60 million now, to 100 million by 2027. Thanks to a massive jump in the stock market, an increase in the price of gold, and a big rise in property prices, the wealth of these consumers is ballooning, and they may be ready to spend it. All that spending is likely to create opportunities for investors, says Goldman Sachs. And that’s especially true for high-end brands and spending categories such as leisure, jewelry, restaurants, and healthcare. But not just any stocks will do. Goldman recommends companies that have a competitive moat – think: top-notch quality, leadership status, and a history of outperforming – and that focus on high-end segments. Here are Goldman’s top picks: 🔹 Titan. With its strong brand name and sprawling retail network, it’s poised to capture the country’s growing appetite for luxury jewelry.🔹 Apollo Hospitals. Healthcare spending is already on the up, and Apollo Hospitals is strategically placed to cater to the growing number of people who can afford its services and facilities.🔹 Phoenix Mills. This company owns prime real estate that attracts high-end brands and affluent shoppers, and it’s poised to benefit as the retail sector booms.🔹 MakeMyTrip. With a strong position in online travel booking, this firm is set to take off, fueled by the uptick in luxury and leisure tourism.🔹 Zomato. The surge in out-of-home dining and the preference for convenience are serving up gains for Zomato, which specializes in food delivery.🔹 Devyani International and Sapphire Foods. These two, which operate popular quick-service restaurants, have been feasting on the growing trend toward branded eating-out experiences among the wealthy.🔹 Eicher Motors. Known for its iconic Royal Enfield motorcycles, Eicher Motors taps into the luxury automotive segment, appealing to consumers’ aspirations for exclusivity and status.But be aware of the downsides before diving into Goldman’s “Affluent India” picks. Most of them trade at pricey valuations, and the country’s competitive environment could reduce their market share and profits. There’s also the risk that changes in the government’s tax policy would shrink the bottom line for these firms. What’s more, a potential correction in asset prices could affect the affluent’s wealth and consumption.💬Will Indian stocks beat US stocks over the next decade?Let me know in the comments.Please 🔔 Subscribe to my profile & give this post a 👍 if you want to receive more ideas like this. Thanks !>> Finimize#india #goldmansachs

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🤖 Is AI Already Stealing Our Jobs? Ever wonder if AI is elbowing its way into our job market? Henley Wing Chiu from Bloomberry took a deep dive into Upwork's freelancing gigs since ChatGPT was released, and guess what: It's not all doom and gloom. Here’s what he found:📉 There’s indeed been some losers: writing, customer service and translation jobs have all since a big drop in the # jobs since ChatGPT was released.But outside of these categories, most of the other job categories covered in the study were not negatively impacted. 📈 In fact, the # of jobs actually went up for those other categories: Web design, graphics design, software development and video production jobs. It turns out, AI’s perhaps not the job-stealer we feared – at least for now. Now sure, it may simply bebecause AI hasn't mastered the art of crafting top-notch videos or sleek designs yet, and the surge in certain job sectors could be fleeting.But it’s a theory, and so far the evidence is clear: AI is reshaping rather replacing the job market, spotlighting the irreplaceable value of human creativity and ingenuity.Of course, once AI hits the big leagues with General Intelligence, we might just find ourselves in a world where the hottest jobs are in sunscreen application and gourmet ice cream tasting. But deciding between SPF 30 or 50 and whether to go for double chocolate or vanilla bean doesn’t seem like the worst prospect :)💬Does AI scare you?Let me know in the comments.PS. 🔔 Subscribe to my profile & ♻️ share with your network if you want to receive more ideas like this. #AI #artificialintelligence #jobmarket

