Banque Syz's Monchau: Tech Is Backbone of Stock Market

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Bloomberg Sep 13, 2023 12:02 · 5793 Views

Charles-Henry Monchau, chief investment officer at Banque Syz discusses his global asset allocation strategy. He speaks with Bloomberg's Yousef Gamal El-Din on "Bloomberg Daybreak: Middle East and Africa."

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  • 00:00 I take you straight to the terminal to look at this chart to set up the inflation numbers.
  • 00:05 This looks at both the year on year and the month on month, and where we are with consensus, the core at 0.2% potentially for a third month in a row.
  • 00:14 Do you think that consensus has become
  • 00:16 a little bit too pessimistic on how much progress has been made?
  • 00:21 Well, if we look at the core, so the market is looking for stabilization and that seems to be doable.
  • 00:26 I think the surprise could probably come from the headline.
  • 00:30 The headline number is expected to move on a sequential basis from 0.2 to 0.6.
  • 00:35 So
  • 00:35 that looks a bit, let's say on the eye sides.
  • 00:38 But the the key point for us is that
  • 00:41 I think it would be very good for the market to get.
  • 00:43 That's a nice surprise because currently the market is very nervous
  • 00:46 with what is happening on the oil sides.
  • 00:48 Also bond yields moving up, we saw the auction yesterday wasn't great.
  • 00:52 So we need that kind of surprise to kind of revive a little bit let's say the the bull market which has been
  • 00:58 in place since the start of the year.
  • 01:00 So it's it's a very important report today just ahead of the Feds and during this black operated by the Fed by the way.
  • 01:07 So would you be a buyer of big tech and specifically Apple, we had their important product launch, the stock was down as it usually is after an announcement like that.
  • 01:17 But to build on what you're talking about
  • 01:19 if we get an inflation that surprises
  • 01:22 to the upside in terms of positive positivity, would that be enough for you to double down on on big tech in the US
  • 01:30 Well we are buyers in the medium to long run on on big tech but we we we need to keep in mind one thing is that big tech currently
  • 01:38 I'm not cheap.
  • 01:38 You know you you were mentioning Apple.
  • 01:40 If you look at Apple you know you're talking about 29 times PE
  • 01:43 trading price for sale of seven times.
  • 01:45 So there is no room
  • 01:46 for downside.
  • 01:47 Surprise the nervousness
  • 01:49 of of of Apple
  • 01:50 was
  • 01:51 quite high last week.
  • 01:52 Remember you know this Chinese ban
  • 01:55 for government officials not being able to use iPhone.
  • 01:58 So they are currently pressure on that type of stocks.
  • 02:01 Obviously if we do see Boneys coming down that would definitely help them, the group because the group is very correlated to what is happening on bone yields.
  • 02:10 So yes, a positive surprise on the CPI will probably help big tech
  • 02:15 to at least stabilize at this point
  • 02:17 and not deep further and they are so important for the market.
  • 02:20 You know, we're talking about 26% of the S&P 500
  • 02:23 being just, you know
  • 02:25 allocated to seven stocks, the Magnificent
  • 02:28 7.
  • 02:28 So that's very important for
  • 02:30 the market action.
  • 02:32 Acadian Asset Management had a note out that
  • 02:36 grabbed quite a bit of attention because it talks about a Bloomberg dollar index that is currently just pausing for thought and it's going to extend its rally potentially by another 5%.
  • 02:46 Inflationary acceleration in the fourth quarter is going to be the game changer
  • 02:50 for markets
  • 02:52 and basically the trigger is going to come as policy makers signal further interest rate hikes in the lead up
  • 02:57 to their October 31, November one meeting.
  • 03:00 Do you subscribe to that view?
  • 03:04 Well, first, you know we are
  • 03:05 bullish dollar.
  • 03:07 And two, what is very interesting with the dollar, it has been very positively corrected to oil.
  • 03:12 So you we also need to watch, let's say the old situation because the old situation is putting pressure on a global basis and as usual the dollar is being seen
  • 03:21 as a kind of let's say defensive currency.
  • 03:24 What is also interesting with
  • 03:25 the dollar is that if you look at the CFTC positioning currently
  • 03:29 speculators are still much too long on the euro.
  • 03:32 So that means that the further we go with the dollar on the I sides, the more they will be able,
  • 03:37 they will be forced to short.
  • 03:39 So I'm afraid that there's still some upsides
  • 03:42 on the dollar and as you know, a stronger dollar is not necessarily the best scenario for risk assets.
  • 03:46 So that's the short term risk
  • 03:48 for the markets, you know, OK, so
  • 03:50 do you do you do you need
  • 03:52 Charles Henry, do you need triple digit oil prices for it to do proper dislocations for global monetary policy or is $92.00 a barrel
  • 04:01 already halfway there,
  • 04:05 now $92.00 a barrel creates some stress but there's no direct impact on inflation.
  • 04:10 If we move to triple digits
  • 04:12 that stuff we two bites and then the market will start to pricing
  • 04:15 the second round effect of inflation.
  • 04:17 I think that's the main fear currently is that we, if we move from this Goldilocks soft landing scenario
  • 04:22 to a scenario where high oil prices not only
  • 04:26 obviously weigh on the upside inflation, but also start to hit
  • 04:30 the gross expectations for next year.
  • 04:32 So I think this triple digit number that you mentioned is kind of let's say the tipping point for the market to move into a more stress scenario.
  • 04:42 Charles Andre, We saw German bond futures on the move getting smacked lower on speculation that
  • 04:48 inflation may stay elevated for longer, and as a result the European Central Bank may have to
  • 04:53 keep rates stricter for quite a bit more time to come.
  • 04:57 So this is a report that suggests that
  • 04:59 the.
  • 05:00 Eurozone could remain up above 3% in terms of inflation next year.
  • 05:05 What is your read on that report and what are you penciling in for the ECB?
  • 05:10 I'm just thinking that again, the ECB is facing a super difficult equation to solve.
  • 05:15 You know,
  • 05:16 there is indeed
  • 05:17 inflation still too high.
  • 05:19 They are currently
  • 05:20 potentially the middle of the session.
  • 05:21 Just watch consumer confidence and numbers in Germany yesterday.
  • 05:25 Energy prices as you said
  • 05:27 is a nightmare for the Eurozone, weaker euro and also last but not least you probably saw the BTP
  • 05:33 Boone spread whining yesterday.
  • 05:35 So that means that the ECB is a bit, you know stuck in the middle,
  • 05:38 they need to stay hawkish.
  • 05:40 But the other on the other way they they also know that the growth is is being challenged.
  • 05:44 So it's again a
  • 05:46 very difficult situation to manage the ECB.