It’s been an interesting summer for financial markets — more or less, a series of mostly downbeat economic data led traders to think the Fed will ease off the pedal, though over the last week they’re becoming less convinced of that view.
Taking a longer lens is Dario Perkins, managing director for global macro at research firm TS Lombard, who says a new macro supercycle is emerging. “The supercycle in inflation and interest rates is ultimately about ‘power,’ and the balance of power seems to be shifting,” he writes. And that power is swinging to labor, even if rate hikes from the Fed and other central banks tip the economy into a recession.
The ratio of vacancies to unemployed workers has surged in the developed world, while the working-age population has decreased.
“A mild recession is not going to eliminate current worker shortages or tilt the balance of power back to capital. Central banks cannot stand in the way of structural shifts, such as deglobalization, climate change and ‘wartime economics,’” says Perkins, who previously worked at the U.K. Treasury and was an economist at ABN Amro.
What does that mean? In the short term, there will be frustration for both bulls and bears, with further gyrations in both bonds and stocks as the inflation/deflation pendulum swings. Ultimately, though, long-term interest rates are going to be higher, and central banks will be fighting to keep inflation below 3%, not below their 2% targets, Perkins says.
“With secularly higher interest rates, investors will no longer be able rely on the continuous rerating of all other asset classes, especially long-duration equities such as U.S. tech stocks. The 2020s will demand a more discerning approach to asset allocation,” he says.
The beneficiaries will be companies with tangible assets — the real economy, so to speak. In a high-pressure economy, there’s a scarcity premium on physical assets, uncertainty about future returns and less benefit to financial engineering, he says. In an era of deglobalization, intangible assets will lose their allure.
“Investors should seek exposure to ‘tangibles’, such as commodities, real estate and many traditional ‘value’ parts of the equity market, which are likely to gain from this transition,” Perkins says.
| Theme | Winners |
| Higher interest rates | Banks, financials, healthcare |
| Infrastructure spending | Industrials, materials, commodities |
| Structural energy shortages | Energy, commodities |
| Defense spending | Defense, aerospace, materials |
| Global housing revival | Banks, materials, commodities |
| Deglobalization and reshoring | Industrials, capital goods |
| Climate change | Commodities, metals, energy |
| Source: TS Lombard | |
The markets
U.S. stock futures
ES00,
NQ00,
meandered ahead of the open. Crude-oil futures
CL.1,
advanced, and the yield on the 10-year Treasury
TMUBMUSD10Y,
stayed above 3%.
The buzz
The economics calendar includes durable-goods orders, which were flat against expectations of a healthy advance. At 10 a.m. Eastern, the pending home sales report will be released. The more technical preliminary benchmark revision to the establishment survey also will be released, in what will show how well the Labor Department has done at measuring jobs growth.
Nordstrom
JWN,
shares are set to skid after the retailer lowered its outlook for the year. Urban Outfitters
URBN,
also reported a tough quarter, and home builder Toll Brothers
TOL,
lowered its deliveries guidance.
There are big earnings releases after the close, when tech companies including Salesforce.com
CRM,
and Nvidia
NVDA,
report results. Cathie Wood’s ARK funds sold shares in Nvidia ahead of the results.
Meme stock Bed Bath & Beyond
BBBY,
has found a financing source on a loan deal, The Wall Street Journal reported, citing people familiar with the matter..
The White House is expected to unveil a plan cutting $10,000 of student debt to those that make less than $125,000.
Minneapolis Fed President Neel Kashkari said the Fed needs to keep tightening interest rates.
Best of the web
In a post-Fukushima shift, Japan is planning new nuclear power plants.
The warehouse property market is returning back to Earth.
This nonprofit is aiming to buy houses before investors do.
Top tickers
Here were the most active stock-market ticker symbols on MarketWatch as of 6 a.m. Eastern.
| Ticker | Security name |
| BBBY, | Bed Bath & Beyond |
| AMC, | AMC Entertainment |
| TSLA, | Tesla |
| GME, | GameStop |
| APE, | AMC preferred equity units |
| AAPL, | Apple |
| NIO, | Nio |
| BBY, | Best Buy |
| STBX, | Starbox |
| AMZN, | Amazon.com |
The chart
Right now the big question in markets is whether this summer has seen a bear-market rally or a new bull market emerge. Jurrien Timmer, director of global strategy at Fidelity Investments, says if this is a new bull market, it’s looking pretty middle-of-the-road in terms of both duration and magnitude so far.
Random reads
NASA has provided the “sound” of a black hole.
Australia, which popularized avocado toast, now has too many avocados.
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Source: https://www.marketwatch.com/story/theres-a-new-supercycle-emerging-for-the-economy-and-these-are-the-stocks-that-would-benefit-strategist-says-11661337445?siteid=yhoof2&yptr=yahoo