What next for global equities?

The business uncertainty index is at its highest since February 2020 when the global economy fell victim to modern history's black death virus. While a contrarian indicator for the index, this fact...

Triple witching hour was profitable last night as the systemic algos prevented a 5-week consecutive index bloodbath. I am now a nervous long on fave stocks with downside risk protection via the option market. Why long?

One, the Volatility Index (VIX) peaked at 27.86 on March 10th and has fallen to 19.30 now, a bullish omen.

Two, credit spreads did not go ballistic and financials could well lead the rebound to 5800 while $12 billion in passive inflows boosted the Mag-7 above their 200-day moving averages led by META, Amazon, Microsoft and above all Nvidia. The 100 strike puts once again expired worthless as I knew they would in my serial NVDA ahlan wa-sahlan trade.

Three, the Powell Fed has pivoted to a dovish tilt after the FOMC dotplots downgraded growth from 2.1% to 1.7% and raised PCE projections from 2.5% to 2.8%. This means, the next move is a cut albeit at the September FOMC. So I expect the Fed funds rate at 3.75% by year end. The Chicago Fed confirmed my analysis and thus remain long TLT calls even though 10-year Treasury note yield has plunged from 4.81% two months ago to 4.25% now. Ballast for risk markets.

Four, fabulous opportunities for potential double baggers in strategic ideas. Take cold storage supply chains. Why not invest in the sole landlord on the planet, who owns almost 2 billion cubic feet of cold storage space on all five continents in history's first and only global supply chain? Big Pharma and Big Food have no choice but to lease high tech spaces to refrigerate their products. So I am a willing buyer at 10X earnings for 20% EPS growth in the next 5-years and a 4% div yield while I wait. This is the mathematics of a double bagger in a stagflation world.

Five, the business uncertainty index is at its highest since February 2020 when the global economy fell victim to modern history's black death virus. While a contrarian indicator for the index, this fact reinforces my view that global recession risk is all too real and so return of capital is way more important than return on capital.

Six, tariff risk and a global trade war are not remotely priced into global equities. Germany and China are the largest exporters to the US. Yet Shanghai/Hong Kong is up 25% and Frankfurt's DAX is up 19% in the first 10 weeks of 2025. Hello?

Seven, Erdogan just proved once again that Turkey will always remain a no-go zone for foreign investors as long as he is Sultan in Ankara. It was insane to arrest the CHP Mayor of Istanbul and precipitate a 10% plunge in the lira and 25% hit on the Istanbul Bank Stock index as offshore hot money fled the local T-bill market in panic and now the Tahrir Square movement has begun in Istanbul.

Eight, the RBI rate cut vindicated my conviction that HDFC and ICICI Bank ADR were both buys as the new credit cycle begins in Bharat while HDB and IBN were trading below two times book value. HDB was up 15% last week and IBN was up 11%. The expect the rupee to trade in a 86-90 range in the next year as this is as much a free float currency as the Japanese yen, which must be watched closely now for signs of carry trade stress since inflation is at 3.4%, higher in Tokyo than in the US. This will force the Bank of Japan to move on interest rates and trigger another global mini meltdown as happened last August. The oldest population in the world lives in Dai Nippon and so senior housing and the adult diaper market are my growth stock obsession du jour.

Nine, Trump's Liberation Day coincides with Eid holidays in Dubai but not for me as I expect the global markets to go ballistic once reciprocal tariffs ignite not just a trade war but a seismic shift in global supply chain shocks and capital flows. This is unknown and unknowable. The bond king Jeff Gundlach has said that US recession risk is now 50-60% and Trump wants the US dollar index to be as low as 85-90 even though DXY has fallen from 110 in January to 104 now. Get set to lose 20% of your wealth next year if you save in dollars and do nothing.

Ten, one of my best special situation trades has been America's second largest oil and gas supermajor Chevron, whose geologists drilled the first gusher in a Damam salt dome in 1937 that birthed Aramco and the Oil Age in Arabia. Now Chevron drills 25% of Venezuela's GDP but Trump did a U-turn on his earlier order to exit its Maracaibo Basin assets once the CIA chief told him Maduro was playing kissy-kissy with China's Sinopec. This means the Hess deal will also not be blocked by US courts and thus Chevron will gain a prize asset in Guyana. At 13X earnings and a 4.2 div yield, this was a beauty at 154 and will remain so as long as the fireworks continue in Gaza/the Red Sea and the White House dials up "maximum pressure" sanctions on Iran. Yet the geopolitics of Russian sanctions/US LNG exports, a global trade war and a supply glut amid a potential US recession guarantees a 2008 or 2014 scale 50% oil price crash. This will be the moment when money hemorrhages or multiplies in energy/EM assets.