Last quote by Thomas Lee
Thomas Lee quotes
We see tail winds building for the sector – higher interest rates/inflation, deregulation, pro-growth policy – all add upside to EPS and multiples.
Since election day, one of the more obvious (and appropriate) shifts in investor frameworks is the shift from the Fed put ... to the policy put (Trump is pro-growth). And with this shift, sector and style implications are notably different – favoring groups levered to higher nominal GDP, higher inflation and de-regulation. As we discussed in our 2017 outlook, we see this favoring CRAP [computers, resources, American banks, phone carriers] as well as value stocks.
We looked at close to 80 years of the performance of 164 industries. When a group severely lags, by at least 2,500 basis points or more, you almost always make money buying these things.
Since 1977, a flattening of the long-term yield curve sees equities weak over the next six months.
Moreover, as many investors are aware, telecoms and cable have suffered from 'liberal' expansion and definitions of net neutrality – hence, could benefit from a Trump administration.
We continue to expect the market to finish the year higher [due to] Santa Claus rally, positive inflows and improving investor optimism. In 2016, portfolio strategy' mattered more than 'market calls.' We would add to telecom exposure.
We believe telecom services may be particularly positive levered to rising inflation given it is such [a] capital intensive business with significant invested assets – hence, rising inflation raises the ROE of the embedded assets.
Recalling why 1991 shows after 8 years of a bull, you need to embrace the rotation. At end of 1991, pundits and investors were skeptical of equities – noting high P/E, lack of benefit from 11 rate cuts, IPOs – perhaps not surprising given the stagflation that marked the previous decade. But that sure sounds like today … doesn't it?
I think that the first half of 2017 could end up being pretty treacherous. It's just a fact. If you look at the first half of (the first year for) a new president, you usually see a pretty big drawdown. Three-quarters of the time it's usually almost 10 percent.
And that means – don't do consensus trades. Focus on groups that have lagged in the last seven years; that means energy, basic materials, mining, steels, [communication] equipment, industrials, tech.
Investors need to focus on laggards ... small-caps ... value – strategies we have argued all year.
Trump looks to be both an 'inflation' and 'de-regulation' president–In our view, Trump is likely a bit of both Eisenhower and Reagan. Notably, the two longest bull markets in history 1953-1974 and 1982-1999 were preceded by a Republican 'revolution'–Eisenhower (1952) brought infrastructure spend. Reagan (1980) saw tax cuts and de-regulation.
Things like corporate tax reform – investors just historically don't pay for that. So even though we think that's going to help corporate profits, it's not something that actually is going to help the stock market on a [private equity] basis.
Political events are important, but they've proven to just be buying opportunities, and I think the mistake everyone makes is they try to be positioned into the event and then they're chasing the market.
That's the 'short-termism' that really bothers me about investing. I think investors need to be thinking about the bigger stories like inflation, earnings trends.
We still see the S&P 500 rallying into YE ... rising inflation is good for stocks.
That's the thing we have to imagine: In a normalized rate world, equity is a great business [and] stock selection makes a ton of sense.
We've almost created a generation of people who've compensated for low interest rates by doing things like buying dividend, going into private equity, seeking leverage in order to juice up returns. It's made equity management a terrible business.
The bigger move has been this huge rotation … into the value names, small caps, the laggards. The irony is these were all trades that were working into Election Day, so they just all got turbo-charged.
Trump victory [is] a surprise but path forward not all negative... Clinton had been the favored 'horse' in this election cycle for investors, so it is natural for markets to see Trump's win as a 'shock. We see 'negative' shock, weakness as short-lived ... a sustained and deeper sell-off can only be justified if Trump's victory leads to a U.S. recession.
I would say it's actually bullish if we end up seeing a relief rally and it really engages investors and we see capital put back to work.
Wage inflation sensitivity [is] beginning to impact stocks. Stocks with low wage sensitivity outperformed 1,590 bp [basis points] since May.
This market has gotten a little dull, shrugging off earnings. Overall, it's been actually one of the better earnings seasons. Now we finally have positive earnings growth.
The S&P, any time the high-yield market has been up 10 percent, has averaged a 22 percent gain. The stock market is only up 4 [percent].
I wonder if it's the [stronger] dollar or the election.
Poor relative performance remains a big issue for institutional investors, setting up the likelihood of a performance chase. So we are still buyers of the dip.
We see 3Q16 as a positive catalyst, marking the end of the earnings recession. The bottom line, in our view, is that we are seeing the positive turn in sales. Central to our positive stance on equities in 2016, is the view that 3Q16 would mark the turning point for earnings (oil fade, USD fade, etc.) and indeed, 3Q16 is shaping up to be a key inflection point.
With revenue growth accelerating higher, oil stabilizing, USD headwinds fading, we believe US corporates will surprise on EPS.
Investors need to buy technology stocks ... whenever sentiment [is] this negative.
Sentiment is so negative, it is at an extreme for sell-side strategists (target price) and for individual investors (AAII % bulls less bears). Strategists [are] so bearish, their S&P 500 target has zero upside.
If Deutsche Bank leads to a true ceasing of credit markets and credit access and liquidity then that itself, because of the effect it would have on the underlying economy, it could drive us into a recession and that would be bearish.
I don't think it's created a bubble. I think it's very scary to hear a presidential candidate, though, say … that he's going to inherit a huge bubble.
The global search for yield has driven outperformance of most dividend payers. However, we have identified several laggards with materially better dividend yields, positive fundamental outlooks, strong balance sheets, and reasonable payout ratios.
They had such leadership for the last seven years, and it's rare for stocks to continue to lead like that.
You have to remember, because people have anticipated this, I think exposure is low, and that's why there's a chance for people to do some panic buying.
Since the start of 2016, NYSE margin debt and the S&P 500 have diverged.
The equity has yet to reflect this and as we noted in the past, we believe credit leads equities.
The economic background remains supportive of growth-oriented trades, as the July payrolls, along with solid ISM readings and also recent chatter on fiscal stimulus are positive for risky assets. We are upgrading consumer discretionary to OW [overweight] from N [neutral], as we see an opportunity for this group to outperform the S&P 500 between now and year-end.
In 1990, bond yields stabilized ? after huge declines from '82 to '90, and there were a lot of investors who thought the bull market would run out of steam in 1990, and they missed really the 10 years of the biggest returns in the stock market.
We see 2016 as ripe for a regime shift and as such, given telecom's 4-years of consecutive underperformance, is the turn for Telcos. Between telecom stocks and utilities, as the P/E and dividend differentials have reached extremes...Telecom [is] the most logical convergence trade to utes [utilities] in 2H16.
We are scared about the month of August. A few recent developments suggest August is likely to be a down month. We are not changing our views and we remain buyers of weakness – however, for our tactically minded clients, it may make sense to fade strength and be prepared to add to weakness in August.
There's very limited supply of U.S. bonds this year. That's actually helping dividend stocks. So we like the idea of consistent dividend payers, but also value stocks.
Gold is an alternate currency. It makes a lot of sense for investors to have some exposure because there're concerns with negative rates and regime changes and Brexit and central bank uncertainty. It makes other currencies less attractive than gold.
It's hard to ignore that U.S. yields are a lot higher on an absolute basis than a lot of other countries which have less credit worthiness than the U.S. It's an argument for yields to continue to inch downwards.
There's always negative bubbles created when people get too worried.
We would be buyers of an upside breakout – in other words, we do not think this breakout attempt will fail like it did in 2015. Upside breakout will be led by small caps due to ISM export recovery.
These are all setting the stage for growth to pick up, and I don't think that's what investors are expecting. I think everyone's worried about 'Brexit' and the Fed.