To The Moon

The monthly Market Cycle Guidebook is a key resource for investors — providing insight into the stage of the business cycle, monetary policy trends, leading indicators, earnings momentum, valuations across multiple different assets and markets, long-term return expectations, and tactical asset allocation views.

Key Findings from the Latest Monthly pack:

• Global monetary policy settings are increasingly shifting from headwind to tailwind as inflation falls and economic cycle data remain soft.

• The major macro dilemma for investors at this stage is the tails; resurgence risk on the one end (growth reaccelerates, inflation resurges), and recession risk on the other end (recession takes hold, deflation comes into focus).

  • The second coming of Trump likely exacerbates this, with a puzzling policy path potentially pushing up inflation, but also raising recession risk (it will all depend on what gets implemented, how quickly, to what degree, and the second order effects e.g. with fiscal consolidation).

• The main upside risks for growth assets would be: a macro middle path (goldilocks, policy perfection), China stimulus, Trump taking a prudent + growth friendly policy path, and in markets a major upside would be a series of bullish rotation trades…

• Among the asset classes most at risk given valuations and the stage of the cycle are US tech stocks, US housing, US dollar, and corporate credit.

• ​​Areas which see superior upside risk/reward meanwhile include government bonds, commodities, emerging markets, and certain sectors on a tactical basis such as defensives, gold(miners), small caps, and frontier markets.

• Rotation and Relative value are thus key themes along with smart diversification and risk management

Pick of the Pack — Global Equities’ Sales Growth

This month’s pick of the pack is a chart showing global median sales growth rates across 45 countries. Sales growth collapsed in 2023/24 as the global economy slowed (notably China, Europe) and importantly — as the great disinflation took hold.

Recall: sales growth is highly sensitive to nominal growth, and inflation actually increases nominal growth (and corporates bank this in the form of higher sales… at least to the extent they can raise prices and maintain enough volume).

But things are changing now heading into 2025. $S&P 500(.SPX)$ $SPDR S&P 500 ETF Trust(SPY)$ $Invesco QQQ(QQQ)$ $NASDAQ 100(NDX)$ $DJIA(.DJI)$ $GLOBAL X DOW 30® COVERED CALL ETF(DJIA)$

Sales growth is recovering, we are seeing less countries with declining Year over Year sales, and the overall median growth rate is turning up. This fits perfectly with my global growth reacceleration thesis, and reflects one upside of the end of disinflation. One key implication of this is that it will likely see global ex-US equities benefitting disproportionately vs US equities — as global earnings have been stagnant/declining vs US earnings soaring. The market is priced for USA’s strong earnings, and so it will be no surprise if the US keeps keeping on, but the market is priced for bad earnings for global ex-US and the biggest surprise would be an upswing in earnings; likely culminating in valuation re-rating too.

So a very important chart indeed.