High Conviction Ideas

The confluence of financial forces such as: physiological credit cycle deterioration, stronger USD, high leverage, less supportive valuation on multiples that won’t expand on tighter margins (i.e. tighter labour market, tariffs, higher PPI) call for financial risk to dominate economic risk.

For these reasons, we identified some trackers of potential market turnaround: global liquidity and credit spread to track financial and financing conditions, EPS revision and momentum to take the temperature on profit cycle and risk adjusted valuation gaps.