With a remarkably high degree of uncertainty surrounding the economy and peaking inflation, many investors are looking to reallocate their assets in the second half of the year.
Jason Trennert, president and chief executive officer of Strategas Research Partners, told CNBC: “The good news is a good part of the multiple compression that I think is behind us due to higher inflation expectations. Bob Pisani in an interview on Monday “Next to ETFs. “
“The bad news is I’m not sure we’ve seen the earnings correction everyone is anticipating,” he added.
According to FactSet, the S&P 500’s second-quarter earnings growth rate was 4.1%, revised lower from 5.9%. If the actual growth rate of 4.1% holds, this would be the lowest rate reported since Q4 2020.
According to FactSet, in the second quarter of 2022, 71 S&P 500 companies issued negative EPS guidance.
“We’re in a more ‘soft landing’ camp, although history isn’t really on our side,” said Trennert. “
Trennert debuts ETF Themed Opportunity Macro Strategy (SAMT) in January. Actively managed funds seek to outperform the broader market by providing exposure to a variety of macro-themed market trends.
“We focus on what we think are the biggest drivers of stock prices at any given time and do our own quantitative analysis to pick stocks that fit those themes,” he said. speak.
The four themes of the SAMT ETF are longer inflation, quantitative tightening, cyclical protection, and de-globalization.
“In typical recessions, earnings are reported to fall by about 30 percent,” says Trennert. “The good news is you’ve got a pretty tight labor market, you still have an easy Fed, and you still have a lot of excess savings for consumers and corporations.”
Despite a bearish year for the S&P, ETF inflows are still resilient. According to FactSet data, $3 billion went into U.S.-listed ETFs in the week ending July 8, pushing investment flows to date to $311.1 billion.
Bruce Lavine, CEO of Nightshares, said in the same interview. “Markets will shake for a little while, but as they respond, you’ll likely see records flowing into the ETF.”
As for SAMT, its largest holdings include a wide variety of heavy commodities such as gasoline and steel. But the US dollar, which hit a two-decade high on Thursday, makes up nearly 3% of the ETF. Trennert said that the currency’s profitability, coupled with the Federal Reserve’s moves to fight inflation, give the US an edge over peer-to-peer central banks.
“Certainly, the Bank of Japan and the ECB are trailing behind the US,” said Trennert. “And they’re taking a big gamble, it seems to me. A weaker currency on their part will help their exports, but it presents a real risk to their consumers.”
