La Rentrée 2023 🌅🌍🏟️
Post summer catchup, q’s for allocators, reading list, Bill Gross on bonds
Well, here we are, mid-September, and it’s great to be back 😁☕️hope you all had a really fantastic summer.
I think it was sometime in early August where I lost track of days/dates. The local Boulangerie was closed Mondays and river traffic was busier on the weekend so that was about the only indication. It’s what author Jennifer Odell calls “Deep Time” and it’s quite wonderful.
September has snapped back to reality though with our littlest starting nursery (oh hello, nursery bugs), out eldest starting pre-school, me starting the new role and Mrs M back full-time after maternity leave. So the back to school vibe is running strong in our house. It was a wonderful summer though - lots of splashing into rivers, chasing the boys around and it was France so of course we ate all the things 🥐 🥩
The first few days have been a great intro to People’s Partnership (I’ll try to avoid the “so excited” cliche, but it is kinda true). Tonnes on the go, straight into it all, plenty of interesting investment stuff on the cards. Folks have been super welcoming so far and the organisation’s purpose-driven culture really really clear. Plenty more to say in due course.
I’ve been a little unplugged from markets stuff most of summer but trying to catch up and see the big picture:
Stocks seem to have been kinda sideways, still well up for the year, still being led by very strong returns in tech stocks. Global stocks forward price earnings ratio (for folks who like that) is a touch above long term averages at around 17 (source: JP Morgan).
One key question for allocators is on regional allocations. Lower valuation levels on non-US stocks feeds through to higher future expected returns there in most models, but shows no sign yet of feeding through to actual returns. So where does that leave you on regional allocations?
Economic data seems to have keep pointing to that soft landing in the US where the inflation shock is basically over, the labour market has softened just slightly but not much and corporate earnings have fallen a little but that was expected and it’s hardly been the recession that was so widely predicted this time last year. So no big surprises. Still seems to be a tension with the traditional/historical view of what might need to happen to get back into balance. The UK position is pretty different though with worse looking data on all fronts.
10-year rates have crept higher over the summer in the US and UK, I guess for different reasons. There’s some really interesting questions here for allocators - how much duration do you actually want in your fixed income right now? Structurally where are term permia and inflation premia going to shake out? Corporate bond spreads have crept lower but yields are still high - so how are we thinking about that?
A couple interesting stock stories I picked up over the summer -
Nvidia: the market’s best performing stock story of the moment actually got cheaper the last 8 months as earnings have rocketed.
Novo Nordisk: Europe’s new largest company (but can you name the rest of Europe’s top 10 stocks? )
Greyscale: looks like a spot bitcoin ETF is finally coming in the US. Probably a couple years too late to be relevant to institutional investors though? Still keen so see where the fee rate lands, greyscale charged a staggering 2%.
Airbnb & Blackstone check into the S&P 500
it’s been a tough two decades for small caps says John Authers -
Summer reading recs -
Saving Time by Jennifer Odell. Extremely thoughtful take on time and how we think about it, why and how it matters. Gets right into colonialism, patriarchy, exploitation and climate change.
Our lives in their portfolios - still making my way through this and will post fuller later. A worthwhile but probably tough read for anyone working in infrastructure investment. It’s a challenging thesis but I think the author gets a lot right about the pitfalls of “asset manager society”.
And for a bit of fiction I loved Sabrine Durrant’s “Sun Damage” and “Lie with Me”
What’s on my podcast playlist right now -
Animal spirits live from Future Proof. I’m always fascinated to see how podcasters use the “live” format and you should check out this conference (was this week, in the US). Might be the future of events.
Odd lots with Bill Gross also from Future Proof. On managing duration, bond bull markets, happiness, and his legacy.
Capital Allocators - Ted Seides speaks to Marlene Puffer of AIMco.
oh, and it’s the Rugby World Cup 😁 …