Macro Thoughts: Shiny Happy People

  Everyone around, love them, love them

   Put it in your hands, take it, take it

   There’s no time to cry, happy, happy

  Put it in your heart where tomorrow shines

  Gold and silver shine

   – R.E.M. , Shiny Happy People; 

•            In hindsight, we dropped our bullish call on risk assets prematurely (in last month’s piece) in place since late March. Thus contrary to our expectations of a correction in last month’s piece, we got a bit of grind, with the market more or less tracking sideways but generally with upward biases.

•            That said we continue to hold a cautious tactical view and expect risk markets to move lower into June. That expected sell-off (if it happens) is likely to provide decent buying opportunities especially in gold and silver and favorite stocks (i.e. those in our model portfolio for Turkish stocks), in our view.

•            In this context, newsflow regarding Hong Kong will add to increasing tensions between the US and China and could result in a similiar sharp sell off seen a year ago due to trade tensions between the two.

•            Gold remains our favorite asset class as our expectations continue to pan out and we maintain our view that today’s emergency monetary policies will become permanent; are being joined by fiscal policies and debt monetization will become more and more widespread , resulting in stagflation down the road. While policymakers seem focused on the left tail (debt deflation) we think their response increases the probability of right tails, a sort of heaven for  gold.

By Mr Murat Berk, chief strategist Yapı Kredi Invest

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