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⏱️ Everyone's Telling You Not to Time the Market, But What If They're Wrong? In the investment arena, clinging to the buy-and-hold strategy is like holding onto the belief that it's the only ticket to wealth city. But let's not sugarcoat it: this path is sprinkled with financial landmines, where losses can loom large and your emotions will do everything to derail you. The Nasdaq's staggering 80% plunge, followed by a grueling 16-year climb to reclaim its peak, alongside Japan's market, which took over 30 years to revisit its former highs, serve as vivid illustrations of the lengthy journey back from financial downturns. What’s more, you’ll need rock-solid faith to stay the course and your long-term conviction will be put to the test when market doubts loom largest. Frankly, it’s a lot. 👉 Could Timing the Market Be the Smarter Move?If by “better” you mean likely to see smaller losses and quicker recoveries, and keep you clear of emotional decision-making, then I’d say yes. But forget crystal ball gazing; this is about a disciplined, emotion-free approach. Think of it as surfing the market's waves: catch the upswings, and when it starts to get choppy, you bail to the safety of cash shores.📝 Here's a Straightforward Game Plan:Just look at whether prices have risen over the past four, eight, and twelve months. If you're seeing more nos than yeses, it’s time to pivot to cash. If not, you remain fully invested.☀️ The Verdict?Despite its simplicity, this strategy applied to the Nasdaq has managed to outshine the steadfast buy-and-hold, not just in returns but in making the investment journey a lot less bumpy. Imagine trimming those nightmarish losses from a scream-inducing 80% to a more palatable under-40%, or sidestepping years of waiting post-crash (check the charts). While the buy-and-hold faithful have braved seven major downturns of over 30%, the market timers faced just a couple. Plus, this method brings a more even-keeled annual return, swapping out some of the highs for fewer lows (again, check the charts).🧯 But, Any Snags?Yes. This strategy is kind of like your financial safety net, designed to limit the worst falls. But, safety nets have their price, including missing out on some of the action during the market's better days and occasionally jumping at shadows. Since 2020, for instance, it's been more of a tortoise, making steady, albeit slower, progress compared to the hare-paced buy-and-hold, especially after those quick market rebounds. So that’s the trade-off with choosing a market timing strategy over a buy-and-hold: the potential for slightly lower returns over the long-term, but an overall smoother journey that protects you from those worst-case scenarios. And that may be a compromise you’re willing to make, especially if you worry that markets may be eventually headed for a crash, that stocks could see another lost decade, or simply that your emotions are at work against you. >> Finimize

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😮 US Stocks Have Never Outperformed For This LongIf you asked a bunch of investors which asset is the most sure-fire bet out there, most would say the US stock market. It’s hard to disagree: it’s home to some of the planet’s highest-quality companies, thrives on the globe’s wealthiest consumer market, and enjoys the backing of the world’s leading reserve currency. Plus, it’s got an unparalleled number of buyers and sellers, it’s a hotbed of innovation and growth, and it has a bunch of highly trusted rules for corporate and regulatory governance. (And so on). It’s hardly surprising, then, that US stocks have often left their global counterparts in the dust. Over the past ten years, for example, the S&P 500 has broadly outpaced emerging markets (on a rolling, five-year basis, in orange) and has breezed past stocks in 21 global developed markets (represented by the EAFE index, in blue). This is the longest stretch of outperformance in history.But that doesn’t mean you should put all your chips on the US market. The S&P 500 might (or might not) be on the verge of a downfall. It might (or might not) be outpaced by stocks from other places. The fact is that the future is unpredictable, and the past is –more often than not –a poor guide of the future. Even the almighty US stocks have seen sharp and extended periods of underperformance relative to other regions, as you can see from the chart. So unless you’ve got a working crystal ball, spreading your investments across regions is one of the most reliable strategies for harnessing stocks’ attractive long-term returns.And, sure, there are times when an economic storm is so intense that it hits all markets everywhere. But over the long-term, different regions tend to move with their own economic rhythms, growth trajectories, and opportunities. In fact, even some of the bigger crashes – Japan in the 1990s, the US in the early 2000s, or China in 2007 – remained relatively contained to one market, highlighting the value of a geographically varied portfolio. So, by all means, keep the US market as your portfolio’s cornerstone if you’re happy with it. Just don’t turn a blind eye to opportunities abroad. If you ask me, adding some international flavor to at (the very) least a third of your portfolio is prudent. With the next decade looking potentially very different from the last, that may be the closest thing you get to a free lunch. 💬How much do you allocate to non-US stocks in your long-term portfolio?Let me know in the comments.PS. 🔔 Subscribe to my profile & ♻️ share with your network if you want to receive more daily quick takes like this.>> Finimize#stocks #usequities #longterminvesting

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