Our flagship product, called Synopsis, is published every two weeks. It uses the data generated by our process to address whatever we think are the most important issues in global investing at the time.
All our notes are tagged thematically, so feel free to click on any of the topics and explore what we have written.
Under UK regulations, our research is only available to professional clients and eligible counterparties; they are not available to retail (investment) clients. Harlyn Research is not registered as an investment advisor with the SEC and therefore any information about our investment products or services is not directed at nor intended for US investors.
So, You Want to Buy the Dip
Thursday, May 20th, 2021Three rules for how to do it
Nothing in the last two weeks has changed our view that a correction in global equities is coming. If you are one of those investors who has waited all year to buy the dip, we have three rules about how to do it. One, decide your tactics in advance and don’t pay too much attention to the narrative behind the correction. Two, don’t add complexity to a market timing trade by using it to rebalance your equity portfolio. Three, if you want to front run a correction, make sure you have enough defensive exposure at a sector level. Our top pick here is European Telecom.
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Is it Time for Commodities?
Thursday, May 20th, 2021We have a process. All we need is the upswing.
We know how to incorporate commodities into our asset allocation process. Over the last 25 years as a whole, our process would have generated significant outperformance on an absolute and risk-adjusted basis. This is achieved by systematically managing exposure to a limited number of commodities: oil, gold and copper only, and by actively managing a small number of other assets, spread across equities and fixed income. Passive exposures don’t work as well and too many assets create unnecessary and counter-productive complexity. The problem with including commodities is that US exceptionalism in equities, currencies and fixed income has made this strategy unattractive since 2010. If you think that this regime may be ending, it may be time to take another look at commodities.
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There Will Be A Correction
Friday, April 23rd, 2021But we don’t know when, why or how much
With very few exceptions, our main risk-appetite indicators are at or close to maximum risk-on. We see evidence of peaking behaviour in global equities vs global fixed income, in US Credit, and cyclicals vs defensives in the US, Japan and the UK. There is one indicator – Italian vs German government bonds - which is already past its peak. Most investors understand this and intend to use any correction as a buying opportunity. However, it still makes sense to take some risk off the table now, if only to put it back on at a lower price. We are also concerned that investors may be ignoring an uptick in geo-political risk.
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To See Ourselves as Others Do
Friday, March 26th, 2021US investors have few diversification opportunities in Europe
Eurozone equities may be cheap when compared to the US, but that’s not really important. Over the last10 years, US investors have never been able to generate a superior risk-adjusted return by diversifying into the Eurozone index, no matter what tactical allocation strategy they follow. The picture is marginally better if we look individual sectors over a shorter time-frame, but Japan and Asia ex Japan, do much better on this test.
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Europe Has Second Thoughts
Friday, March 12th, 2021Earnings estimates need to be revised down
We have started to apply our probability approach to consensus earnings estimates. For Europe ex UK, we cover 45 industry groups as well as the index. There is still a 100% probability that consensus estimates for the index will be higher in 12 months’ time than they are now. But the average score for individual industry groups peaked in February and has started falling. There are eight industries where the probability of an increase is now less than 50%. More importantly, a downturn in the average industry score is normally a indicator that the index score is also about to decline.
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The Pandemic Isn’t Over Yet
Friday, February 26th, 2021New infections may be about to rise in Europe
The bond sell-off this week reflects a very bullish consensus about the pace of recovery from the pandemic, which we believe is not supported by the data. Daily infection rates have stopped falling in the EU and the governments of Germany, France and Italy may be forced to increase restrictions on mobility and economic activity. This would send a shockwave through bond markets – certainly in Europe and probably the US.
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Tickets to the Moon
Friday, February 12th, 2021After Small Caps, Energy could be next
The recent outperformance of Small Caps is starting to generate headlines, but we think there is more to come, especially in Europe. We don’t see any need to take profits, nor do we think that Small Cap outperformance is a reliable indicator of an upcoming peak in the equity index. We do accept that it may be too late to start a big overweight position, So, if you are looking for the next big thing, you may want to consider Energy.
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Fizzing or Bubbling?
Friday, January 29th, 2021The immediate danger lies in Asia, not the US
Everyone is suddenly on bubble alert, but our numbers suggest that the main danger lies in Asian equities, not the US. China, Hong Kong, Taiwan, Korea, India, Japan, Australia and Indonesia all have weekly RSIs above 70%, which is our warning signal. US equities are still below this threshold, apart from Small Caps, which broke above it three weeks ago.
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Three Ideas from the US Senate
Friday, January 15th, 2021Energy, Healthcare and Communications in the spotlight
Elections don’t change things, except when they do. The combination of the Saudi oil cut and Democrat control of the Senate could usher in a period of materially higher oil prices. The Senate victory also means that social media companies may be threatened with more regulation and even a possible break-up. But does the new administration have the political capital to take on Big Pharma at the same time? The outlook for the Healthcare sector may be more hopeful than the Blue Wave doomsters suggested.
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