It appears dresses are back in fashion. So too, special outfits like prom get-gos and the all-encompassing and verdant pick-me-out tones of the ‘mother of the bride’. And as the weather heats up and vaccines snuff out the virus, the consumer is getting back into denim. Macy’s CEO Jeffrey Gennette was just one of the many CEOs who was commenting on recent business trends, and talking up the great reopening. Indeed, the mood in the C-suite is as up for it as it’s been in years. No wonder. Jamie Dimon, who as top dog at JP Morgan has his finger on the pulse of the economy more than most, speaks of a boom. A seriously big boom: I have little doubt that excess savings, new stimulus savings, huge deficit spending, more quantitative…[easing], a new potential infrastructure bill, a successful vaccine, and before now and the end of the pandemic, that the U.S. economy will lightly boom, and this boom could easily run into 2023 because all of the spending could extend well into 2023. And it’s not just the US. It’s the whole world. See recent comments from Moody’s, Alcoa, and Navios Maritime amongst others. Whilst the soundtrack has a disco beat to it, the market appears to have hit a squall. Earnings beats have been met with indifference, share prices have become range bound. Perhaps the Citigroup Economic Surprise Index offers a clue. It has just turned negative. And turned negative after its longest positive run in the history of the index. The bottom line is that economists appear to have caught up with events. The surprises are starting to sour. And so with the cyclical trade beginning to puff out, the pickings are likely to be harder to come by and leads stock pickers to sift the market for idiosyncratic stories. Like turnarounds. Better still, under-appreciated turnarounds whose future lot can be shaped by internal improvement stories under the hot gaze of managers fully aligned to seeing strategy executed; and executed on time. Companies like Altice, a cable operator with an underappreciated benefit from a proven fibre-to-the-home strategy; or Hasbro, a toy company with potential to benefit from a content-to-product flywheel. Companies that are more than able to deliver, and beat, on expectations in coming quarters. Irrespective of where the economic data goes.


The securities mentioned in this blog may be held by funds managed by Majedie Asset Management Ltd.