Earlier this year I went through my Top 10 Charts to Watch in 2021, but I thought it would also be good to share some of my charts and calls that worked particularly well last year (and don't worry, I will be sharing my worst charts next week... there are always two sides to the coin!!).
The charts listed below were particularly helpful in arriving at some of my key calls and recommendations for clients last year. I often find that while I do tell the story around the charts and build the puzzle up with multiple pieces, in many cases a good chart can speak for itself and actually do most of the heavy lifting in the investment thesis.
It's also a good exercise to go through - to see what worked well. It's fairly conventional wisdom to try and learn from failures, but it's also important to learn from success (albeit while being mindful of hubris and the need to stay humble).
With that all said, here they are! Hope you find it interesting...
n.b. I have updated them with the latest data (in a few cases the original idea has actually come entirely full-circle). Also on formatting: the italic text is a quote from the report in which the chart originally appeared.
1. Global Monetary Policy: It quickly became obvious as the pandemic began to unfold that a second global wave of monetary policy easing was on the way:
“The global policy pivot was one of my key themes in 2019, and it proved instrumental in a number of key calls, and was starting to take hold with a number of confidence/activity indicators starting to recover. As we know this has been complicated, and with that complication has come a new wave of easing call it the policy pivot part II [PP 2]. Obviously, the Fed emergency cut is the big one, but it adds to a total 21 rate cuts this year 71 last year), and with likely more to come.” (6 mar 2020)
2. Global Equity Valuations: Along with that wave of truly historic global monetary (and fiscal) policy easing, sentiment had collapsed, and valuations returned to 2009 levels, prompting me to point out the generational buying opportunity that it plainly represented.
“the median PE 10 ratio has dropped to the lowest level since the financial crisis. Although we could argue about what counts as “cheap” we can at least say there has been a spike in the number of countries whose PE 10 is below the 15 x mark. So, at this point it is true that we can debate the impact (duration/magnitude) of the pandemic, but one piece of factual information is that global equities have moved to extremely cheap levels, and represent compelling value (*the usual caveat that cheap can get cheaper applies).” (13 Mar 2020)
3. Emerging Markets Sentiment: As noted, sentiment had collapsed, and a key example was emerging markets. This was one of those times where an extreme reading in investor sentiment provided important and actionable contrarian information. Interestingly, we now find ourselves back at the top end of the range.
“investor sentiment on Emerging Markets has completely flipped from heightened optimism to extreme pessimism (which is a contrarian bullish signal). On the technicals, EM equities have begun to rebound after market breadth collapsed to washed out levels, which in the context of the sentiment + policy + valuations picture is a positive sign.” (10 Apr 2020)
4. Frontier Market Equities: Aside from emerging markets, Frontier Markets also began to look particularly interesting. Along with solid technicals, they had also begun to look attractive from a valuation standpoint, and with a number of very interesting strategic features – which I had been adding further colour on