Tom welcomes Alfredo Pinel, the head of research at Game of Trades to discuss current macro trends. Pinel explains how Game of Trades can assist investors by reducing market noise, providing data-driven research, and simplifying complex information.

One trend in the markets that has been grabbing attention is the risk rotation and the Fed pivot. This has caused an increase in S&P 500 price-to-earnings ratios, higher than those seen in the past few decades.

According to Alfredo, there has been a clear rotation towards defensive stocks, such as healthcare, utilities, and consumer staples, since July. This shift is due to concerns about potential structural rises in interest rates. These defensive stocks have seen outperformance due to their compelling valuations and the potential for rates to stay high for some time.

Currently, bond investors are pricing in a high level of volatility, while equity investors are remaining complacent. This could mean that equity investors should pay more attention to concerns around rate hikes and look into investing more defensively. However, there is a divide between the two markets as many analysts believe that the current rate hikes will not have a negative impact on earnings. This is reflected in the current divergence between leading economic indicators and analysts’ expectations for earnings growth.

The topic of banks and their exposure to monetary policy tightening was also discussed. Alfredo mentioned that due to government intervention in March, the impact of rising short rates has been avoided, but the mismatch of assets is still a risk for these banks. They have been implementing strategies to manage this risk, but regulators are also pushing for them to raise capital and adjust their hedging. If lending growth takes a hit for these banks, it could have a negative impact on the job market.

Alfredo also discussed the potential impact of higher interest rates on the average consumer. With credit card debt continuing to rise and default rates increasing, it is important for consumers to be mindful of their spending habits in light of the economic pressures. The economies of the US and Europe are linked, and the effects of higher rates in Europe could have a spillover effect on the US.

In terms of commodity markets, uranium prices have been on the rise due to increased demand from utilities and potential supply cuts from China and Russia. However, uranium ETFs and miners have not yet caught up, as the risk sentiment needs to improve.

Lastly, Alfredo shared his views on oil prices and its inverse relationship with recession. While the price of oil may increase up to $100, anything beyond that could have serious ramifications for the economy and may not be priced in the market yet.

Time Stamp References
0:00 – Introduction
3:05 – Equity Market Risks
7:45 – Rotations & Opportunity
11:12 – MOVE Index & the VIX
13:14 – Rates & S&P Earnings
15:43 – Rates, Metrics, & Recession
21:30 – Banks & Future Impacts
25:13 – Lending Standards
28:40 – Defaults & Credit Risks
31:40 – Global Economic Risk
35:21 – Dollar Performance?
40:38 – Gold & Silver
42:12 – Uranium
46:22 – Oil Price Shocks
51:52 – Wrap Up

Talking Points From This Episode

• The markets have seen a rotation into defensive stocks since July due to increasing valuations and rising interest rates.
• Small businesses reliant on regional bank lending are expected to drive the job market, however, higher rates could take a toll on lending growth.
• Game of Trades provides actionable trades and strategies to members, ensuring the highest return possible.

Guest Links
Website: https://www.gameoftrades.net
Blog: https://www.gameoftrades.net/blog/
Twitter: https://twitter.com/GameofTrades_
Twitter: https://twitter.com/AlfredoJPinel
Newsletter: https://newsletter.gameoftrades.net

Alfredo is the Head of Research at Game of Trades. In this role he leads efforts in managing the direction of the research and investment strategy, while overseeing the production of various institutional-level quality research products.

Prior to joining the firm, Alfredo operated AJP Capital Management, an investment entity where he managed a global macro portfolio strategy. He was responsible for idea generation, research, trade execution and risk management in efforts to maximize absolute returns.

Prior to that Alfredo was the global strategist at Empirical Research Partners, an independent equity research boutique in New York City. In this role, he produced and marketed global portfolio strategy and stock selection research to institutional clients worldwide.

Alfredo Pinel holds an MBA from the University of Chicago and a Bachelor of Science in Industrial and Systems Engineering from the University of Florida. He is a CAIA charterholder.

In his spare time, Alfredo enjoys hiking in the beautiful state of California, alongside spending quality time on the beach with his family and perfecting the art of grilling.