Media Cynicism

Another reader gets behind Boeing’s foray into Jetson territory with air taxis:

The first place to use them is London. The traffic is outrageous. I recently spent 60 pounds ($75) to go two miles and it took one hour.

“The situation in and around Philadelphia is not that extreme but it is getting there.

As for Friday’s Rundown about a Bloomberg investigation, Chinese spycraft and corporate denial, a reader says:

“Hmmm? Fake news or security issues? Can’t wait to see the fallout.

“Lean towards the big A’s.”

The “big A’s” the reader mentions are Amazon and Apple that both deny their computer hardware was hacked.

He’s more jaded about the reliability of the media. He sides with Amazon and Apple when they say a hack never happened.

We appreciate your feedback.

Your Rundown for Monday, October 8, 2018…

US Versus Th(EM)

There’s a huge return gap in equities right now.

US equities have been boosted by strong economic growth while the rest of the world is experiencing stalled growth and economic uncertainty.

Given how connected our economies are, especially among developing countries, this divergent trend’s surprising. Especially its duration.

graph

chart

This divergence is causing institutional investors to question if a simplified convergence trade’s in order. In this case, pulling back on US equities and investing more in emerging markets (EM).

For this to give investors an advantage, the return gap would have to close and the US market would have to more closely align with emerging markets.

Institutional investors are starting to bet on that happening. It doesn’t hurt that EM stocks are bargains and might be a hedge against more trade-war mayhem.

What should you look for if you think it’s time to get more exposure to emerging markets?

Look for companies with solid fundamentals like good price-to-earnings estimates.

Investors in Google (Alphabet), for example, are expected to pay $25 for every $1 in earnings in the next 12 months.

Over the same time period, investors will pay $6 for every $1 in earnings for South Korean company Samsung — a company with strong brand recognition at a cheaper price.

More to look for:

  • Countries with high USD reserves
  • Countries that are US trade partners
  • Countries that have minimal exposure to Chinese trade

Three emerging-market contenders: Vietnam, India and Brazil.

Finally, in proof the outlook on emerging markets might be changing, last week saw the largest cash inflow into EM equities/debt since April.

Market Rundown for Mon. October 8, 2018

S&P 500 futures are slightly up to 2,886.40.

Oil is down this morning to $73.82.

Gold’s price is down $15.30 to $1,190.30.

Bitcoin is up $41 to $6,642.02.

Have a great day. We’ll talk tomorrow.

For the Rundown,

Aaron Gentzler

Aaron Gentzler

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Aaron Gentzler

Aaron Gentzler is the publisher of Seven Figure Publishing. He is also the editor of The Rundown and has been with Agora Financial / Seven Figure Publishing since 2005. He's been covering technology and markets for over a decade.

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